How many adult Australians depend on welfare as their primary source of income?
I tried this question on a few people this week and got the usually unreliable estimates you get from a straw poll.
Around 10 or 15 per cent was a common answer. Is it as high as 20 per cent, some people ventured?
That’s about where I would have put it.
But no, detailed research by the Centre for Population and Urban Research at Monash University published this week tells us that nearly a third of the adult population rely on government welfare payments as their primary source of income. It is 31.7 per cent to be precise.
What’s worse, it is getting higher.
The centre had some difficulty obtaining comparative data over the years. But the broad measures with some swings and roundabouts are similar and the picture is very depressing. In 1978 the dependency figure was a respectable 16.6 per cent.
It appears that welfare dependency has doubled in the past 20 years.
The centre argues persuasively that less than half the increase can be put down to the aging population. The rest comes from younger families (of various sorts) without jobs.
The centre argues, without giving a great deal of evidence, that the blame for that lies in economic globalisation. But I am not so sure. The internal system seems as much to blame as economic globalisation. Moreover, it is our poor response to economic globalisation, rather than globalisation itself, that is causing Australia to fall lower in the standard-of-living and income-equity scales.
Some of the elements of the system that encourage welfare dependence are:
We pay kids to leave school by offering the dole. We should pay kids to stay in school.
Wages are too high for kids. Payroll taxes and other costs impede employment of young people. It would be better to pay badly and top up with welfare than set up barriers to employment that cause total reliance on welfare.
All welfare recipients, especially single mothers, are discouraged from part-time employment by means testing that make effective marginal tax levels too high.
Tax levels are too high at low incomes and the tax-free threshold is far too low for people who make income from employment.
In the past 10 years government have increased taxes on superannuation causing further disincentive to self-reliance in old age.
In short, all the incentives are to put people into welfare dependence and keep them there.
The centre’s figures reveal that the ACT has by far the lowest level of welfare dependence. Why? Sure, the ACT has a slightly lower age profile, but more importantly it has consistently had the highest school retention rates for decades. Education is the key.
Further, the ACT is a place of service industries. The response to globalisation has got to be education and movement to industries which the world pays more for; not to retreat into the very dime-a-dozen, low-paid industries that abound in the world.
Globalisation offers opportunity. Do what you are good at and trade for the rest. People do it in their lives all the time. They specialise in what they are good at (their main employment and a couple of hobbies) and buy and trade for the rest.
Increasingly, families are specialising in their employment and trading for what used to be done domestically: cooking, cleaning and child-minding. It works globally.
We do not see it globally because we see foreigners doing well in Australia because we live here, but we do not see Australians doing well overseas (which they are increasingly doing) because we do not live there to see it.
There is a real danger if we resist globalisation and go back to broadly protecting the inefficient fondly imagining this will increase jobs.
There is also a danger that we accept globalisation has some benefits but has casualties who must be totally propped up by welfare and that welfare must be expanded and increased.
Provision of too much total-dependence welfare only encourages it.
It is not the recipients’ fault, but the systems.
The greater tragedy is the number of children involved. The centre’s study shows 24 per cent of children are in welfare-dependant families and a further 17 per cent are in “working poor” families, a total of 41 per cent in 1995 up from 20 per cent in 1986.
What a hollow promise was Bob Hawke’s no child shall live in poverty by 1990. Hyperbole aside, Hawke not only broke his promise, but actually doubled the number of children in poverty. He did this by allowing the union movement to maintain artificially high employment-entrance costs.
The figures the centre has provided are far more shocking than all of the economic data that spews forth each month. A third of our society lives in dependency. It is too high.
Surely the centre’s evidence tells us that the more welfare that is available the more people will rely on it; not that if there are more people on welfare that more welfare is needed.
Safety net, yes. Income top-up, yes. Dependency with virtually every mechanism in the system giving incentives to stay there or disincentives to get out, no.
We should aim to get back to 16.6 per cent dependency. The present level of 31.7 is too destructive both for those on welfare and those who have to pay for it.