Australian Welfare System PART 1 -INTRODUCTION Review Process On 29 September 1999, the Minister for Family and Community Services announced the Government's intention to review the Australian welfare system. The Minister appointed this Reference Group to consult with the community and provide advice to the Government on welfare reform. The Group's terms of reference and membership are at Attachment A to this report. In March this year the Reference Group released an Interim Report that outlined a new framework for a fundamental re-orientation of Australia's social support system and sought feedback from the Australian community. After the Interim Report was released, the Reference Group received over 300 written responses as well as verbal feedback from income support recipients, business and community representatives.

This Final Report presents our medium to long term recommendations. In addition, we set out some initial steps, which could be taken in the development of a new Participation Support System. The Reference Group believes the full implementation of the new system may take a decade. Nevertheless, much can be done in the short term to improve the current system to encourage and facilitate participation. The Need for Fundamental Reform Trends Australia is in the midst of a profound economic and social transformation.

The consequences of this transformation require us to re-think and re-configure our approach to social support. Disappointingly, the current social support system may be failing many of those it was designed to help. Australia is in its eighth year of strong economic growth, yet joblessness, underemployment and reliance on income support remain unacceptably high. Disadvantage is also concentrated increasingly in particular segments of the population and in particular localities. These are not problems being faced by Australia alone; they are being experienced in many comparable countries. Over recent decades a variety of economic and demographic factors have combined to create the new and disturbing phenomena of jobless families and job poor communities.

These unequal outcomes have generated the unacceptable prospect that significant concentrations of economic and social disadvantage might become entrenched. In its analysis, the Reference Group focused on four trends (discussed more fully at Attachment B) that underpin the need for a bold change to our social support system: A growing divide between 'job rich' and 'job poor' households. There is strong employment growth in some areas, but high rates of joblessness persist in many regions and localities. In addition, too many children live in families with no parent in paid work. Labour market trends have brought changes in the balance between permanent full-time jobs and part-time and casual work, between male and female employment, between jobs in manufacturing and primary industry and jobs in service industries.Many of the new part-time jobs have been taken in households where there is someone already in employment, which contributes to the widening gap in the distribution of jobs.

More people receive income support. Over the past thirty years, there has been a steady upward trend in the proportion of the workforce-age population receiving income support and other publicly provided assistance. Of special concern is the proportion of the population that depends on income support for the majority of their income. Job opportunities for less skilled workers have stagnated or declined, while technological change and the globalisation of industry and trade has increased the demand for highly skilled workers.This has been associated with a widening distribution of earnings.

Entrenched economic and social disadvantage Without appropriate action now, Australia may be consigning large numbers of people to an intergenerational cycle of significant joblessness. Australia already has one of the highest levels of joblessness among families with children in OECD countries (OECD 1998). In June 1999, about 860,000 children lived in a jobless household. The available evidence suggests that children in families experiencing long term joblessness are more likely to rely heavily on income support as they grow up (Pech & McCoull, 1999). Long term economic and social disadvantage has negative consequences for individuals, their families and the broader community.Lack of paid employment during the prime working years, and consequent reliance on income support, reduce current and lifetime incomes.

Participation in paid employment is a major source of self-esteem. Without it, people can fail to develop, or become disengaged from, employment, family and community networks. This can lead to physical and psychological ill health and reduced life opportunities for parents and their children. In recent times, an unequal distribution of employment gains has also seen neighbourhoods with higher employment and income levels improve their position relative to neighbourhoods with lower employment and lower average incomes (Gregory & Hunter 1995). Just as with jobless families, the problems facing job poor communities can be self-reinforcing.The most disadvantaged regions have poorer educational, social and transport infrastructure as well as reduced employment opportunities.

Without intervention, the cycle of decline in disadvantaged areas may continue despite employment gains in the economy overall. Suitability of existing arrangements The current social support system has its origins in a fundamentally different economic and social environment when unemployment was low and generally short term and the most common family type was a couple with children and a principal male breadwinner. The growth of unemployment, the rising trend of lone parenthood and an aging population have made income support a less exceptional circumstance. We have identified four particular shortcomings with the current social support system: Service delivery arrangements are fragmented and not adequately focussed on participation goals for all people of workforce age.

There is an overly complex and rigid categorical array of pensions and allowances for people of workforce age. There are inadequate incentives for some forms of participation and inadequate rewards for some forms of work. The system does not provide enough recognition of participation. Participation Support System Overview Central to our vision is a belief that the nations social support system must be judged by its capacity to help people participate economically and socially, as well as by the adequacy of its income support arrangements.

Australias social support system must do more than provide adequate levels of income support for people in need. It must ensure that people are actively engaged socially and economically, including in the labour force, to reduce the risk of long term social and economic disadvantage for themselves and their families. Many people will require support at different points in their lives and some may require it for longer periods. Whatever their circumstances, the social support system should seek to optimise their capacity for participation.

The Reference Group considers that a broad concept of economic and social participation can provide a positive underpinning for the Participation Support System. This broad concept extends beyond the traditional focus on financial self-support and labour force status (employed, unemployed or not in the labour force) to recognise the value of the many other ways people can participate in society. It is not possible, and probably not desirable, to draw a clear line between those activities that could be classed as economic participation and those that constitute social participation. Paid work has social value and unpaid work has clear economic value.

All activities that build relationships with others have both economic and social dimensions and should be encouraged and supported. Social participation, valuable in itself, can also enable people to develop skills that may be transferable to paid employment.For some people, therefore, involvement in voluntary work of various kinds might be an appropriate component of an agreed strategy to develop their capacity for economic participation. This approach is intended to re-emphasise an important objective of our proposals for welfare reform to achieve a more equitable distribution of employment, ensuring that long term jobless people are able to compete in the labour market. There is a question as to when and in what circumstances people should be required to seek ...