COTA's response to Welfare Reform

COUNCIL ON THE AGEING (AUSTRALIA)
Response to the Interim Report of the Reference Group on Welfare Reform:
Participation Support for a More Equitable Society

May 2000

Introductory comments

The Council on the Ageing (COTA) welcomes the conceptual leadership of the Reference Group on Welfare Reform in opening up a debate about the purpose and goals of Australia's social security system. The Committee has presented a plan that has the potential to ameliorate the lives of many Australians if the plan is well-resourced, implemented with sensitivity and care, and maintained with integrity.

The Committee's proposals are very ambitious. It is likely that further research, implementation of pilot programs and consultation over a longer time frame will be necessary to advance many of these.

Our specific comments are related below. The issues we raise should not be taken as critical of the ideas contained in the interim report but are aimed at assisting their further development. Our comments reflect the outcomes of consultations with the State and Territory Councils on the Ageing.

1. Do you support the broad thrust of the interim report that the key goal of the social support system should be to help people access opportunities for economic and social participation?

Yes, but with the qualification that the provision of timely and adequate income support in the event that an individual is unable to draw an income from paid employment is an equally important goal.

Why?

The Council on the Ageing (COTA) believes there is a high level of social exclusion amongst many people between the ages of approximately 50 to 64.

The causes of social exclusion for this group are complex but involve two key factors:

• Age discrimination which relegates a great many in this age group into unemployment or undesired early retirement: 46 per cent are not in paid employment.
• High level of reliance on income support payments: 33 per cent are reliant on some form of social security payment which inhibits their capacity to engage in many aspects of the life of the community because they are on a very low, fixed income. The importance of providing this income must not be underestimated either.

The extent to which opportunities for social and economic participation of mature age people can be opened up through the social security system is worth exploring. However, the project envisaged by the reference group will entail significant additional resourcing and a high level of commitment on the part of Government.

In addition, COTA believes that the following issues and questions must be addressed in terms of the changes under consideration:

• The proposed participation model is built around the assumption of strong economic growth and steady-state economy – it ignores the role of the social security system in recession. What does the participation concept mean for recessionary conditions? In addition we note that the rise in the numbers of people on disability support pension has strong associations with employment and economic conditions.
• Rights, protections and appeals processes within a social security system based on the concept of social and economic participation need to be very strong.
• Inadequate social security payments, in themselves, affect opportunities for social and economic participation.
• The relationship of the social security system for working age people to the retirement incomes system needs to be better understood within the proposed framework.
• COTA has had major concerns about the social and economic participation of mature age people who do not receive an income support payment because of the harsh social security means test and who are also subsequently disqualified from training and labour market assistance. This issue also needs to be addressed.

2. Would you support an integrated payment structure for people of workforce age to replace the current categorical system of income support?

It is not clear what advantage an integrated payment structure would confer over the present categorical system.

While simplicity is a desirable characteristic of any system, it is not easy to achieve. The tax reform arrangements for effect 1 July, are designed to achieve greater simplicity over the present arrangements however, have proved to contain a range of inherent complexities of their own.

COTA believes the following are required to advance this issue:

• further research
• a full cost-benefit analysis
• specific community debate

The achievement of the overall objective of social and economic participation is not necessarily contingent on the adoption of an integrated payments system. This could be deferred for further examination.

3. Do you agree with the report's suggestions about the obligations of government, business, the broader community and individuals in increasing economic and social participation? Maybe.

Why?

The concept of 'mutual obligation' needs to be handled with a great deal of care in relation to mature age people. The concept is based on the notion that if people are being supported by the community through an income support payment, they should be asked to make a contribution to the community in return.

However, mature age people feel overwhelmingly that the fact of receiving an income support payment is the result of a diminution of opportunities related to their age. Overwhelmingly, this group wishes to be self-supporting and independent of government. A 'mutual obligation' requirement that implies lack of resolve to gain employment will fuel the existing anger and bitterness of this group and will not assist their workforce prospects.

Mature age unemployed people feel that government and employers are not fulfilling their side of 'mutual obligation'. In this regard, COTA wishes to see a 'mutual obligation' placed particularly on the business sector for addressing workplace discrimination which affects hiring and firing decisions about mature age people. We believe the work of the Australian Employers Convention, initiated by JobsEast and aimed to educate employers about the ageing workforce, the benefits of age balance and the skills of older people, should be supported and enhanced. COTA is also working on developing a 'code of conduct' for business in relation to the ageing population.

The interim report discusses 'mutual obligation' for business, community, government and the individual however only individuals on income support are ultimately accountable on these obligations. For business, community and government 'mutual obligation' can be viewed as a voluntary concept - for individuals it is a condition of income support payments therefore compulsory.

The way that 'mutual obligation' requirements can be strengthened for business, community and governments need to be explored. Pilot programs may be needed in this area.

The proposal for enhanced 'mutual obligation' requirements on the community sector needs to recognise the costs to that sector, in terms of training, supervision and support. The costs to the individual of volunteering as well need also to be recognised and compensated

COTA believes that any increase in 'mutual obligation' for mature age people on income support must be backed by a major increase in services, training and education opportunities.

A strong view in COTA is that mutual obligation should focus on encouraging and facilitating adjustment rather than being directive.

The Council on the Ageing in the Northern Territory wished to point to the problems around 'mutual obligation' for indigenous people on income support payments in remote communities.

4. In what circumstances is it reasonable to require some form of social or economic participation, from people who have the capacity, as the basis for income support provision to people of workforce age?

COTA does not believe, as noted above, that compulsory requirements for social and economic participation are necessary for people over the age of 45 on income support payments. We believe such requirements are likely to be more harmful than effective.

Approaches to assisting this group should be based on a partnership model which opens up the choices available to the individual. COTA believes that if opportunities are opened for people over 45 in the labour market, education and training, that these will be taken up freely and willingly such that coercion is not necessary.

5. Do you consider that improved financial incentives are required to increase economic participation?

COTA has found that the majority of mature age people are highly motivated and are often prepared to take a drop in salary in order to obtain employment if they have lost a job.

The major problems in terms of financial incentives relate to the operation of the income test as it relates to part time, casual or contract work.

Mature age people could benefit from income support measures which enable phased retirement and/or ongoing part-time work to supplement social security as many are discouraged from employment because of the income test.

Mature age people report that they are discouraged from taking casual or contract employment opportunities because of its effects on regular social security payments.

If so, what do you see as being the highest priority for this?

COTA made a number of recommendations in this area in its first submission to the Committee.

COTA's highest priority would be to see the easing of the income test such that people could earn a sum over the period of a year without it affecting their income support payment. For instance in a 12 month period, we suggest mature age people should be permitted to earn around $3000 or the equivalent of $60 per week at any time before payments are reduced under the income test.

6. What changes to service delivery arrangements would be required to facilitate income support recipients of workforce age increasing their economic and social participation?

COTA has identified that a major problem at the present time is that staff at Centrelink and the Job Network are not adequately trained in relation to mature age people. The culture of Centrelink and Job Network providers will need to change to provide the quality of service envisaged in the report. In addition, rates of staff turnover which affects the capacity for the ongoing case management of individuals will need to be addressed. In addition, COTA believes that staff in Centrelink and Job Network dealing with mature age people should be experienced, mature people themselves

COTA has concerns about health assessments of mature age people and inappropriate referrals to jobs for which mature age people may be unsuitable on health grounds.

Individualised service delivery must be backed by adequate education and training opportunities. COTA doubts that more case management of individuals on its own, will be effective in returning people to work unless there are genuine opportunities available for mature age people to gain skills.

Are there any other issues you would like to raise?

To conclude, COTA emphasises the following as being critical to achieving the social and economic participation goal proposed by the Reference Group.

• the need to address age discrimination in the labour market;
• the importance of enhanced education, training and lifelong learning opportunities to support more individualised and streamlined service delivery, to maximise the capacity of unemployed people to gain paid employment, and to minimise reliance on the social security system;
• appropriate staffing for Centrelink and Job Network providers to work with mature age people;
• recognition that many unemployed mature age people are outside the social security system.

For further information about this submission please contact:

Veronica Sheen
National Policy Officer
email: vsheen@cota.org.au

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