Assessing Developments and Prospects in the Australian ... Development… · The National...
Transcript of Assessing Developments and Prospects in the Australian ... Development… · The National...
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Assessing Developments and
Prospects in the Australian Welfare
State
Presentation to OECD,16 November, 2016
Peter Whiteford, Crawford School of Public Policy
https://socialpolicy.crawford.anu.edu.au/
[email protected] Twitter: @WhitefordPeter
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Outline
• Background – Incomes, inequality and prosperity
– Social security and employment
• Assessing policy developments – Policy reviews
– Activation
– The investment approach
– The National Disability Insurance System (NDIS)
• Challenges and prospects
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Incomes, inequality and prosperity
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Trends in income inequality in Australia,
1981-82 to 2013-14
Gini coefficient
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Trends in real mean and median
household incomes in Australia, early
1980s to 2013-14 (1981-82 and 1993-94 = 100)
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Trends in real incomes at different decile
points, Australia, 1994-95 to 2011-12 Percentage change in real equivalent income unit income
6
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
P10 P20 P30 P40 P50 P60 P70 P80 P90
1994-95 to 2002-03 2002-03 to 2007-08 2007-08 TO 2009-10 2009-10 to 2011-12
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Change (%) in real median equivalised household
disposable income, 1995 to 2012 (or nearest year) Source: Estimated from OECD Income Distribution database, http://stats.oecd.org/index.aspx?queryid=46022
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
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Social security and welfare – how
Australia compares
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Social spending, OECD, 2014 or nearest year (%
of GDP)
Spending on cash benefits Spending on Health and Services
9
8.6
0 5 10 15 20 25
Mexico
Korea
Chile
Iceland
Turkey
Australia
Israel
Canada
United States
New Zealand
Estonia
United Kingdom
Switzerland
Slovak Republic
Norway
Sweden
Czech Republic
Netherlands
OECD
Japan
Ireland
Poland
Germany
Denmark
Luxembourg
Hungary
Slovenia
Greece
Spain
Finland
Portugal
France
Austria
Italy
Belgium
10.4
0 5 10 15 20
TurkeyMexico
ChileEstonia
KoreaIsrael
GreecePoland
PortugalSlovak Republic
SloveniaHungary
IrelandCanada
Czech RepublicSwitzerland
LuxembourgOECDSpain
ItalyAustria
United StatesIceland
AustraliaNorway
JapanNew Zealand
United KingdomBelgium
GermanyNetherlands
FinlandFrance
DenmarkSweden
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Public spending on income-tested benefits, %
of GDP, OECD countries 2012
10
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Net replacement rates for low paid workers in first
six months of unemployment, OECD countries, 2013
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Australia’s social security system is more targeted
to the poor than any other OECD country Ratio of transfers received by poorest 20% to those received by richest 20% Source: Calculated from Table s 3 and 5, OECD , 2014, http://www.oecd-ilibrary.org/economics/economic-growth-from-the-household-
perspective_5jz5m89dh0nt-en
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Welfare receipt in Australia % of working age households receiving income support payments by period
13
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0
20
40
60
80
0-4
5-9
10
-14
15
-19
20
-24
25
-29
30
-34
35
-39
40
-44
45
-49
50
-54
55
-59
60
-64
65
-69
70
-74
75
-79
80
-84
85
-89
90
-94
95
-99
10
0+
Health
Age Pension
Other
Aged care
Education
Government spending per person 2012, $’000 per year per person
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Employment, unemployment and
disadvantage
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How does Australia’s employment
performance compare? • In 2015 Australian employment rates overall were the 12th highest in the OECD
(72.2%).
• In contrast, employment for youth (15 to 24 years), Australia is ranked 4th
highest among OECD countries.
• The level of part-time employment is the third highest in the OECD after the
Netherlands and Switzerland.
– Around 29 per cent of the workforce are employed part-time. Most part-time
workers are women — around 72 per cent. Around 46 per cent of female
employees and 15 per cent of male employees participate on a part-time
basis.
• Temporary employment – as defined by OECD – is among lowest.
• Involuntary part-time employment – 7.2% of the labour force and 30% of part-
time workers is the highest in the OECD (2.9% is OECD average and 17% of
PT workers).
• Employment rates among lone parents are among the lowest in the OECD.
• Total joblessness among families with children is among the highest in the
OECD – but may have improved in ranking terms.
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Joblessness in Australia is highly concentrated
in households where no one is in paid work
Working age
population non-
employment rate
Share of working
age in jobless
households
Ratio of household
to individual
joblessness
UK 27.4 16.3 0.59
Germany 34.5 19.4 0.56
Norway 24.8 13.1 0.53
Australia 28.4 14.2 0.50
Denmark 24.5 9.2 0.38
Sweden 26.1 6.2 0.24
USA 28.5 6.3 0.22
Japan 30.7 5.1 0.17
Spain 35.7 5.8 0.16
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Assessing policy developments
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Trends in social security spending,
Australia, 1980 to 2012 Spending on cash transfers as % of GDP
19
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The Australian welfare system has been
extensively reformed since the 1980s • Liberalisation of unemployment benefit income tests in the 1980s.
• Income-testing family allowances 1987, increases in income-tested family payments
and integration of in-work and out of work family payments between 1987 and 1993.
• Following the recession of the early 1990s, the benefit system for the unemployed
partially individualised and “dependency payments” – for spouses (usually wives) of
recipients started to be phased out. The pension age for women was gradually
increased from 60 to 65 years.
• The Coalition government from 1996 increased family assistance particularly for one-
earner families, and also increased assistance again after 2000 when the GST was
introduced.
• Activation policies for working-age welfare recipients were increased for the
unemployed after 1996 and extended to parents from 2006.
• Since 2007 the Labor government targeted more tightly a number of family payments.
• Age and disability and carer pensions were significantly increased in 2009 and the
withdrawal rate on payments was increased from 40 to 50%.
• The age pension age will be gradually increased from 65 to 67 years between 2017
and 2023
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Trends in the number (000s) of unemployed
and unemployment benefit recipients, 1978 to
2012
21
0
100
200
300
400
500
600
700
800
900
1000
Unemployed Recipients
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Trends in underemployment, 1978 to
2012
22
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Feb
-1978
De
c-1
978
Oct-
1979
Aug-1
980
Jun-1
981
Apr-
1982
Feb
-1983
De
c-1
983
Oct-
1984
Aug-1
985
Jun-1
986
Apr-
1987
Feb
-1988
De
c-1
988
Oct-
1989
Aug-1
990
Jun-1
991
Apr-
1992
Feb
-1993
De
c-1
993
Oct-
1994
Aug-1
995
Jun-1
996
Apr-
1997
Feb
-1998
De
c-1
998
Oct-
1999
Aug-2
000
Jun-2
001
Apr-
2002
Fe
b-2
003
De
c-2
003
Oct-
2004
Aug-2
005
Jun-2
006
Apr-
2007
Feb
-2008
De
c-2
008
Oct-
2009
Aug-2
010
Jun-2
011
Apr-
2012
Underemployment rate Males Underemployment rate Females
Underemployment rate Persons
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Changes to “dependency” payments
• Access to Widow B Pension was limited in 1987, and then closed to new
entrants in 1997.
• Wife Pension was closed to new entrants in 1995.
• Partner Allowance and Mature Age Allowance were both closed to new
claimants in 2003, and by 2008 there were no longer any recipients of
Mature Age Allowance.
• Since 2005, new grants of Widow Allowance have been limited to women
born on or before 1 July 1955.
• In combination with the partial individualisation of benefit payments, this has
significantly reduced the effect of assuming dependency within the
household.
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Change in number (000s) of working age
income support recipients, 1996 to 2014
24 PW
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Per cent of working age population receiving
social security benefits, 1976 to 2014
25
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Lone parents :policy developments • 1942 – Introduction of Class A Widows Pension.
• 1968 – States Grants Deserted Wives Act assisted deserted wives in first 6 months after desertion or birth.
• 1973 - Introduction of Supporting Mother’s Benefit providing assistance after six month waiting period.
• 1977 – Introduction of Supporting Parent’s Benefit covering fathers.
• 1980 – Six month waiting period for SPB abolished.
• 1989 - Sole Parent Pension replaced Class A Widows Pension and SPB.
• 1998 – Parenting Payment Single (PPS) replaced SPP.
• 2006 - Child eligibility age lowered from 16 to 8 years for new applicants for social security payments, with new applicants having participation requirements and claiming Newstart.
• 2011 – Amendment to “grandfathering” to restrict impact of new birth.
• 2013 – Remaining “grandfathered” recipients moved to Newstart.
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Lone parents on PPS or equivalent as % of
working age population, 1974 to 2014
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Trends in principal source of income for lone
parents, Australia, 1994-95 to 2011-12
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Employment to population rate (%) among lone
parent families, 1980 to 2012
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Lone parents and apparent outcomes
• Lone parents have enjoyed significant real increases in income since the 1990s
• Employment increases have been significant and reliance on social security has reduced
• Lone parents have moved from the lowest income quintile to the second lowest
• Income inequality among lone parent families has increased, and relative poverty rates have been stable
• Housing costs may have increased as lone parents are now more likely to be private renters
• Much of the improvement in the economic circumstances of lone parents appears to have started before policy changes.
• Some of the changes appear to reflect changes in demographic composition of the lone parent population.
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The National Disability Insurance
Scheme
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The National Disability Insurance
Scheme • The NDIS is being introduced progressively around Australia from 1 July
2016.
• To become an NDIS participant a person must: Have a permanent disability
that significantly affects their ability to take part in everyday activities; Be
aged less than 65 when they first enter the NDIS; Be an Australian citizen or
hold a permanent visa or a Protected Special Category visa; and live in
Australia .
• By 2019, the NDIS will provide about 460,000 Australians under the age of
65 with a permanent and significant disability with the reasonable and
necessary supports they need to live an ordinary life.
• The NDIS takes a lifetime approach, investing in people with disability early
to improve their outcomes later in life.
• Individuals can self-manage their plan or members of their family can.
• The scheme is not income or means-tested.
• The Scheme is funded by an increase in the Medicare Levy plus savings
from previous State Government programmes.
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The National Disability Insurance
Scheme • Self-managed participants can select a preferred service provider
and claim the expense through the Scheme. There are three options
for self-managed participants to pay providers:
– Option 1: Self-managed participants can negotiate with providers to pay invoices
within seven to 30 days as part of their service agreements.
– Option 2: Self-managed participants can submit a payment request prior (within
one week) of receiving the support if the participants have an established service
agreement and the provider requires payment on day of service.
– Option 3: A self-managing participant can choose to pay a service provider
upfront and claim the expense back through the Scheme.
• The NDIS will typically pay claims, once received, within two to four
days.
• https://www.ndis.gov.au/people-disability/fact-sheets-and-
publications.html
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The National Disability Insurance
Scheme • The NDIS Outcomes Framework has been developed to measure
goal attainment for individual participants and overall performance of
the Scheme. There are 8 Outcome Domains (‘Domains’) in the
framework.
– Daily Living
– Home
– Health and Well-being
– Lifelong Learning
– Work
– Social and Community Participation
– Relationships
– Choice and Control
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The National Disability Insurance
Scheme • In the NDIS payment system, supports for participants fall into three
Support Purpose categories:
– CORE – A support that enables a participant to complete activities of daily living
and enables them to work towards their goals and meet their objectives.
– CAPITAL – An investment, such as assistive technologies, equipment and home
or vehicle modifications, funding for capital costs (e.g. to pay for Specialist
Disability Accommodation).
– CAPACITY BUILDING - A support that enables a participant to build their
independence and skills.
• Most supports are priced per hour of service; Support packages for
independent living for people with high needs can be up to $4,800
per week.
• Differing levels of support depending on levels of need.
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The investment approach
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The investment approach • The development of an investment approach was one of the
recommendations of the McClure review of Australia’s welfare system.
• The New Zealand government originally developed the investment
approach in response to a review on welfare dependency, which was
specifically asked to look at the insurance industry for ideas on reform. The
government has subsequently commissioned four actuarial valuations – in
2011, 2012, 2013 and 2014.
• The Baseline Evaluation report released in September 2016 was an
initiative of the 2015-16 budget, when the government allocated A$33.7
million to establish an Australian Priority Investment Approach to Welfare
based on actuarial analysis of social security data.
• Groups identified by the approach will receive support from current
programs and from new and innovative policy responses to be developed
through the A$96.1 million Try, Test and Learn Fund, which was announced
in the 2016-17 budget.
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The Baseline Valuation Report, 2016
• https://www.dss.gov.au/sites/default/files/d
ocuments/09_2016/baseline_valuation_re
sults_report_accessible_version_12_july_
2016_2pwc._2.pdf
• The report estimates the “lifetime” costs of
the social security system as close to $4.8
trillion.
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How do we get to $4.8 trillion • The report takes the population of Australia in 2015. Then, on the basis of past
patterns of receipt of payments, it projects the amount of money the population
will be paid over the rest of their lives and converts this into the present value of
this lifetime spending, with a discount rate of 6% – reflecting the fact a dollar is
worth more today than in the future given the capacity to earn interest.
• The population modelled in the report includes:
– around 5.7 million people currently receiving various income support payments (of whom 2.5
million are age pensioners);
– 2.3 million people not receiving income support payments but who receive other payments
(mainly families receiving the Family Tax Benefit);
– around 3.9 million who were previously receiving payments; and
– just under 12 million people who are not receiving any payments currently or have not in the
past.
• The lifetime valuation is about 44 times the total amount of payments in 2014-15
(A$109 billion). But it also includes people’s future age pension entitlements.
Given the average age of the total population is 39 and that on average
Australians can expect to live into their 80s, it is not surprising the estimated
lifetime cost is more than 40 times the current level of spending on cash
benefits.
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What does $4.8 trillion mean • More than half the total estimated lifetime spending will be on age pensions.
The average lifetime cost per current client is made up of A$150,000 in age
pensions and A$115,000 in all other benefits.
• For previous clients, the corresponding figures are A$114,000 in age
pensions and A$60,000 in other payments. For the balance of the
Australian population it is A$88,000 in age pensions and A$77,000 in all
other benefits.
• For people of working age who are currently receiving benefits it is these
other payments that figure larger than age pensions. This is particularly the
case for people receiving parenting payments, where the age pension is
only around one-quarter of their total lifetime costs.
• New Zealand’s actuarial model does not include family payments. And nor
does it include national superannuation – their equivalent to the age
pension – as it is provided free of any income test to people aged 65 and
over.
• By including both age pensions and family payments, the Australian report
produces significantly higher lifetime costs relative to the size of the
economy.
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Groups with poor outcomes and
high costs • The report highlights three groups of people who are expected to
have very-high average lifetime costs and poor lifetime outcomes:
– For 11,000 young carers, it is expected, on average, they will access
income support in 43 years over their future lifetime;
– for 4,370 young parents it is expected, on average, they will access
income support in 45 years over their future lifetime; and
– for 6,600 young students it is expected, on average, they will access
income support in 37 years over their future lifetime.
• These projected future histories will involve lifetime costs for these three
groups of between A$2 billion and A$4 billion. In all of these cases,
however, a substantial part of their estimated costs relates to years to be
spent on the age pension.
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Assessing the investment approach
• Very early days!
• The principle of early intervention is admirable
• Focus should be on sustainable improvements in
outcomes
• Rigorous evaluation is essential and government seems
to have committed to this, but there are complexities …
• Who has responsibility to intervene – possible cost
shifting and blame
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Future challenges • A significant proportion of the working age population continue to rely mainly on benefits
for their incomes – it is desirable for equity reasons and sustainability to reduce this, but
we should also be concerned that further reforms really do improve equity in outcomes.
• Australia escaped a major economic downturn from the “Great Recession”. This is a
very major advantage in facing future challenges. But real wage growth since 2013 has
been minimal and most employment growth has been part-time,
• Population ageing will soon start to have a much more significant impact on the costs of
the system.
• The Grattan Institute (2013) estimates that on current trends there would be a deficit of
4% of GDP by 2023 (2.5% at the Federal level).
• There are significant needs – with reforms to introduce greater support for disability
services, for aged care and nursing homes, for dental care and to improve equity in the
education system. These reforms need to be properly funded.
• Indexation provisions for unemployment payments are inadequate as are benefit levels.
Similar risks to future family payments. We are residualising the poor – are we
introducing the concept of “deserving” and “undeserving”?
• Because the Australian system is the most targeted to the poor of any rich country,
cutting social security benefits would increase inequality more than any other OECD
country.
• All proposals involve complex trade-offs and genuinely difficult choices, which will
require detailed public discussions and consultation and (hopefully) consensus.
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Additional material
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Spending on cash benefits for unemployed,
OECD countries, 2011 % of GDP
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Spending on active labour market
programmes, OECD countries, 2011 % of
GDP
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Participants (% of labour force) in ALMPS and
income support for the unemployed, selected
countries, 2013 Social
insurance
Social
assistance Other ALMPs
Australia - 6.71 1.85
Denmark 1.79 3.41 0.94 6.08
Finland 3.99 4.63 1.13 4.41
France 8 1.58 0.07 5.11
Germany 2.14 4.45 - 3.07
Italy 4.41 - 2.4 4.65
Netherlands 4.91 4.68 - 4.08
New Zealand - 2.18 - 2.33
Sweden 2.51 - 1.93 5.34
United Kingdom
(2009) - 5.04 - 0.23 47
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Trends in the number of lone parents and those
incapacitated or without participation requirements on
Newstart/Youth allowance (other), 2007 to 2015
Year Temporary ill
or
incapacitated
No
participation
requirement
or in
Disability
Management
Services
Lone parents Total Number
on Newstart
or Youth
Allowance
(other)
2007 39,008 - 12,559 486,491
2013 71,162 59,787 111,288 800.039
2015 72,362 64,218 119,869 (2014) 849,164