The myth of soaring welfare costs

The Liberals’ claims that welfare spending is unaffordable and must be reined in don’t stack up, argues Daisy Farnham

Since coming to power, Tony Abbott has been unrelenting in his insistence that we are in the midst of a budget crisis. As he tries to soften us up for a raft of spending cuts, the welfare system is a key target.

Minister for Social Services Kevin Andrews has denounced welfare spending as “unsustainable” and growth in recipients as “relentless”.

Attacking welfare is a familiar Liberal agenda. John Howard’s government imposed ever harsher penalties in an effort to try to force people off the dole.

Now they want to go further. In opposition in 2013, Joe Hockey argued that, “addressing the ongoing fiscal crises will involve the winding back of universal access to payments and entitlements from the state…This will require the redefining of the concept of mutual obligation and the reinvigoration of the culture of self reliance”.

The Commission of Audit, led by business leaders such as Business Council of Australia President Tony Shepherd, has been charged with finding ways of cutting back social spending across the board. Kevin Andrews has ordered a welfare review, led by former Howard government advisor Patrick McClure.

A key focus of the review is the Disability Support Pension (DSP). At a slightly more liveable rate than Newstart, Andrews is claiming that a “perverse incentive” exists for people to seek access to the DSP. This poisonous rhetoric is designed to paint DSP claimants as welfare “bludgers”. Andrews has suggested creating a single universal payment that encompasses both Newstart and DSP.

But both payments are already low. The basic rate for Newstart is $510.50 a fortnight, and $766 for the DSP. The most recent figures from 2012 show that Newstart was $230 a week below the poverty line, and the DSP $127 below. 41.5 per cent of households with their main earner on the DSP live in poverty. In the context of increasingly expensive costs of living and housing, both payments need to be raised, not reduced. By contrast, McClure is receiving just under $700 a day to plan the government’s cuts to social security.

Welfare costs

A number of myths underpin the government’s assault on welfare. The first is that the welfare system is putting an impossible strain on the budget.

Kevin Andrews has cited figures showing one in five Australians receive a welfare payment as evidence of the need for cuts. But over half of welfare recipients are on the Age Pension. Even Kevin Andrews is not arguing to cut that—and has left it completely out of his review.

In any case, the talk of welfare as a “drain on the public purse” just doesn’t match up with reality. Australia’s spending on social security is one of the lowest amongst the OECD rich nations, at 8.6 per cent of GDP compared with the much higher 13 per cent OECD average.

Research by the Grattan Institute shows that welfare spending as a proportion of GDP has in fact shrunk over the past decade. Only 4.3 per cent of the working age population claim Newstart or Youth Allowance, costing the government a mere 0.5 per cent of GDP annually. Slightly more, 5.5 per cent of the working age population, claim the DSP.

But the Abbott government is determined to attack the poorest and most vulnerable.

The government’s emphasis on the cost associated with supporting the poor and unemployed redirects attention away from hefty government subsidies for big business and the rich.

The Australia Institute estimates that mining companies receive at least $4.5 billion per year in subsidies and tax breaks. Superannuation tax breaks, which are skewed towards high income earners, are set to cost $45 billion by 2015-16, more than the Age Pension.

It is the government’s warped spending priorities, and not “relentless” spending on social services that is driving the current attack on welfare.

Stigmatising the unemployed

The attacks on welfare are also ideological. The government claims that the welfare system is being abused, with a “culture of dependency”, where welfare is seen as a “way of life”.

Terms like “dole bludger” and “welfare dependent” are useful tools for the government in redirecting blame for unemployment onto the unemployed themselves. In mid-2013, there were five people for every job available. But this didn’t stop governments from blaming the personal shortcomings and laziness of the unemployed.

Demonising people on welfare for wasting government money is also used to justify the need for cuts to other areas of the budget.

This is part and parcel of the neo-liberal world view. Unemployment and poverty are presented as the fault of individuals, rather than a structural product of capitalism and recession, or entrenched social disadvantage.

Politicians and right-wing commentators have talked up welfare rorts and the importance of forcing welfare recipients into the workforce. Obscenely rich mining magnate Gina Rinehart saw no irony in declaring that the “age on entitlement” is the cause of Australia’s social ills, saying that “What Thatcher did for Britain our own leaders should do for us—cut spending, cut waste, cut the shackles and back hard workers.”

Anyone familiar with the reality of being “on Centrelink” knows how far from reality these claims of an “age of entitlement” are. Australian governments have successively attacked the idea of rights to welfare and social security since the 1980s, introducing the neo-liberal idea of welfare recipients’ “responsibilities”.

Howard famously argued that those on benefits should “give something back” to the community. This was a rejection of the idea that the state has a responsibility to provide for the disadvantaged and unemployed, as existed during the post-Second World War period.

Since the 1980s, Labor and Liberal governments have enforced strict eligibility criteria to limit access to welfare payments. Those deemed eligible for benefits then face extreme surveillance by Centrelink over their lives for any changes that could justify reducing their payments.

Welfare recipients are required to complete a range of “mutual obligation” requirements, such as jobseeking, training and even compulsory work for benefits.

Non-compliance with these requirements meets harsh penalties. So called “voluntary” unemployment and the refusal of “reasonable” job offers results in a payment freeze for eight weeks.

The other reason the government peddles anti-welfare rhetoric is practical. By stigmatising welfare recipients, the government effectively discourages anyone from staying on benefits, or from seeing them as a viable alternative to low waged work. Demonising those on benefits has gone hand in hand with requirements that force recipients to accept low paid and poor quality work.

The Hawke and Keating Labor governments introduced the concept of “activating” those on welfare. This put the emphasis of government policy on changing the unemployed, rather than on creating jobs. It means forcing people on welfare to look for jobs, even if there aren’t any, and to either accept low paid work or risk having payments cut off.

In the context of large-scale job losses in car manufacturing, at Qantas and in the public sector, this is an increasingly problematic approach.

“Activating” welfare recipients is useful for governments because it puts downward pressure on wages and conditions across the economy. If there are more people looking for jobs, and willing to accept low paid work, it is easier for bosses to lower wages and conditions.

The Abbott government has committed to ramping up the work for the dole program initiated by the Howard government in 1997. The program is compulsory for Newstart recipients under 50, for below award wages, not covered by any standard workplace health and safety agreements.

At the moment, work for the dole becomes compulsory after one year on Newstart. Kevin Andrews is arguing that it be made compulsory after just six months.

Modelled on Howard’s Green Corps, Andrews has proposed a “green army” of 15,000 unemployed young people, to be paid as little as half the minimum wage, to complete basic community work such as clearing waterways, fencing and tree planting. ACTU President Ged Kearney is right to say, “this is not about getting people on the margins of the workforce into work, it is about providing a low-paid workforce”.

The Abbott government is intent on stirring up anti-welfare sentiment, and vilifying people on welfare benefits. But the government is limited in how far they can cut back by the necessity of providing workers with basic healthcare, education and social security. They cannot scrap welfare completely.

But workers also fought to win the right to welfare for the unemployed, as a basic support for those who through recession, misfortune or illness had no income from work.

Cutbacks to welfare can be stopped if ordinary people refuse to accept them. This will require building a movement, based on the vision of a society where welfare is a universal right, and the needs of workers and the poor are put before the profits of businesses.


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