Disability welfare unsustainable? Reform without alarm

Fears of an “unsustainable” increase in the cost of the Disability Support Pension are overblown and restricting eligibility further may lead to fewer recipients finding jobs, says the author of a paper examining the rise in the number of DSP recipients.

Associate Professor Roger Wilkins, principal research fellow and deputy director (research) at the Melbourne Institute of Applied Economic and Social Research, told The Mandarin the growth in disability payment receipt was “more apparent than real”.

Treasurer Scott Morrison has warned budget savings are needed to pay for new programs after The Australian reported a real increase in the “burden” of the Disability Support Pension — an income support program for people with physical, intellectual or psychiatric conditions that prevent them working — from $10 billion to $17 billion over the past decade. Payments have grown by an average of 7.6% every year for the past decade, according to the newspaper.

Social Services Minister Christian Porter indicated the government would continue to impose a tougher approach. He told the paper:

“The Disability Support Pension is an important safety net but there is no doubt that we inherited a situation where the growth in people claiming the DSP stretched the system to an unsustainable point.

“DSP spending over the last decade has been growing at a rate considerably faster than inflation and at a considerably greater rate than our population. Suggestions DSP spending is merely increasing in line with population growth are simply wrong.”

But male receipt of the DSP as a proportion of the population has actually fallen slightly over the past 15 years, argues Wilkins, who co-authored a 2013 paper on the increase in the number of overall DSP claimants for Australian Economic Review.

The number of women claiming it has increased, but this is explained by a number of factors: an increase in female labour force participation, lifting the female retirement age and the movement of claimants off payments that have been abolished, such as the widow allowance and the wife pension.

“Over the last 20 years, welfare reliance for people with disability has gone down,” Wilkins said. “Reliance on the DSP has gone up, because more people on welfare with a disability have moved onto the DSP, but they’ve moved off other payments.

“Could we, and should we, try to lower DSP receipt? I would say yes — not so much from a fiscal sustainability perspective, but for the wellbeing of people with disability.”

People on the DSP are more likely to die while on it than leave it. A system geared towards assisting people with disability back into the labour market would be more useful, he thinks.

Crackdown could make it worse

Governments love to talk about tightening criteria for welfare payments to encourage people back to work, but such changes appear to have the opposite effect for some.

Perversely, making it harder to obtain disability payments creates what Wilkins calls the “gatekeeping effect”, where those on payments are worried they won’t be able to receive payments again if they take a chance on accepting a job. Many recipients’ health is volatile and they might be unsure how they can cope with employment, so many make the calculation that it’s safer not to risk it.

“I certainly accept that policy reform is needed, but more for improving the lives of people with disability than a fiscal imperative.”

An alternative to the current system, Wilkins suggests, would be “reimagining it as a support to help people adjust to disability and get back into employment, rather than as a destination you go to and you’re parked in”. This would involve the creation of a tiered working age payment, where the support level and participation requirements — involving searching for jobs, retraining, and so on — would be dependent on health and ability level, as recommended in the report of the reference group on welfare reform to the Minister for Social Services.

The current work test regime, which requires being able to work 15 hours a week, is “very arbitrary”, Wilkins adds. The functioning of the system is not helped by the fact rates for job search payment Newstart are significantly lower than the DSP, “so there’s a real sense of financially punishing someone if they’re just below or above some threshold”.

Although he doesn’t believe there really is a crisis of sustainability in the disability payment scheme, as some claim, Wilkins accepts that “perhaps that’s just the rhetoric you need for people to accept that policy reform is required”.

“I certainly accept that policy reform is needed, but more for improving the lives of people with disability than a fiscal imperative,” he said.

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