Social security

143. The transfer, or social security, system affects incentives for labour market participation in many ways, including financially—through maximum rates of payments; means test structures (including their interaction with the income tax system); eligibility criteria for payments; and obligations (such as requirements to look for work) attached to payments.^[196]

144. Financial incentives, however, are only part of the story. A person’s responsiveness to them will depend on the role played by other factors that influence workforce participation. A person may take into account many other considerations, such as: meeting basic financial needs; work ethic; caring responsibilities; health and disability status; level of wealth; social expectations; the availability of child care; working conditions; and the benefits of remaining attached to the labour market as it affects career prospects and expected future earnings.^[197]

145. The legislative basis of the social security system is the Social Security Act 1991 (Cth) and the Social Security (Administration) Act 1999 (Cth).^[198] While legislation governs and sets out the decision-making framework, the Guide to Social Security Law provides guidance to decision makers for implementing the legislation.^[199]

146. There are two long-standing values that provide the basis of the Australian social security system. One is the recognition of government and community responsibility to assist those in need.^[200] Need is measured by reference to the income and assets of the applicant through income and assets tests—known as the means test. The other value is that private provision outside the social security system is to be encouraged as far as possible,^[201] with the social security system seen primarily as a safety net.

147. Income support payments made through the social security system can reduce incentives to work.^[202] In addition, the level of income support relative to minimum wages can influence workforce incentives. The Tax Review argued that the higher the level of income support for people of working age, the more likely it is a disincentive to work.^[203]

148. While the amount of any income support payment may be relevant to incentives or disincentives to work for mature age persons, this aspect of social security—and its budgetary and financial implications—is not a focus of this Inquiry.

149. Social security law is administered by the Department of Human Services (DHS) through Centrelink while policy responsibility is spread between the Department of Education, Employment and Workplace Relations (DEEWR) and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).

150. As discussed below, certain payments and entitlements available through the social security system affect mature age participation in the workforce or other productive work. It is therefore important that mature age persons can access the information they require from Centrelink.

Activity-tested income support

151. Australian unemployment assistance through the social security system is based on the notion of ‘reciprocal’ or ‘mutual obligations’—that taxpayers in general will support a person through income support payments in return for the person actively pursuing ways to avoid the need for further support, such as by undertaking activities that will improve their skills and increase their employment prospects.^[204] Job seekers receiving certain income support payments therefore have an activity test or participation requirements to qualify—and remain qualified—for the payment.^[205]

Job Seeker Classification Instrument

152. Once a job seeker registers for activity-tested income support, Centrelink, or in some cases a Job Services Australia (JSA) provider, administers a questionnaire—the Job Seeker Classification Instrument (JSCI)—to determine a job seeker’s relative level of disadvantage in the labour market and, therefore, the likely difficulty in obtaining employment.^[206]

153. The JSCI collects 18 categories of information, including age and gender.^[207] Job seekers are assigned ‘points’ according to their answers to specific questions: a higher score should reflect a greater level of disadvantage. The table below illustrates the points assigned to a person according to his or her age and gender.^[208] Generally, older job seekers attract more points than younger job seekers.^[209]

154. Job seekers are classified as ‘Stream 1’ if they have fewer than 19 points; ‘Stream 2’ if they have 20–28 points; and ‘Stream 3’ if they have more than 29 points. Entry to ‘Stream 4’—the stream for the most disadvantaged job seekers—is based on an Employment Services Assessment (ESAt) or Job Capacity Assessment (JCA).

Employment Services Assessments

155. Applicants are referred for an ESAt or a JCA where the results of the JSCI indicate ‘significant barriers to work’.^[210] An ESAt or JCA is a more comprehensive assessment of a job seeker’s capacity and barriers to employment than a JSCI.^[211] The assessment informs the kinds of activities that a person will be required to undertake to improve their capacity to meet activity test requirements and, in some circumstances, indicates whether a person may be eligible for an exemption from these requirements.^[212]

Employment services providers

156. Like all job seekers, mature aged job seekers may use JSA,^[213] the Australian Government’s national employment services system, to enter or re-enter paid employment.^[214] The focus of the JSA system as a whole is on a job seeker’s capacity and readiness to work. JSA places job seekers with JSA providers—private and community organisations that provide job search assistance. The Disability Employment Services (DES) system provides employment services for job seekers with disability. The role of JSA and DES providers is to assist individual job seekers to gain sustainable employment including connecting job seekers to skills development and training opportunities.

157. JSA and DES delivery is provided by employment service providers who are contracted by DEEWR under Employment Services Deeds, due to expire on 30 June 2012. As part of the Codes of Practice contained in the Deeds, providers ‘commit to assisting employers meet their skill and labour shortage needs by [among other things] working with employers to identify job and industry specific training needs and how they can be met’.^[215]

158. The Australian Chamber of Commerce and Industry’s (ACCI) publication Employ Outside the Box, indicates that the use of JSA by employers has ‘fallen to as low of 5% of recruitment’.^[216] ACCI stresses the importance of a stronger engagement between employers and JSAs to ensure that providers understand the needs of employers, job seekers have the necessary skills for work, and employers develop an appreciation of the JSA’s offerings to employers.^[217]

159. There may also be concerns about the effectiveness of JSA and DES providers in assisting mature age job seekers to find suitable employment and training opportunities.

Activity test requirements

160. Activity-tested income support payments have an activity test or participation requirements that applicants must satisfy to qualify—and remain qualified—for the payment.^[218] The activity test is designed to ensure that unemployed persons receiving income support payments are ‘actively looking for work and/or doing everything that they can to become ready for work in the future’.^[219] Similarly, participation requirements aim to ensure that a person ‘looks for, and undertakes, paid work in line with their work capacity in order to increase workforce participation … and reduce welfare dependency’.^[220]

161. There are opposing views as to whether such activity test and participation requirements improve employment prospects for job seekers.^[221]

162. Generally, job seekers must be ‘actively seeking and willing to undertake any paid work that is not unsuitable’.^[222] This usually requires job seekers to search for a job, perform paid or voluntary work, study or participate in other activities.^[223] A person who does not meet the activity test or participation requirements may have a ‘failure’ imposed, which may result in suspension of his or her payment.

163. Generally, people aged over 50 years who are in receipt of certain income support payments are not required to participate in an ‘approved program of work’.^[224]Approved programs of work include Work for the Dole; Drought Force (as a category of Work for the Dole); and Green Corps.^[225]

164. In addition, different activity requirements apply for job seekers who are aged 55 years or over,^[226] who are taken to satisfy the activity test if they undertake at least 30 hours per fortnight of voluntary work, paid work (including self-employment) or a combination of the two.^[227] A person must still register and remain connected to a provider while undertaking these activities and is also required to accept suitable paid work or referral to interviews.^[228]

165. The Australian Institute for Social Research notes that the driver for relaxing mutual obligation requirements for older workers is that they experience longer periods of unemployment.^[229] As at July 2011, the average period of unemployment for those aged 55 and over was 63 weeks, compared to only 33 weeks for those aged 15–54.^[230] However, according to DEEWR data, job seekers who choose the voluntary/part-time option are generally unemployed for much longer than those who actively look for a job.^[231]

166. While noting that ‘volunteering can be both a pathway and an alternative to employment’, the Participation Review Taskforce, established by the Minister for Employment Participation, recommended that mature age job seekers should have the same participation requirements as other job seekers unless they have no, or very limited, chance of success in the labour market.^[232] However, the Taskforce recommended that this change should be preceded by actions to combat negative attitudes towards older workers.^[233] However, there may be concerns that some mature age job seekers have ill health, and while not qualified for Disability Support Pension, find the activity tests too onerous.^[234]

Employment Pathway Plans

167. For job seekers who receive an activity-tested income support payment, JSA providers work with them to identify the mix of vocational and non-vocational activities they need to participate in to obtain employment. These activities are outlined in an individualised Employment Pathway Plan (EPP).^[235]

168. In setting the terms of a person’s EPP, Centrelink or a JSA provider must take into consideration, among other things, ‘the person’s education, experience, skills, age, physical condition and health (including mental health)’.^[236]

169. Exemptions or suspensions from EPPs are available in certain circumstances and for a defined period.^[237] In addition, the Employment Pathway Fund (EPF) is available in some circumstances to purchase assistance to address vocational barriers,^[238] while the Employment Assistance Fund (EAF) helps people with disability and their employers by providing financial assistance for work-related equipment, modifications and services.^[239]

Experience+

170. Experience+ is a suite of pilot programs designed to help mature age job seekers who are not eligible for the Government’s employment services, and to help existing workers who may be at risk of losing their job or exiting the labour market. The pilots commenced on 1 June 2010 and are due to end on 30 June 2014.

171. Experience+ offers a range of services: career advice; on the job support; job transition support; and Experience+ Training. More Help for Mature Age Workers is also available under Experience+, allowing mature age persons with trade skills to access a skills assessment and gap training to achieve a qualification.^[240]

Work requirements for Disability Support Pension and Carer Payment

172. Working age payments, such as Disability Support Pension and Carer Payment, are made conditionally on the basis of a person being unable to undertake substantial employment because of disability or caring responsibilities. Neither payment is subject to activity or participation requirements, as recipients are considered ‘either unable or unavailable to participate in significant part-time work in the open labour market’.^[241]

173. The Pension Review considered it important that Carer Payment and Disability Support Pension more actively address questions of workforce participation to ensure that, where people have the capacity to support themselves and are no longer eligible for the pension, they can establish or re-establish themselves in the workforce.^[242]

Disability Support Pension

174. Disability Support Pension is an income support payment for people who are unable to work due to permanent physical, intellectual or psychiatric impairment.^[243]

175. Return-to-work ‘suspension’ provisions apply to Disability Support Pension recipients who no longer eligible for the payment due to earnings from work to return to the payment within two years if they later cease work or reduce their earnings below the income test limit.^[244]

176. Currently, recipients of Disability Support Pension granted on or after the Welfare to Work changes on 11 May 2005 can only work up to 15 hours a week before their payment is suspended or cancelled.^[245] However, as of 1 July 2012, more generous rules will be introduced to allow all Disability Support pensioners to work up to 30 hours per week without having their payment suspended or cancelled. They will be able to receive a part pension, subject to usual means testing arrangements.

Carer Payment

177. Carer Payment provides income support to people who, because of the demands of their caring role, are unable to support themselves through substantial paid employment. Although Carer Payment is available to young carers as well as older carers, the majority of carers are aged 35 to 64 years, many of whom are females aged 45 years and over.^[246] According to the Australian Bureau of Statistics, ‘the likelihood of a person providing care to someone else increases with age, peaking for women between the ages of 55 years and 64 years and for men aged over 75’.^[247]

178. If a person works, volunteers, studies or trains for over 25 hours per week (including time taken to travel), he or she is ineligible for Carer Payment.^[248] In addition, any income received for work undertaken under the permitted 25 hours per week may affect the rate of payment, due to the income and assets tests.^[249] As argued by Carers Australia, this can mean that ‘caring and paid work can become an either/or proposition that does not fit for those wanting and needing to combine the two roles’.^[250]

179. Some measures have been put in place to address this concern including:

• Working Credit;
• payment of certain supplementary benefits during an ‘employment income nil rate period’;
• the ability to have the payment resumed during the employment income nil rate period if a person reports a fall in income sufficient for Carer Payment to be payable again; and
• continued use of a person’s Pensioner Concession Card for a certain period after payment ceases to be payable.^[251]

180. Although these measures are available to people aged below 45, in light of the high percentage of mature age carers, these mechanisms are discussed below.

Working Credit

181. Working Credit applies to people who are below Age Pension age and are in receipt of certain income support payments, including Carer Payment and Disability Support Pension.^[252] Working Credit allows payment recipients to accrue ‘working credits’ that are then depleted when employment income is received.

182. Working Credit aims to encourage people of workforce age who get income support payments to take up full-time, part-time, or casual work by:

• allowing them to keep more of their Centrelink payments while working;
• making it easier for people to get their Centrelink payments and benefits back if a short-term job (12 weeks duration) ends;^[253] and
• allowing a recipient to keep the Pensioner Concession Card or Health Care Card for a period after starting work.

183. A person eligible for Working Credit will accrue working credits for a day if the person has, for that day, a fortnightly rate of total ordinary income that is less than $48.^[254]

184. A person who has accrued Working Credits and begins to receive employment income will remain qualified for income support while they reduce their Working Credit balance.^[255] For example, a Carer Payment recipient who has a Working Credit balance and who ceases to provide constant care for more than 25 hours a week and part or all of the cessation is due to taking up or increasing paid work, is treated as still being qualified for the period it takes to run down their Working Credit balance.^[256] This continues until their Working Credit balance is reduced to nil or their qualification or payability (other than related to employment) is lost.

Concession cards

185. Services and concessions, through discounted fees and user charges, have an important impact on the wellbeing of income support recipients. Concessions and services that are directly linked with the receipt of pensions and allowances—such as concession cards—can enhance the total value of these payments. As such, the loss of support when paid work is undertaken can therefore be greater than just the withdrawal of primary payments.

186. To address this, concession cards are available for a period on return to work, and alternative concession cards are available to some beyond the pension and allowance cut-outs.^[257] The length of time individuals can retain a concession card, when their or their partner’s income stops their payment, depends upon which payment they received, which concession card they hold and the reason their payment stopped. This can lead to confusion.

187. One such circumstance is where a person qualifies for an ‘employment income nil rate period’. A person whose income support payment is not payable because of ordinary income, made up entirely or partly of employment income, may qualify for an employment income nil rate period.^[258] During this period the recipient can be paid certain supplementary benefits and retain a Pensioner Concession Card or Health Care Card and have his or her payment resumed if income is reduced sufficiently for the income support payment to be payable again.^[259]

Re-skilling for employment

188. Mature age people are likely to require new or updated skills development. Some income support payments are available to assist those undertaking full-time study. However, thresholds established for these payments regarding the length of time in training and education may actively discourage mature age workers and others from participation in programs that provide qualifications that will lead to sustainable employment.

Austudy and Pensioner Education Supplement

189. Austudy provides financial help to those aged 25 years or over and studying or undertaking an Australian Apprenticeship full-time.^[260]

190. Pensioner Education Supplement (PES) assists with the costs of full or part-time study. To qualify for PES, a person must be receiving a payment that attracts PES, be at least 16 years of age and be undertaking qualifying study.^[261] There is no maximum age limit for PES.^[262]

191. For the purposes of PES^[263] and Austudy,^[264] approved courses of education or study include secondary courses, tertiary courses including pre-vocational, diplomas, graduate certificates and masters courses.^[265] There is no minimum duration for a course to be approved.^[266] A person is not eligible for PES or Austudy if they have completed a course for a Masters degree (for PES) or Doctorate (for PES and Austudy), or a qualification of the same standing at an educational institution.^[267]

192. A person must complete a course within the time it usually takes to complete that course, whether part-time or full-time—known as the ‘allowable time’. Time already spent in study at the same level is deducted from the allowable time to determine whether the recipient is still qualified for the payment.^[268] An exception applies where a person has exceeded the allowable time for time spent studying in a course more than 10 years ago.^[269]

193. There may be concerns for mature age persons around eligibility requirements for these payments such as the requirement to study full-time for Austudy; the impact of previous studies on eligibility; and the types of courses approved for eligibility for Austudy and PES.

Productivity Places Program

194. To address certain skills shortages, the Australian Government introduced the Productivity Places Program (PPP). As part of a national agreement between the Commonwealth and state governments, the PPP provides funding for qualifications for existing workers and job seekers in priority skills areas. The program only provides qualifications that are either an entry pathway to occupations in demand or will allow individuals to gain or update their skills, ensuring that they improve and maintain those skills needed in their industry.^[270] Courses include specified Certificates II, III and IV, Diplomas and Advanced Diplomas. The PPP concludes in June 2012.

Other barriers to work

195. The ALRC is interested in hearing from stakeholders about other ways in which social security laws present barriers to work.