We Must Crack Down on the Disability Support Pension: Opinion
12 October 2011 at 9:50 am
In this article from The Punch, Jessica Brown, Research Fellow at the Centre for Independent Studies calls for a crackdown on the Disability Support Pension to move more people from welfare into work.
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 www.cis.org.au
We’ve had this conversation before. It is crystal clear where the fault lies. Your title of “Crackdown” is divisive and unhelpful. Its not DSP you need to crack down on. Every bit of evidence I’ve read shows the barriers to be in Governments for creating a system of unemployment penury and perverse disincentives and employers (including governments) for systematically and illegally excluding disabled people from work opportunities, while simultaneously blaming them for their condition.
Good on you for highlighting the cowardice around the Henry Tax review – so lets shut down the tax havens, family trusts, negative gearing, advantageous treatment of superannuation and channel that money onto programs that WILL provide jobs for people with disabilities.
Newstart has nothing to do with the disability support pension.Newstart is a buffer to for people who lose there jobs,until they get another job.The disability support pension is for for people who are deemed incapable of working and is permanent payment.Why would anyone try and compare the payments or have to make them the same I do not understand.If we must ,why not talk about reducing the DSP to the level of the newstart payment.
Have any of the major players and commentators of this debate ever tried to live off DSP whilst being actually sick? Not all people on disability have workplace injuries so why is the conversation always centred around people who could return to work? What about people suffering cancer, MS, serious mental ilness, CF, chronic arthritis, etc, for whom working is just not an option?
I was genuinely unwell in my late 20’s with a life threatening illness and for 4 of these years had only the DSP as income. It is extraordinarily hard to live with dignity and comfort on so little money especially when you factor in the expense of complimentary treatments and health products which are not covered by Medicare.
Isn’t being seriously sick or permanently disabled bad enough, why should you be forced to live in poverty as well? Leave the DSP alone!
So instead of dealing with dole bludgers, Jessica Brown wants to force the disabled into work? She is one nasty piece of work.
As a sister of a mildly disabled person I am shocked to see such ideas that there needs to be a ‘crackdown’ on DSP. My sister has been in and out of work for years, has had minimal positive helping in obtaining work and whilst she is capable of working she is not able to sustain a job in the real world due to her learning difficulties. For the past 12 months she has wanted to get in to work and has been asking for help through the government and disability support programs however the assistance she has been given has been poor, and has since had to live off the DSP… which, as ‘Anonymous’ has said above, have anyone proposing such nasty ‘crackdowns’ tried to live of the DSP. There needs to be a lot more focus on getting the people that want to work, such as my sister, in to jobs that suit them and can be long term to build self esteem and focus on the people themselves. Rather than getting as many disabled people in to the workforce to cut costs. Get off your academic high horse Jessica Brown and have some compassion for people with real problems that need to be addressed properly. Dollars is only one side of the story and there are a lot worse things that the government spends its money on!
having worked full-time since I was 16, then working two jobs to raise three children without family assistance and having saved for a deposit on a home without any first home buyers grant i was struck down with MS at 55. I cannot work or enjoy most things that were a part of my life.
It took 18 months after I left work to actually qualify for the DSP and get a pension of $98 a week because my wife of 35 years works and earns a whopping $35,000 a year before tax. Yes there may be work-shy types on the DSP, but not too many.
Academics amaze me. I never saw too many when it was pouring rain and blowing a gale during my often 60 hour working week, but I hear them all the time in some media forum or another.
Try living with any dignity at 55 on $98 a week. By the way when I started work we had no super, it came in at 3% originally and has hardly built into a massive nest egg over 25 years. Also, I tried to find work for a year, but after 195 applications I kind of figure there’s a little bit of discrimination against 55 year olds with a disability.
Disability support pension like all other forms of welfare in Australia dollar for dollar penalises those recipients for obtaining employment at a rate higher than the highest marginal tax rate in the country! (%45%)
The rate of loss of pension for every dollar earned while on the payment is 50% lost through income reporting which is more than the current tax rate paid for every dollar earned for $180,000 and over. If want to reduce the incentive to be on the payment and not find paid employment then look into abolishing all these societal deteriorating programs and implement a single negative income tax which applies to all citizens.
Set the tax rate so it applies at a flat rate of 40% starting from negative ($-15,000) and going all the way to $100,000 and then 60% thereafter. Not only would this give people who are out of work an constant intensive and actual benefit to find paid work but it would cater for people who genuinely cant work.
To reiterate the single biggest problem with Australia’s welfare system is that it penalizes those who are on welfare for paid work at a rate higher than those who are earning $180,000 and over, therefore discouraging paid work and encouraging welfare dependence.
Reference: https://www.ato.gov.au/rates/individual-income-tax-rates/