The supposed paucity of New Start Allowance (NSA) is the story which won’t die, canvassed in the Henry Tax Review it has since been the subject of some parliamentary inquiries, study by NATSEM and a whole lot of hot air. The most recent iteration of this has been because grandfathered parenting payment recipients were transferred to NSA on the first of January.
In all of the discussion though there seems to be a remarkable lack of knowledge about what the changes mean, how welfare/employment programs work in Australia, what living on NSA is like and the rent-seeking happening. I’m going to try and address some of that here.
Parenting Payment Background:
Back in 2006 as part of the Welfare to Work reforms under the Howard government the eligibility requirements for Parenting Payment (PP) were changed so that all new applications after 1 July 2006 only received PP if their youngest child was aged under 8 (single rate) or 6 (partnered rate). All existing recipients were ‘grandfathered’ and continued to receive PP until their youngest child turned 16.
When recipients moved off PP if they moved onto New Start Allowance which includes a requirement to undertake employment services, e.g. attend meetings with a Job Network (now Job Services Australia) provider, look for work and complete training courses.
In other words where in the past parents weren’t encouraged to find work until their child was in year 10 they would now be encouraged to find work soon after their child started primary school.
DEEWR studied the impacts of this and released a report in 2008 and found that the changes significantly increased the number of parents leaving welfare and moving into work. How significant? Try a 150% increase with the rate of people leaving in under six months jumping from 15% to 38% (page vi).
Parenting Payment Changes:
The changes which just happened moved the grandfathered recipients from the old regime onto the new one, what is the actual impact though? DHS (Centrelink) has a nice breakdown on their website,
So no change for partnered payment and a $130/fortnight reduction in maximum payment rate and a $440/fortnight reduction in maximum earnings for part payment.
Note that in all cases these figures exclude rent assistance which is worth up to a further $121/fortnight and health care/pensioner cards reduce many expenses.
Living on Newstart Allowance:
Interestingly in all of the complaints about reduced payments there has been very little mention of the fact that these parents have been receiving higher payments than other slightly younger parents for five and a half years.
But what’s it like to live on NSA? Over at Fairfax living on $120k is “struggle street” so NSA is inconceivable:
it’s a breeze living on $35 a day, IF YOU LIVE IN A PRETEND SOCIALIST AGRARIAN SOCIETY!
Bloody hell, when will politicians understand – really properly understand – that you cannot live on $35 a day in Australia – let alone Sydney, ranked recently as one of the most expensive cities in the world? A place where those on an income of $120,000 a year profess to be on Struggle Street?
Meanwhile on the The Drum they deploy some admirable reasoning to explain that by them having lived on NSA they actually proved that it can’t be done:
After paying rent and bills, I had $100 a week to live on. I don’t actually remember how I did it. I think it’s safe to say that, actually, it can’t be done.
Enough heckling from the cheap seats though. It’s data time. Back in August last year NATSEM released a study on NSA and financial distress. In brief their findings were:
- Unemployed people are more likely to be poor (shock!)
- Unemployed households are likely to be poor for 2+ years (shock! in high employment it’s only the most disadvantaged who aren’t working)
- After housing unemployed households have $242/wk disposable income (actual shock! more than you’d think) or 33% of nat. avg (shock! unemployed are poor)
- After housing, utilities and food unemployed households have $154/wk in disposable income (actual shock! a lot more than you’d think)
- 36% of unemployed households experience financial deprivation and 45% experience stressors (shock! unemployed are poor)
As an aside it certainly doesn’t help their case that many of the progressives advocating an increase point to things like the the indignity of not being able to afford (or having to budget for) a night out drinking with friends.
What they seem to be confusing is the purpose of NSA. It isn’t meant to be a comfortable life, it’s meant to be an uncomfortable and short life because you’re meant to move into employment quickly.
Not enough money to find a job?
A lot of the discussion has alleged that NSA is too low to find a job on but really when when your argument rests on the idea that someone with $154/wk in disposable income can’t afford a shirt and tie I think you’re fighting a losing battle and may have (perhaps mercifully) never seen an ad for Lowes or Rivers.
Now sure $154/wk isn’t exactly a lot and you won’t be building up savings which leaves you vulnerable to unexpected expenses, but on the other hand this is Australia not a developing country (or the US) so bulk-billing exists, you’re on NSA so you have a healthcare card to reduce prescription costs to almost nothing and in a worst case Centrelink will provide a $500 advance payment.
Rent seeking churches:
The NATSEM study was commissioned by a group of leading churches and one of the leading advocates for increasing NSA is ACOSS, the church’s lobby group, so it’s worth looking at their motivations in some detail.
Firstly though some background on how employment services work, if you receive New Start Allowance (NSA) then you will be required to register with a Job Services Australia (JSA) provider and look for work. JSA providers are private sector organisations, often charities though occasionally for-profit (for example Thérèse Rein’s old business Ingeus).
At registration and regularly thereafter jobseekers level of disadvantage is assessed based on time unemployed, homelessness, drug addictions, disabilities, etc. This leads to a classification of Stream 1 (limited), 1, 2, 3 and 4. Essentially someone in Stream 1 (limited) can be expected to find work with little to no assistance and someone in Stream 4 will need significant assistance.
JSA Providers are paid in a relatively complex fee structure (p117 Annexure C) which is designed to incentivise them to find people long term employment and the amounts range depending on the level of disadvantage, this breaks down into:
- Employment Pathway Fund: an initial payment intended to cover costs of jskrs obtaining licenses/etc, this ranges from about $10 to about $1100
- Service Fees: a small ongoing payment for having a jskr on the books, this ranges from about $60 to about $500 and is paid every thirteen weeks.
- Placement Fees: a small payment for getting a jskr into a job, this ranges from about $380 to about $550
- Outcome Fees: large payments for keeping a jskr in employment, these are paid after a jskr completes 13 weeks work and then again after a further 26 weeks. This ranges from $0 for Stream 1 (as they typically need no assistance staying in work) up to about $3500 for Stream 4 who have been unemployed for 5 or more years
JSA Providers then are receiving a significant amount of money (about $1.6b annually in total) to help people find work.
When Mission Australia, Salvation Army, etc allege that jskrs do not have enough money to buy a shirt and tie they are wrong but they are also omitting that they were given money to spend on shirts, ties, boots, licenses, etc for jskrs and they chose not to.
So when JSA providers ask for NSA to be increased to pay for things then at best they are saying that they want to be able to increase their profit by earning more (place more people in jobs) without spending more (actually helping people). At worst they are saying they want to be able to increase their profit by earning the same or more (place the same of more people in jobs) and spending even less (even less actual help).
Unfortunately it’s a bit beyond back of the envelope stuff to estimate the effect which a NSA increase would have on JSA revenues. I can certainly say two things though, (1) it definitely wouldn’t be 1:1 however (2) it would be positive.
Jenny Macklin wasn’t being insulting when she said she could live on $35 a day, she was being insulting when she said she couldn’t. She was being insulting to the hundreds of thousands of people who do and she was being insulting to the millions of people who pay for it.
When the commentariat gets worked up about this they are failing to imagine a lifestyle other than their own, they are failing to rationally think about the issue and they are falling for the rent seeking of the major churches.
Disclaimer: I have had some exposure to this through my employment however my views are entirely my own and don’t necessarily reflect those of my employers of colleagues. All facts and figures referred to are in the public domain.