Welfare-to-work program punishes the poor

Linda Seaborne & Alison Thorne

With its fourth-term agenda, the Howard government has launched a vicious attack on working people, both in and out of work.

Its proposed changes to industrial relations are aimed at crushing the ability of workers to organise collectively, and driving down wages and conditions. Its Welfare to Work initiatives, announced in the federal budget to come into effect in June 2006, go hand-in-glove with the attacks on union and workers’ rights. By forcing sole parents and many with a disability to work 15 hours a week, the government will ensure a conscripted work force with no choice but to take the new low-wage jobs.

The government argues that people on welfare will be financially better off if they have some paid employment. Under the current system, this is certainly true. But scratch the surface of Howard’s plan and we find a scheme designed to cut payments rather than to enhance employment prospects.

The fundamental problem with the government’s plan is that it is not a welfare-to-work strategy, but a welfare-to-poverty strategy that moves people from one payment onto another lower one. The Australian Council of Social Services estimates that 300,000 people will be worse off after June 2006.

Currently, eligible sole parents and people with a disability receive a pension payment. These payments are structured to enable a mix of part-time work with caring responsibilities or managing a disability. More than half of all sole parent pensioners work part-time and nearly three-quarters do some paid work in any given year.

Under the pension income test, people can improve their circumstances by working part-time. Pensioners have an income-free threshold, which increases with the number of children in their care. Any income earned above this threshold reduces the pension by 40 cents in the dollar.

Pensioners who study are also eligible for an annual Education Entry Payment and a Pensioner Education Supplement, which at current rates is an additional $31.20 per week.

Under Howard’s Welfare to Work plan, sole parents whose youngest child has turned six and disabled people who are assessed as capable of working 15 hours per week will no longer be granted a pension. Instead, they will required to seek 15 hours of employment per week and placed on an “enhanced” Newstart payment that includes a Pension Concession Card. This payment is $29 a week less than the pension.

The income-free threshold is also much lower, does not increase with the number of children and payments will be reduced by 60 cents for every dollar earned from employment — a much harsher taper than the pension. Recipients of this payment are not eligible for the Pensioner Education Supplement.

The impact is that income support will cut out at a much lower level, which will result in the loss of the pension concession card, and all the services and discounts that go with it. Many doctors only bulk bill patients who have a pension concession card.

The National Centre for Social and Economic Modelling (NATSEM) estimates that a sole parent with one child on the Parenting Payment Single benefit can earn up to $718 per week before the entitlement to income support cuts out. A sole parent with one child receiving the enhanced Newstart Allowance will only be able to earn $426 a week before payment of part-income support and eligibility for a pension concession card stops.

The NATSEM research also reveals that, under the new system, a sole parent with one child and earnings of $200 per week faces a cut in payments of $92 a week when their child turns six. This represents a 17% cut in income for these families!

There are other implications too. Once a welfare recipient is no longer receiving a disability pension or parenting payment single, they are no longer eligible for the pensioner tax offset. This means that at the same time as their disposable income is being cut by being moved onto Newstart, their tax liability increases.

While those currently receiving pension payments will be able to retain the old payment, this benefit will quickly be eroded. Research by Bob Gregory from the Australian National University shows that a big proportion of sole parents move on and off benefits over a five-year period. For example, if a woman on the pension attempts reconciliation with her former partner and it doesn’t work out, she’d only be eligible for the lower NewStart payment when she went back to work. The same would occur if she got a full-time, fixed-term contract job for six months and then had to go back on benefits when the job ended.

The government’s “reforms” are a cruel sham, introduced as part of a budget that also gave tax cuts to the rich. Strip away the rhetoric about the dignity of work and what we’re left with is nothing but a package that will cut incomes to those most in need and force people to take low-paid jobs.

Where is the funding to massively boost childcare places? Where is the support for those seeking further education or retraining? Where are the programs to make public transport and buildings more accessible? Where are the jobs with family friendly conditions or that allow flexibility to manage a disability?

A real welfare-to-work scheme would:

[The authors are members of the Socialist Alliance.]

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