Newstart Allowance and mature age job seekers

7.58 This section considers the situation of mature age job seekers in receipt of Newstart Allowance. The ALRC does not make any recommendations for reform of Newstart Allowance, on the basis that any reforms to this payment are not most appropriately targeted based on the age of recipients.

7.59 At June 2012, there were 550,000 recipients of Newstart Allowance. Of these, approximately 22% were aged 40–49, almost 19% were aged 50–59, and 9.1% were aged 60–64.[90]

7.60 For the purposes of Newstart Allowance, ‘mature age’ is defined as 55 years and over. At June 2012, there were 98,050 recipients, or 18% of the total Newstart Allowance population, in this age group.[91] This number has almost doubled since June 2002.[92] The increase has been driven by the phasing out of Partner Allowance, Mature Age Allowance and Widow Allowance, as well as the increasing age of eligibility for the Age Pension for women.[93]

7.61 Approximately 50,000 Newstart Allowance recipients aged 55 years and over are ‘very long-term’ income support recipients (in receipt of income support for two years or more).[94] This represents approximately half of the total Newstart Allowance recipients in this age bracket,[95] as well as 20% of all very long-term income support recipients.[96]

7.62 Some Newstart Allowance recipients have been assessed as having a partial capacity to work: a physical, intellectual or psychiatric impairment that prevents a person from working at least 30 hours per week at the relevant minimum wage or above, independently of a program of support, for the next two years.[97] At June 2012, there were 99,884 Newstart Allowance recipients with a partial capacity to work.[98] Of these, 27.1% were aged 55 years and over.[99] Persons with a partial capacity to work made up 27.6% of all Newstart Allowance recipients in this age group.[100]

Adequacy of allowance payments

7.63 It has been argued that the current rate of Newstart Allowance[101] is too low to provide an adequate minimum standard of living, as well as to enable effective job search activity.[102] This may be particularly so for mature age job seekers, who may have substantial financial commitments.[103]

7.64 NWRN submitted that the rate of Newstart Allowance is a barrier to workforce participation. It argued that ‘income support payments need to provide a sufficient income to enable people to look for work and to cover job search costs’.[104]

7.65 Additionally, NWRN argued that the gap between payment rates for pensions and allowances ‘creates perverse incentives for unemployed people to seek higher, non-activity-tested payments especially when they are older and have been unemployed for lengthy periods of time’.[105] The Tax Review has also noted that the differences in rates of payment can ‘create disincentives to work or incentives to move to higher payments’.[106]

7.66 In 2012, the Allowance Payment Inquiry considered the adequacy of the allowance payment system for jobseekers.[107] A number of submissions to that Inquiry argued that the rate of payment of Newstart Allowance creates barriers to work.[108] For example, the Business Council of Australia argued that

trying to survive on $35 a day [the approximate daily base rate for a single person receiving Newstart Allowance] is likely to erode the capacity of individuals to present themselves well or maintain their readiness for work.[109]

7.67 The Allowance Payment Inquiry found that ‘Newstart Allowance does not allow people to live at an acceptable standard in the long term’.[110] However, rather than recommend any increase to the rate of Newstart Allowance the Inquiry recommended that additional resources be focused on moving people off income support and into work.[111]

Activity test requirements for mature age job seekers

7.68 Different activity tests and participation obligations apply to some mature age persons. Job seekers aged 55 years and over have a concessional activity test option. They may satisfy the activity test if they undertake at least 30 hours per fortnight of approved and suitable voluntary work, paid work (including self-employment) or a combination of the two.[112] At 29 June 2012, 19,582 (21.8%) of all activity-tested mature age job seekers were satisfying their requirements in this way.[113]

7.69 Where mature age job seekers are satisfying their activity test in this way, they are generally not required to attend appointments with their employment services provider. They must still register and remain connected to a provider while undertaking these activities and are required to accept suitable paid work or referral to interviews.[114] In addition, they may access or continue to access the full range of services available through their employment services provider on a voluntary basis.[115] Job seekers not satisfying the concessional activity test have the same participation obligations as other job seekers.[116] In the Discussion Paper, the ALRC decided against proposing that any changes be made to this activity test.[117]

Withdrawal rates for mature age job seekers

7.70 Newstart Allowance has undergone significant reform since the early 2000s. The primary consequence of the reforms has been a significant extension of its scope to encompass a wider population group, including parents of young children, people with a partial capacity to work and the mature aged.[118] These reforms have meant that Newstart Allowance increasingly treats groups of recipients differently—for instance, through different activity test requirements.[119]

7.71 In general, however, Newstart Allowance recipients have the same income free area and withdrawal rate applied to any income received. The current income free area is $62 per fortnight.[120] Income between $62 and $250 per fortnight reduces payment by 50 cents in the dollar. Income above $250 per fortnight reduces payment by 60 cents in the dollar.[121]

7.72 In the Discussion Paper, the ALRC asked about the possible effect on incentives for workforce participation of changing the income test withdrawal rate for Newstart Allowance recipients aged 55 years and over.[122]

7.73 There was some support for reducing the withdrawal rate for mature age recipients of Newstart Allowance.[123] The Brotherhood of St Laurence (BSL) contended that the current withdrawal rates act as a barrier to taking up part-time or casual work:

harsh taper rates result in little financial benefit from part-time work and many people are wary of the risks of taking up casual or short-term employment, namely the job coming to an end and having to reapply for income support. Facilitating and supporting the transition into part-time employment may have benefits for longer-term and more highly disadvantaged jobseekers in relation to confidence and work experience, and with assistance, may lead to full-time employment.[124]

7.74 However, other stakeholders argued against any change to the income test for mature age job seekers.[125] The Australian Council of Trade Unions (ACTU) did not support any change, on the basis that it could ‘lead to an increase in the complexity of the income support system’. The ACTU and NWRN suggested that, rather than making changes for mature age Newstart Allowance recipients alone, the income test for all Newstart Allowance recipients should be considered in a more comprehensive review of the income support system.[126]

7.75 The ALRC has concluded that changes to the withdrawal rate are more appropriately considered in the context of a systemic review of income support payments. As a consequence, it makes no recommendation to change the income test withdrawal rate for mature age Newstart Allowance recipients.

7.76 The ALRC notes the Allowance Payment Inquiry recommendation that the income free area—the amount of income that a person may receive before their Newstart Allowance payment starts to reduce—be increased to six hours work per fortnight at the minimum wage for long-term Newstart Allowance recipients.[127] The Allowance Payment Inquiry made no recommendation to change the withdrawal rate.

7.77 Any increase to the income free area would improve the financial reward from paid work for all long-term Newstart Allowance recipients, including those who are mature age. The ALRC supports further consideration of the Allowance Payment Inquiry’s recommendation to this effect.

[90] DEEWR, FaHCSIA, DHS, DIISRTE, Submission to the Senate Inquiry on the Adequacy of the Allowance Payment System for Job Seekers and Others (2012), 58–59. At August 2010, 198,327 (32%) of Newstart Allowance recipients were aged 44 years or older: ACOSS, Beyond Stereotypes: Myths and Facts about People of Working Age who Receive Social Security, ACOSS Paper 175 (2011), 11.

[91] DEEWR, FaHCSIA, DHS, DIISRTE, Submission to the Senate Inquiry on the Adequacy of the Allowance Payment System for Job Seekers and Others (2012), 44, 92.

[92] Ibid, 92.

[93] Ibid, 59, 92.

[94] Ibid, 79.

[95] Ibid, 44.

[96] Ibid, 79.

[97]Social Security Act 1991 (Cth) s 16B; FaHCSIA, Guide to Social Security Law (2013) <www.fahcsia.gov.au/guides_acts> at 21 March 2013, [1.1. P.56].

[98] DEEWR, FaHCSIA, DHS, DIISRTE, Submission to the Senate Inquiry on the Adequacy of the Allowance Payment System for Job Seekers and Others (2012), 80.

[99] Ibid.

[100] Ibid, 44, 80.

[101] At 20 March 2013, the basic rate of Newstart Allowance for a single person with no children is $497 per fortnight. For a single person aged 60 years or over after nine continuous months on payment, the rate was $537.80 per fortnight: FaHCSIA, Indexation Rates March 2013 (2013).

[102] Whiteford argued that there was ‘wide acceptance’ among participants at the Tax Forum in October 2011 that Newstart Allowance was inadequate: P Whiteford, ‘Social Security Reform: The Tax Forum and Beyond’ (2012) 31(1) Economic Papers: A Journal of Applied Economics and Policy 24, 25.

[103] Gosnells Community Legal Centre Inc, Submission to the Allowance Payment Inquiry (2012).

[104] National Welfare Rights Network, Submission 50.

[105] Ibid.

[106] The Treasury, Australia’s Future Tax System: Final Report (2010), 61.

[107] Senate Education, Employment and Workplace Relations References Committee—Parliament of Australia, The Adequacy of the Allowance Payment System for Jobseekers and Others, the Appropriateness of the Allowance Payment System as a Support into Work and the Impact of the Changing Nature of the Labour Market (2012).

[108] Stakeholders who argued that the rate of payment amounts to a barrier to work included: the Australian Council of Social Service; Australian Council of Trade Unions; Brotherhood of St Laurence; Business Council of Australia; National Employment Services Association; and Western Australian Council of Social Service.

[109] Business Council of Australia, Submission to the Allowance Payment Inquiry (August 2012), 46.

[110] Senate Education, Employment and Workplace Relations References Committee—Parliament of Australia, The Adequacy of the Allowance Payment System for Jobseekers and Others, the Appropriateness of the Allowance Payment System as a Support into Work and the Impact of the Changing Nature of the Labour Market (2012), 54.

[111] Ibid. An income support bonus of $105 (to be indexed by the CPI) for a single Newstart Allowance recipient (as well as recipients of certain other payments) will be paid on a twice-yearly basis beginning in March 2013: Social Security Act 1991 (Cth) ss 919, 920, 1191–1194.

[112] This concessional activity test is available to persons aged 55 years and over and in receipt of Newstart Allowance as well as Parenting Payment and Special Benefit: Social Security Act 1991 (Cth) ss 502A, 603AA, 731G; FaHCSIA, Guide to Social Security Law (2013) <www.fahcsia.gov.au/guides_acts> at 21 March 2013, [3.2.8.20].

[113] DEEWR, Correspondence, 23 July 2012.

[114] FaHCSIA, Guide to Social Security Law (2013) <www.fahcsia.gov.au/guides_acts> at 21 March 2013, [3.2.8.50].

[115] DEEWR, Correspondence, 23 July 2012. Providers will receive service fees as well as placement and outcome fees if mature age job seekers voluntarily participate in employment services.

[116] Participation Review Taskforce, Participation Review Taskforce Report (2008), 9.

[117] Australian Law Reform Commission, Grey Areas—Age Barriers to Work in Commonwealth Laws, Discussion Paper 78 (2012), 127–129.

[118] For a summary of the reforms, see: DEEWR, FaHCSIA, DHS, DIISRTE, Submission to the Senate Inquiry on the Adequacy of the Allowance Payment System for Job Seekers and Others (2012), 28–29, 139–146.

[119] Different activity tests may apply for principal carers, persons with a partial capacity to work, and job seekers aged 55 years and over: FaHCSIA, Guide to Social Security Law (2013) <www.fahcsia.gov.au/guides_acts> at 21 March 2013, [1.1. A.40].

[120] DHS, A Guide to Australian Government Payments: 1 January–19 March 2013 (2013), 34. By comparison, the income free area for pension payments is $152 per fortnight.

[121] Ibid. In general, partner income that exceeds the earning thresholds also reduces payment by 60 cents in the dollar.

[122] Australian Law Reform Commission, Grey Areas—Age Barriers to Work in Commonwealth Laws, Discussion Paper 78 (2012).

[123] National Seniors Australia, Submission 92; Brotherhood of St Laurence, Submission 86; Australian Chamber of Commerce and Industry, Submission 85.

[124] Brotherhood of St Laurence, Submission 86.

[125] Australian Industry Group, Submission 97; ACTU, Submission 88.

[126] National Welfare Rights Network (NWRN), Submission 99; ACTU, Submission 88.

[127] Senate Education, Employment and Workplace Relations References Committee—Parliament of Australia, The Adequacy of the Allowance Payment System for Jobseekers and Others, the Appropriateness of the Allowance Payment System as a Support into Work and the Impact of the Changing Nature of the Labour Market (2012), vii. A ‘long term’ Newstart Allowance recipient is a person who has been in continuous receipt of payment for 12 months or more: DEEWR, FaHCSIA, DHS, DIISRTE, Submission to the Senate Inquiry on the Adequacy of the Allowance Payment System for Job Seekers and Others (2012), 63.