We live in a period of history where the scrutiny around our welfare system is at an all time high. Government attitudes towards our nations un- and under-employed citizens are primarily disparaging and punitive, while maintaining the myth that their approaches to policy reform in this area are designed to aid those least fortunate among us.
In contrast to the official rhetoric, there are simply not enough jobs to go around in this economy, and the act of punishing honest jobseekers for a situation that is ultimately outside of their control, a situation in no small part created by the current and previous governments, is not only irrational but inhumane.
So what exactly is going on with out welfare system, and is there a potential alternative to the wasteful and inefficient bureaucracy we seem to be saddled with?
Let’s start with the a look at the welfare system as it exists in our society today.
We are currently employing a means tested welfare system, which translates to the idea that you, your partner and your families income should determine if you are eligible to receive a social security payment. Also assessed under this model is the client’s job history, current employment status, ability to work (judged on physical and psychological factors) and compliance with mandatory activities such as work for the dole and/or job training sessions.
Much of the processing in the system is outsourced to non-governmental organisations with varying degrees of ideological and/or religious commitments.
So what is it to be a client in this system? What can an Australian citizen expect when applying for a payment?
It is commonly said that Australia is spending too much on its welfare system, with the federal government stating that it is “unsustainable”. Currently Australia is spending 6.9% of its GDP on welfare payments, less than half of other developed countries including France, Italy and Belgium, who all spend more than 16% of their GDP on welfare payments.
Australia is ranked 25th of the 30 countries in the OECD in terms of government expenditure on unemployment benefits. Contrary to popular belief, there exists in this country no “age of entitlement”, with the amount of persons on Centrelink payments steadily decreasing since the Howard era. It is clear that when (according to figures from ACOSS) 2.5 million Australians are living on less than $400 dollars per week, that government spending is simply not adequate to meet the needs of its people.
Despite this obvious inconsistency, the current federal budget cut 13 billion dollars from the welfare system, pushing Australia even further out of line with our democratic neighbours overseas.
The Newstart allowance has an uncharacteristically low rate of payment compared to other developed nations at just $257 per week, which is only roughly 64% of what is needed to live out of poverty, and only 40% of the minimum wage. This means payments to jobseekers are not meeting the true costs of living in Australian society.
To further drive the nail into the coffin of the unemployed in this nation, the Abbott governments budget revealed that job seekers applying for Youth Allowance or Newstart allowance, who have not been previously employed, will face a six month waiting period of no income support before they are eligible for payments, which they will receive only by undertaking 25 or more hours per week of Work for the Dole activities. Once they have been on this program for six months, they will lose the existing income support unless they undertake training or study.
It is commonly stated that “anyone can get a job if they try hard enough”, inferring that Australia’s unemployed population are taking advantage of the welfare system and simply not trying hard enough to gain stable employment. According to figures released by the Australian Bureau of Statistics, as of September 2014 there are 156,000 job vacancies. Competing for these job vacancies are in excess of 750,000 people. This means that even if every single vacancy was filled by previously unemployed persons, there would still be more than 600,000 unemployed people left over. When you factor in the roughly 920,000 underemployed Australians (as of July ’14), on average there are 10 job seekers for every job vacancy in the country.
Long term unemployment has doubled since the 2007 global financial crisis, with more than 200,000 Australians receiving Newstart Allowance for more than a year as of October 2014, according to a report published by the Department of Social Services.
Under the current Australian welfare system, if a recipients income is less than $48 per fortnight, they will earn working credits, up to a maximum of 1000. These equate to dollars in the sense that if a recipient has 550 credits, works a week and earns 450 dollars, they will have 100 credits left over. This means that as long as there are credits in the recipients account, their payment will not be subjected to normal means testing.
This provides a small grace period whereby the disincentive of reduced income from beginning work is minimised, however if the recipient is being paid a low wage, say 250 per week, and uses up their working credits, they are effectively put in a situation of being penalised for working. The penalty often winds up with the person receiving the same amount of money as they were prior to employment, with the added pressure of labouring in a low paying job. This is itself is a huge disincentive to work, as the jobseeker will realise that they are able to collect the same amount of money without any work.
This creates a sense of pointlessness to the act of seeking and finding work which discourages welfare recipients from making a concerted effort to change their circumstances. It does not appear to be a long term fix to the problem of unemployment.
As of September 15th 2014, the Commonwealth government gave Job Service Providers such as Mission Australia the ability to directly suspend the payments of unemployed clients. This privatisation has effectively placed the lives of all JSP clients into the hands of private companies. These companies are less transparent than government-administered institutions, meaning jobseekers will find it far more difficult to hold their providers accountable for their decisions. The decision allows JSP’s to manage cases independently of government oversight or influence, increasing the likelihood of intimidation of clients and lessening the ability of citizens to legally challenge any abuse.
There are other glaring issues with the structure of policy in our welfare system, but for the sake of brevity I’ll refrain from listing them all out here. As you can see from these examples, the situation is less than optimal.
So what, if anything, is the alternative? Many people are under the mistaken impression that Australia’s model for welfare is either above average or simply adequate to meet the needs of its clients, but it seems from my experience that the vast majority of those who hold such opinions are unaware of a very interesting and innovative program that has been trialled around the world with great success. That program is called Basic Income, and it could be not only a viable path forward out of poverty for Australia, but perhaps even our best option.
First, let’s get a little perspective.
The industrial revolution replaced human labour with technology.
The information revolution is replacing cognitive human tasks with machine equivalents.
Jobs like driving, medicine and document translation are now able to be mechanised in this way. Massively open online courses are showing that technology has huge promise in education, paving the way to lower fees and easier access from across the socio-economic continuum.
This advancement in technological sophistication is creating a world where the vast majority of jobs can, and soon will be, performed by machines and computers, leaving little room for human labour. An eventual situation of mass unemployment is inevitable under these circumstances, unless arbitrary roles are created for the purpose of keeping people employed. Our ability to produce items with our labour may become economically worthless as 3D printing and similar technologies make manufacturing complex objects quicker and easier than ever before.
Thus, on the output side of our new robot economy, we have a material abundance undreamed of by earlier generations. But on the production side, we have an economy increasingly independent of human labour and so unwilling to pay for it.
Hence, the looming unemployment crisis.
The approach of our government to this rapid shift seems to be quite plainly out of step with the situation itself.
It is seen as the duty and responsibility of every moral individual to seek paid work, and their failure to do so, even in economies where the number of unemployed persons is higher than the number of available jobs, is seen as entirely the fault of the jobseeker, as a sign of a lack of moral substance or character. This moral ideology was introduced by capitalist interests around the industrial revolution, in order to create an impetus for subsistence economies to move into profitable ones.
What is Basic Income, and why consider it as a replacement to a means tested system?
Universal basic income is the idea that governments should guarantee all of their citizens an income sufficient for a decent standard of living.
Under the UN Declaration of Human Rights, Article 25, it is stated that “”Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” Australia was one of the eight countries involved in drafting this legislation, and as a signatory to the declaration is obliged, ethically if not legally, to provide this level of care to its citizens.
The current welfare system in Australia requires a vast bureaucracy in order to ensure that recipients are not claiming their benefits fraudulently. This bureaucracy requires personal tax advisers, who are sucked out of the productive sector to fulfil these roles. This system needs to be updated in terms of its infrastructure every few years, which, when the system must cover millions of recipients becomes prohibitively expensive. By removing the idea of means testing, the entire apparatus designed to support it becomes unnecessary, and the need for continued spending on the maintenance and renewal of this system disappears with it.
The administration cost under basic income would be comparatively miniscule.
When welfare benefits are contingent on hours worked, income, family status, employment and so on, this creates opportunities to game the system, either by illegally lying (fraud) or by simply obeying the incentives put in front of you with no desire to change your circumstance (waste). Removing this incentive structure disallows gaming the system and ensures that the system reaches people exactly as intended.
Basic Income style programs give workers the ability to refuse a job with unsuitable or unhealthy conditions, extremely low remuneration, or abuses of power in management. In order to retain their staff, businesses would have to meet the demands of their current and potential employees, as they would no longer be able to hold the threat of financial ruin over their heads to keep them working in unsatisfactory conditions. This could potentially require no government intervention and would improve the quality of workplaces for employers and employees alike.
Policies such as the minimum wage will also be less important to enforce, as with basic income workers have a financial safety net in place already. As workers ability to negotiate with employers increases, the need of the government to tightly regulate the labour market lessens, allowing more freedoms and providing benefits for employers and employees alike.
With minimum wage obsolete, manual labour can be priced at its fair market value, therefore reducing the amount illegal immigrants stand to gain from working illegally and being paid cash in hand. This creates an incentive for immigrants to pursue legal immigration procedures as the potential incentives are more substantial.
Many basic mental health issues like anxiety and depression can be traced directly to poverty, and to a sense of being on uncertain ground financially and existentially. Many people feel as if they are days away from homelessness and that the available services have rather large cracks through which they are likely to slip. If there is a guaranteed level of security for these individuals, the threat of extreme poverty, starvation and homelessness is no longer a reality, providing a situation in which these people can feel truly comfortable. Without that sense of security and comfort, it is far less likely that the individual will be deemed suitable for employment.
The removal of the moral stigma of unemployment and the tests one is subjected to under the current system will also contribute to lessening psychological distress and feelings of misanthropy and alienation from the government, leading to a more cohesive and tight knit community. There is also evidence that poverty itself reduces cognitive capacity, again making it less likely that a given individual will be capable of finding and maintaining employment.
Basic health standards may improve under basic income as well. In the Basic Income trial in Dauphin, Manitoba, an 8.5 percent reduction in hospitalisation was found to be a direct result of the minimum income. This was attributed to the reduction in workplace injuries and family violence resulting from the rise in incomes.
The cost of ordinary welfare systems fluctuate over time due to economic factors, creating a situation of instability whereby government may feel pressured to cut funding to welfare programs under tough financial situations. The current Australian government under Tony Abbott’s leadership has done exactly this, effectively reallocating the funds from welfare services to defines under spurious notion of protecting the security of the nation. Under a Basic Income type system, the income is paid to all adults regardless of whether they hold a position within the labour system, thus to a large degree negating the impact of economic trends on the welfare system itself.
With the rise in the automation of currently human-run services, the unemployment rate is likely to rise steadily into the future. This would impose a significant strain on current systems of welfare due to the high intake of recipients and the need for expansions to the system of bureaucracy to cope with the demand. Under Basic Income, the rate of spending is constant and thus is unlikely to be swamped under the inevitable wave of jobless adults the sophistication of our technological life will bring.
The extra wealth available to persons under Basic Income type systems also encourages the development of small businesses. The usual fly-or-die situation of business startups is negated, as the entrepreneur has a financial safety net to catch them should their business fail. More people would feel comfortable starting their own business under this model, which is likely to increase innovation and competition in the economy. Evidence of this in action can be found in the Namibia study, where those receiving basic income were shown to be more enthusiastic in setting up small businesses and on average increase their earned income by 29%.
Much work in the areas of charity, academia, arts, music and community outreach type programs is socially beneficial but not profitable for those performing the tasks involved. Many people relegate these aspects of their life to weekends or days off, and even more simply cannot find the time to perform an action that is unprofitable to them or their families. A basic income would allow these individuals to spend more time on work of this sort without losing potential sources of income or marginalising existing sources.
As people have the money they need to fulfil their fundamental human needs under basic income, they are more likely to spend time reflecting on what it is exactly they’d like to do with their life here on earth. It is more likely that under this system, individuals will find the time to study their chosen profession, move to jobs they enjoy and thus are more likely to excel at, and generally reflect more on the nature of existence and the relationship of self to other. This is likely to decrease social unrest and antipathy, and increase the cultural and technological output of the populace.
Every adult under this system would be entitled to basic income independently of any other people. This gives them effective financial independence. Many abusive relationships are maintained through financial blackmail of the abused party, a situation which could be easily eliminated were those individuals given the means to escape financially.
How would we pay for it? From the Queensland University of Technology:
“It would be paid for from income taxes on all other income, and tax allowances will be reduced or curtailed. Current targeted, means-tested and contributory benefits will cease, to be replaced by the Basic Income. The present income tax allowances and deductions benefit higher income earners proportionately more than the less well off. By removing the tax allowances, higher income earners will contribute a little more income tax than under our present system.”
Historically, supporters of Basic Income have included Martin Luther King, Milton Friedman and Bertrand Russell.
There are obvious questions here that I’ve left unanswered, but again in the interests of brevity I’ll leave it up to you, the reader, to do your own research into any other queries you may have.
It seems obvious from this information that the Australian welfare system is fundamentally broken, and that this brokenness is not entirely accidental.
Government policy in this area is in direct contradiction to all the available data that suggests that increased spending on the poor and at-risk elements of society not only increases economic security, but social cohesion overall. The Abbott administration has failed to learn from the mistakes of the past, and seems to be content in ignoring the successes of foreign nations in this area.
If we are to secure a future of opportunity, freedom and safety for our children, we simply must stand up and demand a better welfare system in this country. Whether that comes in the form of a Basic Income style model, or whether that means simply bringing Australia into line with other developed nations, it is clear that radical change is not only desirable but necessary.
The smokescreen of government rhetoric on this issue can be blown away only by an informed populace, determined to fight for their basic human rights. We owe it to ourselves and to our fellow human beings to make ourselves into that populace, in the spirit of unity, compassion, friendship and love.