We must crack down on the Disability Support Pension
Thanks to an ageing population, Australia is facing a budget black hole. We must cut social spending to plug the gap and more Australians need to move from welfare into work, tax expert Greg Smith told this week’s Tax Forum.
But as the media and welfare lobby were quick to point out, unemployment is relatively low by world standards. The dole is already lean and mean, leaving little room for cuts.
Instead, reforms should focus on a much more intractable issue: Disability Support Pension.
There are now more than 800,000 people - around one in 20 working-age Australians - on a disability pension. Many thousands are profoundly disabled, but around two-thirds have moderate or mild disabilities.
Both sides of politics agree that the payment, which now costs taxpayers more than $13 billion a year, must be reined in. But reform has been a torturous and bumpy road. To significantly reduce the number of people on DSP, wholesale changes are needed.
We must get better at identifying which disability pensioners might be able to work - now or in the future. Some shouldn’t be required to work. Some should face similar requirements to unemployed people. Many have the capacity to work but need a lot of support to do so. Instead of treating disability pensioners as one homogenous group, we must recognise that their circumstances vary greatly.
We must also ensure that disability pensioners who can work look for jobs or prepare for work in some way. Currently, once a person is on a disability pension there is no requirement to ever look for a job. The great majority stay on welfare for life.
We know from successful reforms to unemployment benefits and single parent payments that incentives alone are ineffective unless they are accompanied by rigorous conditions. Yet we don’t set out clear rules and expectations for disability pensioners, even if they are capable of rejoining the workforce.
Instead, those disability pensioners who are able to work should be asked to develop and comply with an individually tailored participation plan. This might involve job search through a specialised Disability Employment Service, or training and rehabilitation.
Recipients with severe and profound incapacities should not be required to develop a participation plan, but they should be supported if they choose to do so.
Importantly, we need to ensure that it makes financial sense for people with disabilities to move from welfare and into the workforce. We need to get rid of the welfare traps that keep people stuck on DSP.
The growing difference between disability and unemployment benefits - currently $130 a week a growing - must be addressed. The Henry tax review provided a good blueprint of how this might be achieved, but despite this week’s high profile Tax Summit, the recommendations continue to gather dust.
The relationship between DSP and the Pensioner Concession Card must also be reviewed. Many disabilities pensioners are reluctant to leave the pension for fear of losing health-related benefits.
The government has announced a series of recent changes which have had some effect on the number of people going on to DSP. Since June, the proportion of DSP applications approved has dropped by around 13 per cent.
Since September, people with mild disabilities who apply for DSP must now first attend a support program to get them ready for work. Many will have to serve out a three-year waiting period on unemployment benefits – and face mutual obligation requirements – before being given another chance to apply for the pension.
From 2012, young disability pensioners under 35 assessed as being able to work eight hours a week will be required to attend quarterly Centrelink participation interviews.
But problems remain. These reforms will not affect the great majority of existing disability pensioners. Even if the inflow rate is significantly reduced, the very low return-to-work rate of DSP recipients (around 1 per cent each year) means it will take decades before the overall cohort begins to drop.
Australia has been remarkably successful in reforming our welfare system over the past 15 years. Now, policymakers must ask: What worked in the 1990s to get unemployed workers back into jobs? What worked in the 2000s to get single parents into the workforce? How can we apply these lessons to increase employment among people with disabilities?
Until we can answer these questions, DSP will remain the unsolved social policy holy grail, contributing to an emerging social spending black hole.
Jessica Brown is a Research Fellow at the Centre for Independent Studies and author of Working Towards Self-Reliance, released this week and available at cis.org.au
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