Ask an expert: What has COVID-19 taught us about Australia’s welfare system?

22.07.20

COVID-19 has seen many Australians rely on income support for the first time, shining a light on the country’s welfare system.

According to UNSW Canberra and Public Service Research Group Visiting Fellow Dr Sue Olney, “we knew there were fault lines in our social safety net - this pandemic has cracked them open”.

We asked Dr Olney what we can learn from the current unemployment crisis.

What were the main issues with Australia’s welfare system prior to COVID-19?

There is a long history of research and government inquiries into Australia’s welfare system, analysing its strengths and shortcomings and informing ongoing reform in that arena. A key area of focus has been mutual obligation for income support for people of working age, fuelled by a persistent but unsubstantiated ‘bludgers vs battlers’ narrative. The 2018 Senate inquiry into Australia’s employment services system, jobactive, exposed persistent and growing cracks in its punitive foundations.

Much of the debate about the system prior to COVID-19 revolved around the rate of income support for people facing complex barriers to work, combined with activity requirements that fail to improve their prospects of finding a job. Despite determined campaigns to raise the rate of income support, unemployment benefits had not increased in real terms since 1997 – a tactic intended to discourage long-term welfare dependency. The rationale from successive governments of all political persuasions for keeping the rate of what is now called the JobSeeker Payment below the poverty line was that it was a transitional payment, designed to encourage people to actively seek work. The repeated messages were that the best form of welfare is a job and that anyone willing to work could find a job, despiteample evidence to the contrary.

How was Australia placed with unemployment before the pandemic?

At the end of 2019, more than 700,000 unemployed people were looking for work in Australia and a million underemployed people were seeking additional work. Over the previous 25 years, rolling policy changes had gradually moved people facing complex barriers to participating in the labour market from other benefits into the employment services system. Over a similar timeframe, changes to the nature of work, the rise of the gig economy, and the growth of contract, part time and ad hoc employment in skilled industries like health, allied health, ICT and education saw the number of Australians without paid leave entitlements rise to an estimated 37 per cent of the national workforce.

Combined, these factors posed unprecedented risk as the pandemic emerged. As one million people entered Australia’s welfare system without warning – casual and permanent employees who lost their jobs, sole traders, contract workers and the self-employed – it was clear that the practice of attributing unemployment to individual inadequacies and providing unemployed people with punitive levels of income support had to change, and change quickly. Governments have faced economic challenges and pandemics before, but COVID-19 poses new and complex challenges for governments trying to sustain economic activity in a global marketplace with entire populations out of circulation, at risk of serious illness or death, and in need of essential services.

Do JobSeeker and JobKeeper go far enough to help recipients during this difficult time? If not, what could be done differently?

The pace of decision-making in Australian governments in response to the crisis has been staggering. In mid-March the Board of the Reserve Bank of Australia noted "it was likely that Australia would experience a very material contraction in economic activity, which would spread across the March and June quarters and potentially longer." Within three weeks, the Australian Government had committed 13.3 per cent of annual GDP to cushion what was by then the inevitable economic fallout of the pandemic for households and businesses.

In line with a number of other countries, Australia temporarily and substantially increased income support for jobseekers, streamlined and accelerated access to the JobSeeker payment, and allocated supplementary payments to welfare recipients. This has kept many people out of crisis and has been widely welcomed as unemployment becomes a universal risk.

The JobKeeper Payment - a temporary subsidy for employers to continue paying their employees through a period of ‘business hibernation’ – has kept around 3.5 million workers out of the pool of jobseekers to date. This payment has been criticised for its perverse incentives, exclusion of some industries, neglect of the precariously employed and its shaky financial estimates, but it has kept workers connected to their employers and put money directly into the hands of people who keep it circulating in the economy. Time will tell if it proves to be an effective strategy to revive businesses quickly post-pandemic, but scepticism is reasonable in the meantime.

With a longer view, the fledgling JobMaker plan for economic recovery will focus on targeted skills development and industrial relations. However, this calls for careful use of policy levers to ensure no one is left behind. Even in times of skill and labour shortages, there are people with particular characteristics who face discrimination in the job market.

From the outset there were questions about how long the increase in the JobSeeker payment and the level of support provided under JobKeeper could be sustained. History shows that a reduction in the unemployment rate is likely to lag behind economic recovery, and that the nature of work changes after prolonged disruption to the labour market. However, political discussion that frames this support as a drain on the economy is disingenuous and self-serving. It is an investment in keeping people out of crisis, and in keeping money circulating in local economies.

How will the changes announced this week affect recipients?

The government’s commitment to extending JobKeeper and the increase to JobSeeker is a relief, but the changes will hit some people and businesses hard. Tapering off the level of JobKeeper support may force some businesses to close and push more people out of work and on to unemployment benefits. In turn, reducing the JobSeeker payment and reintroducing the mutual obligation requirement of constantly applying for work will be tough in the current tight and competitive job market. It is highly likely that jobseekers will be pushed into precarious jobs that increase the risk of them contracting or spreading COVID-19. More broadly, people new to JobSeeker will be living below the poverty line for the first time, which has implications for the economy, public health, housing, justice, education, and society more broadly.

Will COVID-19 have any permanent changes on welfare and how the government supports those looking for work?

It’s too soon to know the full ripple effect of COVID-19, but we have already seen policy action in the welfare-to-work space that was unthinkable three months ago. Estimates of its socio-economic effects are grim, with the UN Secretary General calling the pandemic “a defining moment for modern society”. As this health and economic crisis plays out, some people who lose their jobs may be drawn into new industries, different types of employment and different ways of participating in the economy. However, it’s likely that many will stay on the margins of, or outside, the labour market. Early school leavers, Indigenous jobseekers, people with disabilities, people living in unstable housing, people living in areas with concentrated unemployment, people with dependents who have complex needs, and people from a non-English speaking background face particular risk of entrenched unemployment. There are tough times ahead for businesses and for people looking for work, and it is imperative that the burden is fairly distributed to avoid serious social and economic consequences. The premise that unemployment is an individual problem or choice has to change.

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