There has been a big increase in people claiming the Disability Support Pension (DSP) although at least half of the claimants are capable of holding down a job. A large part of the increase in DSP numbers represents ‘hidden unemployment,’ as many previous unemployment recipients are now found on the DSP.
- In 1980, 2.3% of working-age adults were claiming Disability Support Pension (DSP); by June 2003, this proportion had more than doubled to 5% (673,000 people). The annual cost of payments is $7.6 billion.
- Few commentators believe this increase reflects a real increase in disability and incapacity in the working-age population. Many DSP recipients have relatively mild complaints which need not prevent them from working, and some are not incapacitated at all. At least half of those currently claiming DSP are capable of holding down a job.
- A large part of the increase in DSP numbers represents ‘hidden unemployment’. Workers in their 50s and early 60s who are out of work would previously have claimed unemployment benefits, but today they gravitate to the DSP, which is more generous and less demanding than unemployment assistance. Once enlisted, few people leave until they retire onto the state pension. DSP has become a state-funded early retirement package.
- Taking account of the growth in DSP claimants, long-term unemployment is probably twice as large as the official figures suggest – around 650,000 people (300,000 more than official unemployment figures).
- Both the 2000 McLure Report and the 2004 Senate Poverty Inquiry suggested abolishing the distinction between unemployment allowances and disability pensions, but this could do more harm than good. It would be expensive, and it would further blur the distinction between those who are expected to work and those who are not.
- It makes more sense to tighten DSP eligibility, yet the Senate recently blocked two attempts to limit DSP to those who genuinely cannot work. Surveys suggest the Senate is out of touch with public opinion on this issue, for nearly two-thirds of Australians say they want eligibility rules tightened.
- Tighter rules could halve the number of DSP claimants. If those who are capable of working were transferred to unemployment allowances, this alone would save $500 million per year. If just one-third of them eventually went back into the labour force, annual savings would top $1.5 billion.
- Some of the money saved by reforming DSP could be used to improve disability services for those who really need them. The Australian public wants disabled people to be properly supported, but they do not want people who are capable of working living on disability pension until they retire.
Professor Peter Saunders is Social Research Director at The Centre for Independent Studies and co-author of Poverty in Australia: Beyond the Rhetoric (2002).