Submission to the Senate Standing Committees on Community Affairs Inquiry into the Social Services Legislation Amendment (Welfare Reform) Bill 2017

CPSA's response to the Senate Standing Committees on Community Affairs Inquiry into the  Social Services Legislation Amendment (Welfare Reform) Bill 2017. 

More information about the inquiry can be found on the Parliament of Australia website, along with CPSA's submission

CPSA's Submission 

CPSA welcomes the opportunity to make comment to the Senate Standing Committee's Community Affairs Inquiry into the Social Services Legislation Amendment (Welfare Reform) Bill 2017. As an organisation representing the interests of pensioners of all ages and low income retirees, CPSA is particularly concerned about the impact of the Bill on older jobseekers. Older jobseekers face significant discrimination in the employment market, which constitutes a barrier to gaining ongoing, stable employment, particularly those who have been unemployed for a long time[1].

CPSA notes that this Bill appears to propose a punitive and ideologically driven overhaul of social security payments that seeks to punish individual jobseekers for being unable to find work. This is despite the overwhelming evidence that there are simply not enough jobs for all those who want to work[2]. The purpose of the social security system is to recognise and support people experiencing disadvantage. CPSA contends that this Bill proposes to do the opposite.

Schedule 1 – Creation of the Jobseeker Payment

The Australian Government claims that the consolidation of a number of payments into a single Jobseeker Payment in the Social Services Legislation Amendment (Welfare Reform) Bill 2017 "will simplify the income support system and treat people in similar circumstances consistently"[3]. The Government hopes to achieve savings of $368.7 million over the forward estimates through these measures. However, CPSA does not agree that re-branding a raft of individual payments as the Jobseeker Payment necessarily simplifies the income support system nor does it recognise the variation in circumstances between social security recipients.

Consistent treatment of social security recipients

The motivation for introducing the jobseeker payment seems to be to remind recipients that they are looking for work, must look for work or ought to look for work, even if their prospects of finding a job, or holding down a job, are zero. It is disingenuous to say that all people of working age in need of social security payments are "in similar circumstances". Factors such as age, health, education, housing and addiction lead to significant variation in the circumstances of social security payment recipients. The social security system must recognise and support the varying circumstances of working age people who find themselves in need of assistance from Australia's income support.

At a minimum, the social security system as it applies to working-age people should be reformed to reflect short-term and long-term unemployment. Data published by the Department for Human Services about income support payments in its Statistical Paper series makes this distinction, but the income support levels for short-term and long-term are the same in dollar terms. Clearly, a person with recent work experience has a much better chance to return to the workforce than someone who has been out of the workforce for a prolonged period. The short-term unemployed person may have savings to complement the very low rate of assistance available and tide them over, whereas a long-term unemployed person generally has no reserves and needs a higher payment.

Australia's social security system does itself recognise this in that the Age Pension and other similar payments for people who generally are out of the workforce are higher than unemployment benefits. Even then, for those who depend on them as their single source of income, the Age Pension and similar payments hover around the poverty line. Unemployment benefits are significantly lower than pension type payments and must be increased so as to ensure recipients are able to meet their own basic needs.

Recommendation 1: That unemployment benefits for the long-term unemployed should be increased to the level of pension-type payments.

Recommendation 2: That unemployment benefits for short-term unemployed people should be increased to a level where basic needs are met.

Simplification of the income support system

The Widow B Pension is already closed to new entrants and will phase out in three years' time without any regulatory action. Similarly, the Widow Allowance and the Partner Allowance, payable at the same rate as Newstart Allowance, are set to phase out in five years' time. Accordingly, CPSA questions the need to abolish these payments. CPSA also notes that current recipients of the Widow Allowance who are in their early sixties will face significant difficulties when they are suddenly treated as potential workforce participants by Centrelink. Clearly, job prospects are not strong for recipients of this payment.

The abolition of the Wife Pension, also closed to new applicants, requires complicated regulatory arrangements to ensure that recipients continue to receive a higher rate of payment than is available under the proposed Jobseeker Payment. In the process, recipients will not have their payment indexed until they reach Age Pension age and an estimated 200 recipients living overseas would have their payment cancelled altogether. Current Wife Pension recipients who transition to a Jobseeker Payment will be required to look for a job. These changes to the Wife Pension will place recipients in significant hardship and will actually cost the Budget $6.3 million. Clearly, this does not simplify the income support system, but rather complicates it and makes it more expensive.

It is unclear how cessation of the Bereavement Allowance and Sickness Allowance payments will simplify the income support system. It is also unclear how this measure will ensure bereaved or sick social security recipients are treated more "consistently", given these payments recognise specific hardships that are not experienced by all social security recipients. CPSA is concerned that those who are bereaved or experiencing temporary sickness/injury will be consistently worse off if the Bill proceeds.

Schedule 3 – Cessation of Wife Pension

The Wife Pension is a non-activity tested income support payment paid at Age Pension rates to female partners of Age Pensioners or disability support pensioners who are not eligible for a pension in their own right. To qualify for the Wife Pension, a person must have lodged their claim prior to 1 July 1995, which is when the payment was closed to new entrants.

Schedule 3 proposes to cease the Wife Pension from 20 March 2020. Transitional arrangements will allow women who cease receiving the Wife Pension at that date to receive an alternative payment, where available.

The Government estimates around 2,900 recipients under Age Pension eligibility age would move to the yet-to-be-passed-into-law Jobseeker Payment, which is significantly lower than the Age Pension. Bearing in mind that the Wife Pension was closed to new entrants in 1995, or 22 years ago by the time this would come into force, this measure would affect 2,900 women who for 22 years or more have been on a significantly higher payment than Newstart (to be renamed Jobseeker Payment).

The Government acknowledges that this 'simplification' is unfair and accordingly proposes a transitional measure where recipients of the Wife Pension who transition onto the Jobseeker Payment would be paid at the rate of the Wife Pension the day before it ceases (19 March 2020). Accordingly, these women will miss out on the indexation of their payment until they become eligible for the Age Pension. Given the cost of $6.3 million to the Budget, it would clearly be fairer and more straight forward to allow the Wife Pension to phase itself out.

Recommendation 3: That the Wife Pension should be allowed to phase itself out.

Even though the 2,900 recipients of the Wife Pension have not worked for at least twenty-two years (as the payment was closed to new entrants in 1995), the Statement of compatibility with human rights[4] is clear that the Department of Human Services will attempt to get these women back into the workforce, and failing that, subject them to the Activity Test. In its Statement of compatibility with human rights the Government says: "Introducing these recipients to activity testing may be seen as a retrogressive measure, but it is for the legitimate objective of ensuring sustainability and consistent treatment in the system that does not restrict the basic right to social security". CPSA contends that this "objective" is not legitimate.

As noted earlier, an estimated 200 recipients living overseas would have their payments cancelled. It is unacceptable to simply cut the Wife Pension of people who established their eligibility many years ago and who, if this measure goes ahead and as a direct result of this measure, will not qualify for the Age Pension once they reach Age Pension age, unless they return to Australia to live. While again the Government makes soothing comment in its Statement of compatibility with human rights to the effect that this is necessary to "drive efficiencies and deliver greater administrative consistency within the welfare system", it is unclear how kicking 200 women off the Wife Pension and closing off their chances of receiving an Age Pension in the future is compatible with human rights.

The assertion that "the recipients [have] ample time to return to Australia or adjust to their new circumstances" completely disregards the fact that these people have already planned their lives according to the current set of rules and that the Government is moving the goal posts.

Recommendation 4: That if the Wife Pension ceases, recipients should be assessed for their eligibility for the Disability Support Pension and the Carer Payment.

Recommendation 5: That if the Wife Pension ceases, recipients transferring to unemployment benefits should not be subjected to activity testing.

Recommendation 6: That if the Wife Pension ceases, overseas recipients should be transferred to another payment.

Schedule 5 – Cessation of Sickness Allowance

As part of the proposed replacement of the Sickness Allowance with the Jobseeker Payment, a new Relief from Activity Test provision will be introduced into the Social Security Act (new section 602D).

CPSA notes that a Budget 2017-18 briefing note[5] outlines the proposal to remove mutual obligation exemptions due to drug or alcohol abuse, as well as the proposal to remove Impairment Table 6 from the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011. This is an administrative measure.

The removal of Table 6 – Functioning Related to Alcohol, Drug and other Substance Abuse, means that people whose functioning is significantly or catastrophically impaired as a result of substance abuse would no longer be eligible for the Disability Support Pension (DSP). It appears that new section 602D is designed to ensure that those people who lose their DSP following the removal of Table 6 are not able to receive an exemption for the activity test when they are moved onto the Jobseeker Payment.

CPSA regards the combination of the use of an administrative measure (removal of Table 6) and the introduction of an amendment to primary legislation (new section 602D) as a very questionable operation. The effect of this operation would be that people with a Table 6 disability who have a very limited chance of ever becoming job-ready, go onto the Jobseeker Payment, rotating in and out of rehabilitation programs and Employment Pathway Plans. However, given the vulnerability of this cohort and the shortage of places within substance abuse rehabilitation programs, CPSA is concerned that these people will be unable to meet their activity test and will have their payment cut as a result.

The motivation for removing Table 6 appears to be purely ideological and based on not only blaming a person with a Table 6 disability for their predicament but wanting to punish that person.

Recommendation 7: That 'Table 6 – Functioning Related to Alcohol, Drug and other Substance Abuse' should not be removed from the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011.

Schedule 6 – Cessation of Widow Allowance

Schedule 6 proposes that Widow Allowance be closed to new entrants from 1 January 2018, with the payment ceasing entirely from 1 January 2022. No Widow Allowance recipients or applicants up to 1 January 2018 would be financially disadvantaged. However, this measure is entirely unnecessary as the Widow Allowance will phase out naturally by 1 January 2022 without any legislative or administrative changes. The Widow Allowance is only open to women born on or before 1 July 1955, all of whom will reach Age Pension qualification age by 1 January 2022. Given that under the proposed

Recommendation 8: That the Widow Allowance should be allowed to phase itself out.

Schedule 9 – Changes to activity tests for persons aged 55 to 59

Currently Newstart Allowance recipients aged over 55 can satisfy the activity test by engaging in voluntary work for at least 30 hours per fortnight. This arrangement only applies if the Department considers there are no real prospects of a person finding work. In June 2013, there was a total of 127,651 people aged between 50 and 59 on Newstart, of whom 39,833 (31 per cent) were classified as short-term unemployed and presumably did not have the option to satisfy their activity test by doing 30 hours of approved voluntary work.

The proposed amendments would change the activity test to being engaged, for at least 30 hours per fortnight, in a combination of approved unpaid voluntary work and suitable paid work, at least 15 hours of which must be in suitable paid work. Newstart Allowance recipients will be required to give up half their current (volunteering) job in order to find a second half-job consisting of suitable, paid work.

The policy attention aimed at Newstart recipients aged 50 to 59 seems misguided. ABS unemployment and underutilisation data very clearly show that older workers (those in the 45 to 54 cohort and over-55 cohort) are not overrepresented compared with the under-45 cohort. In fact, seasonally adjusted data for May 2017 for over-55s shows an unemployment rate of 3.6% compared with an overall rate of 5.6%. Unemployment among the 45 to 54 cohort is also significantly lower than the overall unemployment rate. The underutilisation rate for over-55s is also lower than for other age groups. Importantly, it is not as though this is a one-off result: these lower rates have generally obtained since data collection and publication started almost forty years ago. Accordingly, CPSA questions why the Australian Government is proposing to increase the activity test requirements for this cohort, given that older workers are not overrepresented in unemployment and underemployment figures and tend to outperform younger people in terms of workforce participation.

Newstart recipients over 60 will continue under the current arrangement and those aged 50 to 59 will effectively be treated as Newstart recipients aged under 50. While those aged 50 to 59 will technically have the option to do 15 hours of volunteering and 15 hours of suitable paid work, these are people the Department considers have no prospect of finding suitable paid work. This means that a person aged 50 to 59 who was previously assessed as having no real prospect of finding suitable work, must now, without any apparent change to the criteria used by the Department, try and find suitable paid work, which the Department presumably still considers the person as being incapable of finding.

While the Government claims to have set aside $100 million "to increase the skills and experience of mature age job seekers from 1 July 2018", this money would be likely to go towards the cost of changing administrative arrangements, such as amending Newstart Employment Pathway Plans for the 87,818[6] long-term recipients currently aged between 50 and 59. The $100 million equates to $1,100 for each long-term unemployed Newstart recipient aged 50 to 59, an amount manifestly inadequate to get recipients currently considered by the Department as unemployable, job-ready.

The economic circumstances of long-term-unemployed Newstart recipients aged 50 to 59, of whom approximately 80 per cent are single can only be described as dire and deserving of financial relief rather than of increased pressure to find a job that is not there. The single Newstart Allowance stands at $535.60 per fortnight, just under $14,000 a year or $38 per day. No specific information is available on housing occupied by Newstart recipients, but it is obvious that no form of housing (not even social housing) is really affordable for this cohort. Forcing long-term-unemployed Newstart recipients aged 50 to 59 to look for a job without real support does not achieve anything other than making life a lot harder for those people who are already doing it incredibly tough.

Recommendation 9: That the proposed changes to the activity test requirements for Newstart Allowance recipients aged 50 to 59 should not proceed.

Recommendation 10: That if the proposed changes to the activity test requirements for Newstart Allowance recipients aged 50 to 59 are introduced, they should not apply to recipients who are long-term unemployed.

It should also be noted that the proposed measures in relation to the activity test do not include a measure announced as part of the 2017 Budget that Newstart recipients aged 60 and over would have a volunteering requirement of 10 hours per fortnight[7]. 

Recommendation 11: That activity test requirements should not be introduced for recipients over the age of 60.

Schedule 11 – Removal of intent to claim provisions

CPSA rejects the proposal to remove the intent to claim provisions, which allow claimants to receive payments from the date on which they initially contacted the Department of Human Services. While electronic communications have sped up the application process, an application can only be once a person has become eligible for a payment. The result of abolishing the intent to claim provisions is that applicants will not be paid from the day they become eligible

Given that by definition the bulk of applications would be from first-time applicants, it is only reasonable to make applying for a social security payment as easy as possible and to give people a reasonable period of time to get together all necessary information. Requiring applicants to have their entire application completed on the same day they become eligible for a social security payment is setting these people up to fail.

For this reason alone, intent-to-claim provisions should remain. If they are to be changed at all, the Government should legislate that applicants will be paid from a date nominated by them as the date on which they consider they became eligible if the Department of Human Services confirms that date is the date they met eligibility conditions.

Recommendation 12: That intent-to-claim-provisions should remain unchanged.

Recommendation 13: That if intent-to-claim provisions are changed, they should stipulate the date when the applicant became eligible to receive the payment as the start date for payments.

CPSA is particularly concerned that the categorical abolition of intent to claim provisions will disproportionately disadvantage applicants who have limited or no access to means of electronic communications. This would include some older applicants as well as many applicants who are homeless or who have particular disabilities or medical conditions.

The purpose of removing these intent-to-claim provisions is not "to encourage claimants to take greater personal responsibility for understanding their payment entitlements and submit claims in a timely manner", but this is clearly an attempt to make the social security system even less accessible than it already is to people who need it.

Recommendation 14: That if intent-to-claim provisions are changed, those applicants who do not have access to electronic communications should continue to receive payments from the date on which they initially contacted the Department of Human Services.

References

[1] Australian Human Rights Commission, National prevalence survey of age discrimination in the workplace (2015), 3. At https://www.humanrights.gov.au/our-work/age-discrimination/publications/national-prevalence-survey-age-discriminationworkplace [Accessed 1 August 2017]

[2] The Vacancy Report produced by the Department of Employment estimates there were around 171,800 vacancies advertised in June 2017, compared to 728,100 jobseekers: http://lmip.gov.au/default.aspx?LMIP [Accessed 1 August 2017]

[3] Explanatory Memorandum, Social Services Legislation Amendment (Welfare Reform) Bill 2017

[4] P138: Explanatory Memorandum, Social Services Legislation Amendment (Welfare Reform) Bill 2017.

[5] Australian Government Department of Social Services (2017) ‘Welfare Reform: 2017 Budget’ Available: https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf [Accessed 1 August 2017]

[6] Statistical Paper No. 12 – Income support customers: a statistical overview 2013, Australian Government, Department of Social Services.

[7] PP159: Budget Paper No. 2 2017-18. Available: http://www.budget.gov.au/2017-18/content/bp2/html/