Welfare dependency in Australia is historically low. More cuts will only hurt the needy

Extract from The Guardian

Greg Jericho

Let’s not play the idiotic game of calling cuts targeting the poor ‘reform’. Cutting welfare means hitting those who are already among the poorest

Zed Seselja, the assistant minister for social services, says welfare dependency is a major drain on the budget. Photograph: Tracey Nearmy/AAP

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@GrogsGamut

Monday 25 July 2016 11.42 AEST 

Upon being named the new assistant minister for social services and multicultural affairs, ACT senator Zed Seselja told the media that welfare dependency was a significant issue and a major drain on the budget.

It came in the same week that the latest Household, Income and Labour Dynamics in Australia (Hilda) survey report showed that our level of welfare dependency remains very low, and surprisingly so given the state of the employment sector.
Seselja was ready with the standard Coalition soundbites in his first media interview. He suggested the government “wants to have a culture in this country that, to the maximum extent possible, encourages those who can work, to work.”
Well obviously. Which government doesn’t want that? And is there any proof we don’t already have such a system?
As the Productivity Commission’s report in to the tax and transfer system in 2015 showed, our welfare is very much targeted to the poorest:

For all the talk about welfare being a burden on our budget, overwhelmingly the biggest cost to the budget is the aged pension:

And the implication of Australians being too dependent upon welfare also does not stack up. The Hilda survey report released last week by the Melbourne Institute of Applied Economic and Social Research reveals as well that Australia’s welfare dependency remains well below what it was 15 years ago.
The report found that in 2014, 31.6% of individuals aged 18–64 were living in a household that received income support at some stage of the financial year ending 30 June 2014. This compares with a figure of 37.8% in 2001.

Not surprisingly the report notes much of the decline occurred from 2001 to 2009, and that since then there has been a stabilising of the numbers on welfare – and the 31.6% rate in 2014 was slightly higher than the 31% in 2009.
But living in a household that receives some form of welfare doesn’t really imply dependency – let alone some large number of the population slovenly choosing to stay on welfare rather than get a job.
The report noted the proportion of households dependent upon welfare for either 50% to 90% of their total income is also well down on 2001 levels.
Not surprisingly as well, both levels have remained relatively constant since the global financial crisis. In 2013 there was a slight increase in welfare dependency on both measures, but then in 2014 there was a slight decrease.
This isn’t much of a shock – welfare dependency is always going to fall much quicker when employment is growing strongly – as it did prior to the GFC, and which it hasn’t since then:

Employment is a major factor regarding welfare dependency. Not only does it affect Newstart, given the very targeted nature of our welfare system, the level of income you earn also affects how much welfare you receive (or whether you receive any at all), and loss of work can also push older workers into retirement earlier than they otherwise would have.
But it is not just about employment. As the Department of Social Services data shows when you take away both Newstart and those on the aged pension, the level of people on welfare has continued to fall:

And this is the problem when members of the government start talking about needing welfare reform to “better target” those who need it. Not only is our welfare system already extremely targeted, as a result of the increasing desire to continually “better target” it means those who remain dependent are almost exclusively the very needy.
There would appear to be in the minds of those who harp on about the need for welfare reform an ability to continually reduce the dependency level down to a negligible level.

But despite the unemployment rate being higher now than in 2008, our current level of welfare dependency remains roughly where it was then – hardly a sign of a flabby, luxurious welfare system – especially, as I have noted, as the proportion of people in full-time employment has fallen since 2008.
The Hilda data also shows that in reality most people don’t stay on welfare for long.
Nearly two-thirds of those who had a spell on welfare did so for two years or less, and for those in families of a couple with children, 70% were on welfare for that period:

The data highlights, however, a rather big gender divide on welfare. Single men are those who are least likely to be on welfare for more than two years, while single women and lone parents (81% of whom are women) are the most likely.
That single women are more likely to receive welfare than men is very much related to employment – and the type of employment both genders have.
Just 27% of non-married women are employed full-time compared to 43% of non-married men. While of course this does not cover single parents, it is a rough guide that does explain part of the reason single women – even if they may be in some form of employment – are more likely to receive some form of welfare and also be on it longer than men:

The Hilda report also noted the continuing gender disparity of income.
It noted the average level of work experience began to lag behind men once they reached their 30s – due clearly to leaving the workforce to raise children:
Women with the same level of work experience had a lower average income than their equally experienced male counterparts.
This is a reflection that those industries which predominately feature female employment are more likely to have higher levels of part-time employment and also lower average earnings:
We also should note that single parents are among the households most likely to be in the poorest 20%:

The Hilda data shows that cutting welfare (let’s not play the idiotic game of calling it reform) means hitting those who are already among the poorest. It also means cutting at a time our welfare dependency is historically low – especially when considering the current level of employment.