Newstart needs a new start

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Over the next couple of weeks, we'll be hearing a lot about company and personal income tax cuts. The Turnbull government holds the view that tax relief for companies and middle-income earners is necessary to improve the economic prosperity of Australia, offering a financial hand up to households struggling to pay their bills.

Centrelink officeFor those on Newstart, though, those same increased costs of living are being all but ignored. It is time to discuss the development of a transparent, consistent process to determine welfare payments like Newstart.

Ken Henry's 2009 report to the Treasurer on Australia's future tax system presented 'a vision of a future tax and transfer system that would position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century and would enhance community wellbeing'.

The Henry review, the most comprehensive analysis of Australia's tax and transfer system in recent times, looked at 'the relationships of the tax system with the transfer payments system and other social support payments, rules and concessions, with a view to improving incentives to work, reducing complexity and maintaining cohesion'.

Henry proposed three types of income support payment: pensions, participation payments and student assistance.

Pensions would be set at an appropriate level for people not expected to work — that level being what would be needed for an adequate standard of living. Participation payments would be less than the pension rate, because government has a legitimate policy objective of encouraging participation in the workplace using both the carrot and the stick.

Student assistance would be less again because students could be expected to engage in some part-time work without too much interference with their studies; and where need be, they could take out a low-interest loan in the expectation that their studies would ultimately contribute to the capacity to earn a higher income.

 

"It's not as if there is a large cohort of unemployed persons who are without work simply because they do not want to work and because they are in receipt of sufficient welfare payments to live comfortably but frugally."

 

It is legitimate to provide positive and negative incentives for people to access the labour market, including social security payments lower than those payable to persons who have no prospect of accessing the labour market whether because of age or disability. But it is just plain wrong for governments to keep payments such as Newstart and the Youth Allowance at abysmally low levels, in the name of 'budget repair', when there are insufficient jobs available and no realistic prospect of employment, training or education.

The threefold classification of payments is fine in theory. But since the Henry review, no government — Labor or Liberal — has addressed how to design a process that is fair and transparent for determining the participation payments and deciding how best to offset what is needed for an adequate standard of living with a discount to provide sufficient incentive for participation in the workforce.

The problem is highlighted with the unacceptably low Newstart payment, which is set at the whim of the government of the day with no transparent process and no criteria for determining a fair and workable payment.

Back in 2012, when the Senate conducted an inquiry into the level of payments, the Business Council of Australia acknowledged Newstart 'no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment'. If anything, it is now worse.

Despite the modest increase to Newstart in recent months, it still falls woefully short of what is needed for a motivated unemployed person to survive with dignity while setting about to find a real job.

It's not as if there is a large cohort of unemployed persons who are without work simply because they do not want to work and because they are in receipt of sufficient welfare payments to live comfortably but frugally.

The latest unemployment figures sit at 5.6 per cent — roughly the same as when the Coalition first came to power. And that's before we consider the significant issue of underemployment.

All this is occurring at a time when both productivity and profits are going up, but wages and employment rates are static. There is something wrong with our economic policy settings, which provide for increases in profit in the order of 21 per cent last year while delivering wages growth of only 2.1 per cent, on average, with many workers receiving smaller (or no) increases.

When there is no obvious prospect of the government's budget settings reducing unemployment and underemployment and when wages are static, government should not punish the unemployed by paying welfare payments that are inadequate. This places too much burden for 'budget repair' on the shoulders of those who can least afford it.

By all means, reduce the welfare payment by a factor calculated to provide motivation for participation in the workforce. But tell us how that factor is calculated and according to what criteria.

If employment for less than the minimum wage is prohibited (as it is in Australia, and for good reason), then we need to provide welfare payments commensurate with the individual's capacity to survive frugally and with dignity while participating in the lottery for a scarce job that pays the minimum wage or more.

It's time for our major political parties to commit to the establishment of an independent commission to set evidence-based benchmarks, ensuring adequate income support payments for those Australians unable to get full-time employment through no fault of their own.

The setting of the minimum wage, which is carried out in isolation from any 'budget repair' conversation, provides the blueprint for a transparent, consistent approach that can allow those who are seeking work to live — and try to find a job — with greater dignity.

 

 

Frank BrennanFrank Brennan SJ is the CEO of Catholic Social Services Australia.

Topic tags: Frank Brennan, Newstart, Centrelink, welfare

 

 

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Existing comments

Thank you Father Frank for a relevant and well-presented argument. It is to our national shame that we treat the unemployed and underemployed as an underclass. It’s reminiscent of the 19th century notion of the deserving and undeserving poor. Our treatment of people who are forced onto Newstart and other welfare payments is disgusting when you consider that the number of potential applicants vastly outnumbers the number of available jobs. Thanks again. Louise
Louise M Oliver | 01 May 2018


The ridiculous thing is (and the Liberal party knows this), economic modelling has always shown that the economy receives the largest boost possible by directing tax cuts and welfare to the lowest earners first because they have the highest marginal propensity to consume and this enhances the multiplier efect. It is facile to argue differently.
Matt Miller | 01 May 2018


Father Brenan is correct Newstart need very substantial modifications. 1) Criteria for Newstart should be set by Parliament 2) Criteria for determining amount of Parliament should be set by Parliament. 3) Parliament should devolve setting the actual amount paid on Newstart to a Independent forum similar to Arbitration Commission. 4) Those on Newstart should be assigned work tasks to complete. 5) Commonwealth Employment Service should be re-established and outsourcing of unemployment services to private contractors cease 6) Newstart should be set at a rate similar to Disability Pension . There should be no advantage switching to Disability Pension or Disadvantage switching from Disability pension. 7) If taxation can not pay for adequate social services then it is time to increase taxation or find savings elsewhere in budget. 8) 5% unemployment is a disgrace and it is time for Commonwealth Government to set Key Performance Indicators to reduce unemployment to less than 1.5%. 8) Parliamentary Salaries should be adjusted downwards or upwards depending on achieving KPI. The above suggestions came mainly out of Old DLP )1972) Platform (current DLP policy says nothing about Social Security or unemployment)
Andrew Jackson | 01 May 2018


A must read for all involved in current debates about reducing taxes. Four years volunteering with St Vincent de Paul Society has taught me just how poor people are on Newstart, particularly for people with one or more children to care for. Stagnant wage settings are almost as bad; the obscene 10:1 ratio of profits to wage increase quoted by Father Frank clearly demonstrates how far Australia has moved away from the just society of "everyone gets a fair go".
Ian Fraser | 01 May 2018


A key point has been missed. The REAL unemployment figure shows we have 1.5 million unemployed or one vacancy for every twenty unemployed, plus around 1 million underemployed. All the parties in the Federal Parliament deny this. Consequently they won't increase the dole payment. Dodgy figures lead to a dodgy analysis and therefore dodgy decisions.
Marcus L'Estrange | 01 May 2018


Another point to consider is the classifications. Many Australians would be appalled to discover that a man with non Hodgkins lymphoma, currently ungoing Chemotherapy would be classified for Newstart. Even with advances in treatment the five year survival rate is around 70/30. So while you are desperately fighting for life you are also expected to be looking for work. The treatment for cancer is gruelling and debilitating. The stress created by such low payments does nothing to enhance health. We have truly become a heartless nation. Shame on you Australia. Liliane P.
Liliane Price | 02 May 2018


The quality of a society can be judged by the manner in which it treats its most vulnerable citizens. Australians (25-64 years) searching for work are expected to survive on the New Start Allowance of $545.80 per fortnight. The minimum wage, designated as a ‘livable’ income, is currently $1345.40 per fortnight. What does this comparison say about fairness and decency in our country?
Meg Scally | 02 May 2018


Meg Scally. You draw attention to the difference of $800.40 between New Start allowance and the minimum wage and ask what it says about fairness and decency. It says nothing about either. What it does illustrate, however, is the difference between productive employment on behalf of the community at large and unproductive expenditure by the community at large for no return. The fact the New Start allowance exists is, however, fair and decent - not every society makes such an allowance.
john frawley | 02 May 2018


one real problem is that Governments such as the Qld Govt. are using electricity as a form of tax and thereby hurting the people who can least afford this essential commodity. Qld Govt. gets $900 million profit from electricity entities that it owns
BERNARD TRESTON | 03 May 2018


Hi Liliane P. Exactly. Ridiculous that someone with NHL should be on Newstart. It's the product of the "one size fits all" approach of the present Centerlink and its Minister. I have known people with terminal Leukaemias who have been walking and talking, getting to hospital clinic appointments (albeit with taxis or family driving them) ten days defore their death. No doubt Centerlink would say: "you can walk independently so look for a job". The result of Centerlink not employing assessors with some clinical background. Incidenatlly, Newstart hasn't risen (i.e. not indexed to inflation) since 2000. We had a Labor Govt 2007-13, so why didn't it do something about it? Something with which to challenge Shorten.
Bruce Stafford | 03 May 2018


I think this articles in the U.S. "National Catholic Reporter" would be interesting to everyone, and you too, John Frawley . https://www.ncronline.org/news/opinion/editorial-proposed-cuts-food-program-are-immoral Some of the Republican proposals are draconian, but keep in mind cuts very similar to theirs were almost introduced in our 2014 horror Federal Budget. One line of yours I agree with, John. You wrote: "..unproductive expenditure by the community at large for no return." Every cent given to Newstart recipients goes back into the community to be spent on goods and services, with one significant exception, rent money. That goes into the bank accounts of landlords who squirrel it away out of circulation as they have earnings qwell in excess of their needs. Or maybe they will send it overseas in the form of a purchase of an Audi or BMW. How about that? "Lifters and leaners" eh?
Bruce Stafford | 03 May 2018


Thank you for the reference in NCR, Bruce Stafford. It is certainly a clear depiction of using a sledge hammer rather than a tack hammer to crack a pistachio nut! It also highlights Liliane's comment and your suggestion that not one size fits all and that in the matter of welfare some independent assessment process has to be implemented to ensure that the sick, disabled and unavoidably disadvantaged are properly cared for by society at large without any obligations to be met. Then we might have a true welfare system rather than an economic model. Money is a bugger of an evil! However, I doubt that we can learn anything much from the USA (where money is God) in matters of just welfare until it becomes a true democracy!!
john frawley | 04 May 2018


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