A workable way out of the welfare trap - The Centre for Independent Studies
Donate today!
Your support will help build a better future.
Your Donation at WorkDonate Now

A workable way out of the welfare trap

IN the past decade, the US reduced its welfare rolls by more than 60 per cent. It achieved this mainly by requiring the adult recipients to work, although good economic conditions and new childcare and wage subsidies also helped. About two-thirds of the clients leaving aid went to work, even though most of them were single parents — the group Australians would regard as the least employable. Most families leaving welfare gained income, although many remain in or near poverty. Other effects on families and children were mostly positive.

In Wisconsin, the state that led reform, more than 80 per cent of recipients left the rolls, mostly for work, and a large majority of low-income parents are working. The state achieved this with severe and immediate work tests coupled with lavish spending on child and healthcare to move families into jobs. Welfare was largely rebuilt around employment.

Meanwhile, welfare reform in Australia has stalled. In theory, "mutual obligation" rules already require many jobless recipients to take steps towards working. But in practice, most still receive support without activity requirements. Single mothers and people on disability benefit face no serious participation tests at all. The Government has no plans for change.

What explains the difference? First, politics. In the US, the public supports aiding poor families, but it fiercely demands that the adult recipients work alongside the taxpayers. In the 1980s, some states experimented with tougher work tests, and in the '90s both national parties committed themselves to change.

President Bill Clinton, who had promised to "end welfare as we know it", signed a radical reform bill written by a Republican Congress in 1996. In Australia, by contrast, both parties approach welfare reform cautiously. While most voters support moving recipients towards work, they are less insistent about it than Americans. One reason is that work by mothers is still less usual in Australia than it is in the US, where most mothers with children — even single mothers — already work full-time.

The "welfare lobby" — groups and experts interested in poverty — strongly opposes enforcing work. It has more influence than in the US, where it was thrown on the defensive 20 years ago. As one sign of this, a government bill to tighten up eligibility for disability has been held up in the Senate. Recommendations for wider participation requirements made by the McClure report four years ago have mostly been ignored.

A second factor is administration. In the US, elected leaders forced welfare officials to focus on moving recipients into jobs, not only on paying their grants accurately. In Australia, however, benefit payment is assigned to Centrelink, while the responsibility for mutual obligation rests with the Job Network. Employment officials say that Centrelink often does not support them by reducing payments to clients who fail to fulfil their activity requirements. Yet it is difficult to convert Centrelink to a work focus because it administers other benefits, such as pensions, that have no participation requirements.

A third difference is research. Whereas Australians view welfare as a political issue, in the US it is seen more as a problem to be solved. Experts on poverty mostly opposed work tests, but their flank was turned by well-designed evaluations that showed that mandatory welfare work programs could raise recipients' employment and earnings while reducing dependency. That made defending the old system more difficult.

In Australia, however, evaluations have not had the same prominence, leaving unanswered claims by opponents that enforcing work would be futile or harmful.

To get reform back on track, first get a new mandate for change. Both parties should take positions on reform during the next election, so that whoever wins will have more authority to act. Second, address the administrative problems by reforming Centrelink or creating a sub-unit within it dedicated to running mutual obligation programs. Third, publicise evaluation results more effectively, or launch new studies to establish the actual effects of mandatory work programs

As in the US, reformers should emphasise that their main goal is to help the poor more effectively, not to reduce society's commitment to them. While enforcing work does cut the welfare rolls, it expands the welfare state in other ways. Most must be spent on childcare and other services, and government assumes an onus to enhance the capacities of the poor. The goal is to use employment to integrate them more fully into Australian life.

Lawrence Mead, professor of politics at New York University, addressed the Centre for Independent Studies' recent Big Ideas Forum: The Welfare Revolution and the Consilium conference earlier this month.