Breaking the cycle of wretchedness


2013-04-24 04.49.50 amNICK CATER

The Australian, 29 September, 2015


“Single-parent families are now the fastest-growing family type in Australia,” The Daily Telegraph reported matter-of-factly on Friday. It was an old story. The number of single-parent families has been growingly steadily for decades. Since the early 1970s, in fact, when Gough Whitlam introduced the sole parent benefit.

In 1971 one in 16 families with dependent children were a parent short of a couple. Now it’s one in six. Surely not even the most steadfast social engineer would consider this to be progress.  Single parenthood is one of the most effective routes to welfare dependency yet devised.  It robs adults of dignity and children of hope.

In 2011, more than 475,000 Australian children under 12 were living in welfare-dependent homes. Two-thirds of them lived with a single parent. The outlook for this unfortunate cohort of pre-teens is dismal. Their educational achievements are likely to be poorer. They are less likely to find employment and more likely to be jailed. Their chances of enjoying stable adult relationships are diminished. The cycle of wretchedness perpetuates itself.

Encouraging single parents to find a job is, therefore, one of the most useful things a reform-minded government can do. John Howard’s government tried in 2006 by switching single parents from the Parenting Payment to the lower Newstart allowance once their child turned eight.

Three years ago Julia Gillard’s government relegated another 163,000 single parents to Newstart with a clumsy extension of the Howard government changes. The main purpose appeared to be to find a lazy $700 million for her beleaguered Treasurer. The legislation slipped through on October 9, 2012, the day Gillard delivered her misogyny speech.

Has it worked? If the aim was to heap misery upon misery then the answer is yes. Hundreds of thousands of single parent families have had their income cut by more than $100 a week. Perversely, single parents are penalised for working part-time. Under the Parenting Payment rules, a single parent with two children could earn $211.20 a fortnight without losing any of their benefit. Newstart’s allowable earnings are just $102 a fortnight, and the benefit reduction is harsher; 50 cents in the dollar compared to 40 cents for the Parenting Payment.

If the aim was to get single parents working, the reform is hardly a success. There was a spike in workforce participation for single mothers after 2006, but that has since fallen back. According to research by National Centre for Social and Economic Modelling commissioned by Anglicare it is hovering somewhere below 60 per cent, roughly the level it was at in 2005 and the same as for women more generally.

In summary, the pain to gain ratio is unacceptably high. “We haven’t really seen any particularly strong dividends from these policies in terms of single mothers working at any greater rate than otherwise may have been the case,” National Centre for Social and Economic Modelling’s Ben Phillips told Radio National’s Background Briefing on Sunday.

Australia’s bloated social services bill, currently $154 billion, has troubled successive governments, Labor and Liberal. At last, however, the message is sinking in that the sledgehammer is not the best tool to knock it into shape.

Christian Porter, sworn in last week as Social Services Minister, inherits a framework for intelligent reform that Tony Abbott’s government had been quietly building for the past two years. Abbott commissioned the McClure Report recommending a simplified payments system. Preparation is well underway. A new, simpler Child Care Subsidy will be introduced from 1 July 2017.

In New Zealand, the quiet achievements of John Key’s National Party government show that reform of the welfare sector is eminently possible. Some 42,000 fewer New Zealand children are living in benefit-dependent households than three years ago. The number of sole parents on benefits has been reduced to the lowest level in decades.

While the Gillard government wore its compassion on its sleeve as friend to “the most vulnerable”, the New Zealand government was methodically identifying who the most vulnerable actually are. It commissioned actuaries Taylor Fry to calculate the lifetime welfare costs of people on benefits. It assumed that the amount of benefits an individual claims is not just a fiscal burden but a reliable proxy for misery.

Sole parents were near the top of the list. A mother who claimed sole parent benefit before the age of 20, for example, was likely to stay on benefits for more than 17 years at a cost of $NZ 213,000.

Worse still was the future liability of some 6 per cent of New Zealand children who were destined to spend their entire childhood in welfare-dependent homes.  Of those, bureaucrats have identified a sub-cohort of 600 five year olds with multiple problems who will cost the taxpayers an average of $NZ 320,000 by the time they are 35. Some will cost more than a million dollars.

Earlier this month the NZ Productivity Commission produced a report outlining what it calls an investment approach to social services. The object is to identify the most vulnerable and work with them one-on-one. Welfare applicants will be triaged; a homeless single mother fleeing a violent relationship, for example, will be treated like a VIP with her own personal advisor steering her through the system.

In his final speech as social services minister three days before the Liberal leadership coup, Scott Morrison announced that Pricewaterhouse Coopers had been commissioned to audit future welfare costs as a first step towards introducing the investment approach pioneered in New Zealand. A $60 million upgrade of Centrelink’s computers will help the actuaries retrieve data currently hidden deep in the system.

Morrison’s promotion after nine months immersed in social services augurs well for the future.  We have a Treasurer who would understand better than most that welfare reform driven by improvements to the budget bottom line – like Gillard’s changes to single parent benefits – are certain to fail, while unintended consequences increase the net sum of misery.

Welfare reform is a long game. The game plan introduced under Abbott means Malcolm Turnbull’s government is match-ready.