Posted: April 22, 2005

The disabled actually can retire!

In the Melbourne Age late yesterday an AAP report carried the interesting title Long-term dependence on welfare: study. What study I thought? The report was from the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne and titled Movement between benefit types.

So I read the report in full and probably should not have wasted my time. The AAP report summarises the report's major finding as: "Australians on disability pensions stayed on benefits for longer than other types of welfare recipients" - yes, that is what anyone would expect given the category of pension. And again, the report finds that "disability pensioners were also less likely to move off welfare payments in the long-term." Yes, given the category of recipience that is also what one would expect.

The author of the report was quoted as saying: "The long-term nature of the disability payment is illustrated most clearly in that, instead of moving out of payments altogether, the most common destination for this group is to go straight into another payment - the age pension". What is disturbing about this result is that it is being dressed up as a problem - an individual problem of welfare dependence - rather than a system forcing individuals into welfare dependence because there are not enough jobs. The tone of the AAP report - the news we all read (most do not read the report) - is that individuals make choices to be welfare dependence. There is not one mention of a lack of jobs.

But what is so surprising about the fact that a disabled person who is unable to work because of their disability and survives on a pittance from the Government pension then gets old and qualifies like all Australians for an age pension? Do they have any less right to the aged pension than someone who flows from employment into retirement? DSP recipents also probably take holidays while on disability pension. Some researcher intent on establishing the problems of welfare dependence would (if they could get the data) probably find that this meant they were unwilling to work because they were clearly enjoying a holiday while claiming to have some disability. If the system at one period of the business cycle (when unemployment is high) finds it convenient to classify a person as being unable to work and therefore qualify for DSP (and at the same time keep the politically-explosive unemployment rate down lower than it actually is!) then I find it offensive that when the business cycle is at a different stage (unemployment lower) that these prior classifications (of disability) are considered dubious and the person who was so classified (by the Government) becomes a target for suspicion and research-based allegations that they are welfare dependent.

The report also concluded that at "high proportion of sole parents switched to unemployment benefits, rather than work, once their parenting payment ended". Well, again, no surprise about that when there is double-digit labour underutilisation in Australia (and during the data sample of the study). We have to understand some basic labour market facts.

The disabled and single-parents are at the bottom end of the labour queue. Employers will shun these types of workers if they have a choice. When jobs are rationed as they have been for the last 30 years in Australia these types of workers will experience long durations of unemployment if they decide to enter the labour force. In these circumstances, it is far more rational to stay on a pension like DSP or single-parent benefit if one qualifies rather than enter the relatively harsh Centrelink work-test arena. If there is very little probability of getting work then life becomes even more harried if one spends the time accumulating 'employer rejections' (which often amount to no reply to applications at all!).

If we really wanted to provide a labour market environment that provided opportunities for those on DSP who could work some fraction of the working week or single parents who did want to keep their labour market attachment going while tending the needs of their young children then what we need is more work to be available. The private sector will never provide all the opportunities (and never has). Some of those on DSP also require special job structures that the private sector in general (there are notable exceptions of firms that do take trouble to help disabled workers) will not come to the party.

This is one of the strongest justifications for the introduction of a Job Guarantee. The Job Guarantee would provide on-going (and always available) work for people who are unable to find work elsewhere. Then individuals with disabilities or family responsibilities would be able to work (according to their capacities and preferences) and would not have to rely on welfare payments for survival. After 10 years of a Job Guarantee, if we did the same study as reported above, then we would see a very different picture of flows in and out of categories.

Blog entry posted by bill