Welfare Reform in Australia: Labor's view

Labor's vision for welfare reform is all about opening up opportunities and allowing everyone to have a stake in the wealth and prosperity of our nation. At the core of the challenge we face is the unification of economic and social policy.

It took the devastation of the Second World War to force Australian policy makers to elevate social policy to the same level as economic policy, or more correctly, bend our economic policy goals to the achievement of socially just ends.

The question facing us some 50 years later is when, not if, the devastation of the spread of growing child poverty and an increasing divide between rich and poor becomes so acute that we again put the common wealth ahead of the wealth of the market. We need in particular to see social policy as an issue of hard-headed economics as well as an issue of social justice and equality.

Today, there is one Australian of retirement age for about every five Australians of working age. Assuming current levels of net migration continue in the future, in the year 2021, there will be one for about every 3.5. And by 2051, the ratio will be one for every 2.5.

The demographers rightly tell us not to be too alarmist about this: higher labour productivity makes it easier to support an aging population; and Australia's aging profile is not as extreme as many other countries'. But this does underscore two things: first, we cannot afford to have large sections of the working-age population trapped outside the workforce by a failing welfare system; and second, we need to boost Australia's birth rate to take pressure off dependency ratios in the future.

The two guiding principles linking the social and economic debates must therefore be welfare to work, and work and family. Welfare to work, because it boosts the current working population; and work and family because international evidence shows it is perhaps the most important issue in halting the falling birth rate.

Welfare reform: the McClure report

The Government now has in its hands a directional statement for the reform of Australia's welfare system - the McClure Report. It is a statement Labor has largely endorsed because it points in the direction we believe welfare reform must always point: helping people move from welfare into work.

There are some positive signs in the document produced by the Welfare Reform Committee - its recognition of tax credits, work bonuses, participation supplements, and better case management are all ideas that can make a difference. Properly implemented, this statement will also achieve the other key goal of welfare reform: maintaining a strong safety net for those in need.

If there is a weakness in the Report it is that its loose use of 'mutual obligation' has left the door open for the Government to target some of our community's most vulnerable.

In the eyes of most Australians, this government has gone too far in applying punishments to people on welfare. We don't need to extend such a punitive regime to more groups because one-sided mutual obligation backed by extreme punishments does not help people get work.

We need to re-appraise the level of investment that we make in people. Unfortunately, over the past four years this investment has declined significantly with some $5 billion in cuts to key welfare to work incentives, childcare, and education and training.

This has had clear consequences: more children living in poverty, more children growing up in jobless families, continued growth in numbers on disability and single parent pensions, the unemployed spending longer on benefits - all at a time of record economic growth.

Making work pay

To complement this investment in capacity-building programs, we also need to make sure that work is fairly rewarded when people get the job they have been chasing. This is where tax credits and work bonuses are important.

Tax credits ensure people don't lose so much of their wage in tax and lost social security payments that they are no better off working. Employment Bonuses also provide a significant boost to the long-term unemployed because they reward people who get a job and stick at it. This is one area of the McClure Report the Howard Government was very quick to rule out, which was a bad misstep.

A recent review of in-work benefits in the UK, US and Canada published by the Oxford Review of Economic Policy, noted these effects with particularly positive outcomes for jobless families. Some commentators in the US believe the earned income tax credit is the most important single influence in the decline in the welfare rolls.

This runs contrary to the opinions of hardliners like Laurence Mead, who was invited to Australia recently by the Government. For him, punishment and compulsion are the keys to welfare reform. This is wrong, and to the extent the Howard Government follows this path, it will find itself in a dead-end.

Making work possible

Parents, particularly single parents, know that better incentives go only part of the way. Making childcare more affordable is also an essential part of addressing employment barriers.

While there has been a slight increase in assistance since July it has only partially offset the damage over the past few years. For example, while out-of-pocket childcare costs have been estimated to have fallen by 15 per cent since July, they rose by 27 per cent in the previous four years, after significant government funding cuts to childcare.

Labor's focus will be on providing affordable, accessible, quality child care that helps families earn and keep extra income while reassuring them that their children are well cared for. We will do this not just as a welfare-to-work measure, but as a key plank in the Knowledge Nation vision for the future.

Child care is as much about early childhood development as it is about welfare to work.

Work and Family

There are two aspects to the work-and-family debate that need further explanation: supporting families and restoring the balance in workplaces.

OECD studies show that birth rates are highest where female workforce participation is highest. The OECD sensibly observes that such correlations do not prove that increasing female labour force participation rates will inevitably increase fertility rates. But they do suggest "child rearing and paid work are complementary rather than alternative activities", and that policy should be made on that basis.

In too many families today, our children are not getting the start they deserve because when Governments shift the tax burden to those on lower incomes, remove labour market protection, and withdraw access to social security and social services, the welfare of families is directly harmed.

At the core of Labor's initiatives to strengthen family and community life in this country is a determination to make resources available to families when children are first born.

The point here is simple: if our social services and welfare system could invest more in children we wouldn't have so many disadvantaged adults, thus easing the burden on our welfare system in the future. It is about making families stronger by giving them more time together and providing them with the support they need.

We currently have a patchwork quilt of services - childcare, maternal and child health, family support and early education - that are fragmented and inaccessible. We need a root-and-branch reappraisal of services for children and families and we have to make sure young families get all the services they need to be good families. That means changing the way governments at all levels plan and fund child and family services.

A new child and family service platform would start with a comprehensive national program of early assistance. What early assistance could offer families is fourfold:

• Early childhood and parenting services for all families;
• Comprehensive home visiting when children are young;
• Parenting education before and after the birth of a child; and
• Information and referral services that put families in touch with their local community services

And all of these would be backed by a government commitment to monitor and strive to improve the wellbeing of families and their children.

Based on overseas experience, every dollar spent on supporting young families with parenting and early-intervention programs will save the community seven times as much down the track in health, welfare and policing.

Industrial relations

Finally, we must look closely at the changing patterns of work and the impact this is having on family life. One of the problems with the neo-liberal view of industrial relations is its serious impact on the ability of Australians to balance work and family life.

Too often, workplace deregulation has resulted in more flexibility for employers than employees. It has produced unfriendly working conditions for people with families. Recent evidence in Australia points to the fact that family-friendly clauses in workplace agreements have remained largely the preserve of better educated, higher-paid workers.

This underscores the fact that Labor's traditional concern with equality of bargaining power in the workplace is not some kind of old-fashioned obsession, but is essential if the great bulk of the Australian workforce is to have a more family-friendly working life.

Put simply, where workers have bargaining power, they are getting a more family-friendly workplace. Where they do not have bargaining power, they are missing out. Our nation cannot afford for the majority of workers to miss out.

Labor has a simple four-step plan for labour reforms that will improve families' abilities to balance work and family life.

The first element of our four-step plan is to restore the power of the Industrial Relations Commission - the workplace umpire - to deal with all subject matters of industrial disputes.

The second will be the creation of a database of 'family friendly' clauses for work awards and agreements. This gives both employees and employers in each workplace the benefit of others' experience.

A third point is to get Australian judicial bodies with an interest in industrial issues to work more closely together. There is real value in having the Industrial Relations Commission work hand-in-hand with the Human Rights and Equal Opportunity Commission to advance the family-friendly agenda in Australian workplaces.

The final element of our industrial reform proposals is to extend anti-discrimination legislation to ensure that workers are protected from the extremes of workplace abuse.

This is about providing protection to workers caring for sick children or frail, elderly parents or pregnant women enabling them to balance work and family responsibilities in difficult times. We want to help families find some space in their lives for those that matter most to them - their children - while at the same time acknowledging the importance of work.

Flexible assistance to families

Another idea Labor has put forward is allowing new parents to access future basic family payment entitlements up-front in the form of a family account. This would enable many families to have one parent stay at home for the first few years of a baby's life.

Policies like this would extend to many more families an opportunity that is currently afforded to only a few. This is what Labor means by a welfare system that gives people choices that they would otherwise not have.

These are the priorities Labor brings to welfare reform. As well as emphasising the critical elements of investment, opportunity, reward, and balanced obligations, Labor believes a longer-term approach needs to be taken. However, while in the past we have focused on the social benefits of good economic policy, we now need to turn our minds to the economic benefits of good social policy.