Should the new YA ‘independence’ test be delayed?

It’s not often that a classical liberal unites with a Labor government in support of a more egalitarian income distribution. But that is what I am doing in the current controversy over changes to the ‘independence’ criteria for Youth Allowance.

What ‘independence’ means in this context is that Youth Allowance applicants are assessed only against their personal income, rather than against personal and parental income. In the budget, the government announced that it was abolishing the two softest work tests of ‘independence’. These were working 15 hours a week for 2 years (so that undergaduates working median part-time student hours would qualify automatically for their last period of study) and earning just under $20,000 over an 18 month period since leaving school (which effectively permitted anyone taking a gap year to qualify, though the YA cash would not start to flow immediately in their first uni year).

Like the government, I believe that this was turning YA not just into middle class welfare, but upper middle class welfare. Bruce Chapman’s study, though on a limited sample, found that there were more YA recipients in $100K+ households than <$50K households. My own work on the 2006 census found evidence of behaviour consistent with teenagers from higher-income households making themselves eligible. While there was only a 5% increase in uni enrolments between ages 18 and 19 for households likely to be fully eligible for YA support, and 13% for partly eligible households, in $100K+ households the increase was 29%.
The money the government expects to save by tightening the test – $1.8 billion over four years – is going to be redirected so that (among other things) more students from lower income families get YA benefits based on parental income. While I am a little sceptical that there will be $1.8 billion in savings – whatever behaviour is rewarded by the welfare system will increase substantially, and working 30 hours or more a week for 18 months, the remaining work test, is not that onerous – it is undoubtedly a move in the right direction.

Two issues have arisen in the last few days. The first is that the sudden change in the system (from 1 January 2010) disadvantages current gap year students, who have taken a year off to qualify for YA and will now not do so. This is the kind of problem that often arises in reform – ordinary people who have made decisions based on the expectation that certain government policies will continue. An article in The Age yesterday called for implementation to be delayed until 2011 because of this.

While there may be some tough cases as the margins, I think there should be no delay in implementation. People making some at least semi-genuine effort to become independent of their parents, ie by working full-time, will still be on-track for YA eligibility by mid-2010. The change catches those only working part-time, working full-time but only for a limited period (and spending the rest on holiday), and those rorting the system by ‘working’ for family-owned businesses. Presumably many are also already at uni, at least part-time. They will just have to keep going on a mix of part-time income, parental support, and the reduced YA benefits to which many of them will still be entitled under the new parental income test.

Delaying the scheme would lock the government into full YA payments for several years for many thousands more students than they had budgeted for, wiping out much of the cash they want to redirect to lower income groups. Given the budgetary cupboard is worse than bare, it is hard to argue that people who are not needy by any reasonable definition should be given, by a delay, one last chance to take taxapayers’ cash.

The other more reasonable objection to the change is that it will particularly affect rural students who need to move to study, and therefore will both be independent of their parents in a practical sense and have greater expenses than students who can live at home. Obviously a delay in implementation is not the solution to an on-going problem.

While needing to move to study is a possible new ‘independence’ criterion, it has problems of its own. Students will invent ‘needs’ to get the money. Some semi-arbitrary and complicated geographical distance between the student’s home and the intended place of study will need to be set to decide who needs to move and who does not. From the government’s perspective, already facing some political worries about regional campuses as they move to a demand-driven system, it will further advantage metropolitan universities in the new more competitive system.

The practical difficulties in designing a new ‘independence’ test may defeat this idea, leaving the 18 month work requirement as the best alternative. If they are prepared to do this, it is probably a good proxy test as to whether the student really needs to move. With mid-year entry now quite common, students would not lose the full two years that some are worried about.

29 Responses to “Should the new YA ‘independence’ test be delayed?

  • 1
    iamspam
    May 20th, 2009 10:51

    The claims of ‘upper-middle class welfare’ are all well and good, but the definition of ‘upper-middle class’ seems to be a tad askew in this case, compared to other means tests.

    For the PHI rebate, for the baby bonus, and for superannuation, the cutoffs seem to be around $100k-$150k. But for YA cutoff begins at $40k for a family. That’s not a lot of money.

    I’m not sure how you expect a regional family earning $60k to find the $15k or so needed to send their child to uni. Heaven forfend if they have two of tertiary age! And with work prospects drying up, finding 30h/week of work for 18 months seems rather difficult for an unskilled school leaver.

  • 2
    M
    May 20th, 2009 11:15

    The fundamental assumption made is that parents who earn more than X must support their children through Uni. This is not the case with a lot of people even if the family can afford it. This is certainly not the case for many from a large family (e.g 4) around the income threshold where there is no way they can fund multiple kids to the age of 22.

    The regional issue is also crucial. I come from the country. I don’t want to be too rude, but the regional uni’s are crap for most study areas (quite good for some, but generally bad). Moving to Melbourne was necessary (and mostly subsidized by Mum and Dad, but both my parents earn over $100K so they could afford it). Lots of my friends had to take a GAP year because they needed to qualify as independent, with parents just above the YA cut-off.

    I guess my question is when does parental responsibility end? The new independence age would suggest 22. Does that mean that a parent is legally obliged to support their child up to that age, that they can’t kick them out of home?

    If you come from a high income family but don’t study and don’t work you qualify for unemployment benefits. Isn’t being a uni just being on a particularly long job training scheme? Should the participants be treated differently?

  • 3
    Andrew Norton
    May 20th, 2009 11:16

    iamspam – I don’t expect a family on $60K to be able to afford to support a separate household. On the other hand, I am not going to support a program that disproportionately benefits upper income earners in the cities simply because it also catches middle-income rural families with more genuine needs.

    For the lump sum elements of YA – the rural relocation allowance and the start-up allowance – the new scheme will operate in a similar way to a lump sum payment like the baby bonus. For the weekly allowance, it operates in parallel with FTB A, the main middle class welfare program.

  • 4
    derrida derider
    May 20th, 2009 11:55

    I don’t expect a family on $60K to be able to afford to support a separate household

    But in fact you do – there’s no other way some kids will be able to study. Face reality.

    True, most will be able to go to uni eventually. But for a wide variety of reasons some would-be students can’t work full time for 18 months. Again for a variety of reasons, some can’t supplement the miserable YA rate with part time work. And even if they get to uni in a few years, they will never recapture the years they wasted before they could take up a profession.

    We still have the situation where getting a uni education is far harder for some people than ohers, and its not based on their ability to benefit from the study.

  • 5
    Andrew Norton
    May 20th, 2009 12:29

    DD – If a workable test could be devised for rural students I am not opposed in principle to them being an ‘independent’ category. Commenter ‘M’ is right that there is an underlying debate about parental responsibility, with strong views on both sides offered in previous comments threads. I’m clearly on the ‘you breed them, you pay for them’ end of the debate, which reflects the social reality in most cases, eg the Universities Australia student finances survey found most FT undergrads received support from parents or partners.

    Given the complex and often unverifiable nature of intra-family transfers, we are going to get anomalies whichever system we have. But on M’s example of the comparison with unemployment benefits, that is a more effectively self-regulating system – unemployed youths tend to come from lower-income households, while students tend to come from high-income households; the unemployment benefit has high opportunity costs, while YA has no or low opportunity costs.

    I prefer the anomalies that save taxpayers a lot of money to those which give further rewards to young people who are already among the most advantaged in the community.

  • 6
    conrad
    May 20th, 2009 13:36

    “there’s no other way some kids will be able to study”
    .
    Almost all courses are run part-time these days, so there are certainly other ways if you really want to.
    .
    “they will never recapture the years they wasted before they could take up a profession”
    .
    They won’t recapture their gap year, their summer holiday breaks etc. either. People could also not try and change jobs 5 times in their lives also (or whatever the number is), thereby diminishing the value of their degree. Personally, if people worried about “wasted time”, then the move to longer study times and postgraduate courses becoming far more the norm is surely more important (and who would ever do a PhD?).

  • 7
    Robert
    May 20th, 2009 13:44

    I don’t know student support arrangements in detail so I may be missing something obvious, but what happens to a school leaver who can’t find that quantity of work for 18 months, and whose parents are unwilling or unable to support them at university?

  • 8
    Andrew Norton
    May 20th, 2009 14:02

    Robert – They could get Youth Allowance, but the unemployment version. They are in the same position as other people without work.

    Realistically, they are unlikely to be unemployed indefinitely, and can always start their degree part-time while they work. If so, they won’t necessarily be much if at all later in finishing than those who take gap years.

    Under another change, people are automatically ‘independent’ for YA-student at age 22, from 2012.

  • 9
    iamspam
    May 20th, 2009 14:32

    the move to longer study times and postgraduate courses becoming far more the norm is surely more important
    This isn’t something that students really have a say over, it’s more at the behest of the labour market preferring people with double degrees, and dare I say it, older grads.
    .
    My understanding of recent research is that students get more out of their degree when they live on campus, study full-time, and participate in on-campus activities, at least for some part of it. My experience of uni was that mature-age and part-time students were far less likely to experience this.
    I would think that this set of policy changes is effectively limiting such beneficial experiences to those who can afford it.
    .
    Andrew, I understand your complaints against middle-class welfare, but this appears to be throwing out the baby with the bathwater.

  • 10
    The declaration of dependence « An Onymous Lefty
    May 20th, 2009 15:14

    […] No Comments Andrew Norton is a “classical liberal” who is surprised* to find that he agrees with the ALP on something – its further tightening of the already quite unfair “independence […]

  • 11
    Mary
    May 20th, 2009 18:05

    I have 4’children’ one an apprentice and 3 at University. They were unable to get YA so the 2 older ones both worked while studying and proved thier independence and qualified for YA. My daughter finished her HSC last year and rather than take a gap year immediately got a job which she continued till Uni started and since then has been working one day a week on top of full time study. Living in a semi rural area she travels two and a half hours each way to Uni but neither she nor I can afford for her to live in the city. Her aim is to work all of the next Christmas break and she should have then proved enough income to prove her independence and qualify for YA next May when she could then move closer to Uni. Since year 10 she has been saving and working hard to be able to do this and now she’s left with no way to prove independence other than to postpone her studies for 2 years. The changes should not come into affect until June 2010 so as not to disadvantage those young people who have actually planned their futures.

  • 12
    Brendan
    May 20th, 2009 23:26

    Iamspam – I’d like to see that “recent research”

  • 13
    Alexander
    May 21st, 2009 03:26

    From the government’s perspective, already facing some political worries about regional campuses as they move to a demand-driven system, it will further advantage metropolitan universities in the new more competitive system.

    It won’t have to. Not if it’s done right and the regional campuses are reasonably competitive — and if the regional campuses aren’t competitive, why should we encourage/force people from regional areas to go to them?

    As long as I can get as good an education and social life at La Trobe University Bendigo as I could at La Trobe University Bundoora, but could also get free money from the government, why would I have gone to Bundoora? More people live in the city than in the country, so there’s more people who could move from the city to the country, than people who could move from the country to the city.

    The only problem would be that at the moment regional universities aren’t generally attractive, so that would need to be fixed. It needs to be fixed anyway. Europe and the US can have perfectly good universities outside of big cities; why can’t we? Also if you just used distance as a measure, going from one capital to another is probably more attractive, so it might be necessary to make it moving between regional and metropolitan areas.

    Of course, you probably object to the notion of using taxpayer money to manipulate society. One of the benefits of not being a classical liberal.

  • 14
    Alexander
    May 21st, 2009 03:32

    Oh I meant to build on the “social life” aspect. Currently most regional cities don’t offer as much as metropolitan cities. Of course they don’t, there’s less people there. But I reckon there’s enough people who don’t need a huge social life, or who are happy to trade some of that for money. Especially if they’re near enough to their home city that they can drive down or catch a train for a day/weekend.

  • 15
    M
    May 21st, 2009 10:42

    Alexander the problem is that the regional uni’s have incredible trouble attracting good (and keeping) staff. Most of them only became Uni’s in the last 20 years and are still trying to establish themselves. They often don’t have a broad range of high-paying industries to interact with locally (e.g. Big Law/Accounting Firms, Big Research Hospitals, etc…).

    Australia is one of the most Capital city centric countries in the world (80-90% of people live in the state capitals). Unlike say the UK or the US where the top Universities are not all in the big cities, but also the highly educated industries are not in one location.

    One characteristic of Australians is that in general they don’t like moving. In the UK hardly anyone studies in their hometown, they go somewhere else (as long as they can afford it). In the US the same thing happens, people who can afford college often go somewhere interstate or at least in a different city. In Australia that’s not a common option (although a lot of people do go to ANU). If you live in Melbourne, then you go to a one of Melbourne’s 5+ Uni’s and you probably stay living at home.

  • 16
    Alexander
    May 21st, 2009 19:26

    Alexander the problem is that the regional uni’s have incredible trouble attracting good (and keeping) staff.

    That’s basically my point. You shouldn’t say “changing the YA policy like this will hurt regional unis because it will make it easier for people from regional cities to move to capital cities”. You should make it so people actually want to go to these universities. Do this by fixing the problems with these universities, not by making it impractical for people from Bendigo to go to uni in Melbourne.

  • 17
    derrida derider
    May 21st, 2009 20:38

    In the UK hardly anyone studies in their hometown … In Australia that’s not a common option

    Yep, and there’s a simple explanation for that – our rigid YA independence rules, and our miserable living-away-from-home YA rates. ’twas not always thus – pre the 1992 (I think) changes we were more like the UK.

  • 18
    Jc
    May 21st, 2009 21:44

    DD

    Or perhaps because we’re the most urbanized nation on earth with reasonable universities close by makes it easier to live at home.

    It also wasn’t that long ago when you couldn’t move to study in a different state.

  • 19
    M
    May 22nd, 2009 11:13

    DD I’m not sure in the UK, but I suspect that only middle class people who can afford it live away from home. I don’t know if the UK has YA or something similar which pays better. I doubt it would help since the accommodation cost is higher in the UK (London is just obscene), although one of my cousins was in a 9-girl share house and that was quite common.

    Alexander, I agree that the regional Uni’s should be improved. I actually think this should be part of a larger plan to encourage de-centralisation. Encourage growth and shifting of jobs to regional centres and out of the capital cities (which have major infrastructure issues). Part of the strategy should involve strong high quality industries locating there and having universities that are very strong in the relevant areas (need big cash input for 10 years to establish specialties).

    This is sort of happening at Ballarat with the IT/Technology stuff, but I’m not sure how many good jobs there are and how many are actually just call centre positions filled by a cheap supply of undergrads.

  • 20
    lomlate
    May 24th, 2009 14:38

    I’m not sure I follow your logic completely Andrew. I understand that there was a loophole. I am that loophole. The kid earning $18,000 while living with rich parents in the city. I’m just not convinced this is the solution. If there is a choice between shutting some students out of university or letting students abuse a loop-hole, I know which one I’d prefer.

    Secondly, you seem to be ignoring the fact that this policy will create it’s own loophole, one which I intend to exploit. Under the new system, every student who is 22 years old will get full austudy. Even if you live at home you get the full $370 rate, not just the ‘living at home’ rate on youth allowance. That means every student doing a 5 year degree regardless of independence or parental income will end up getting Austudy for a short period. The majority of students who take a gap year will get it for at least a year. This makes no sense!

    Under the old system there was a loop-hole that benefited rural students, while some students abused it. Under the new system rural students won’t benefit, and ALL students will abuse it.

    I think the government had two options:
    get rid of youth allowance for anyone living at home
    and
    establish a rule for students from the country. There are other scholarships that use a “90 minute” test. – if it takes you longer than 90 minutes to get from your parents home and you’ve moved closer to university because of it then you can get youth allowance. If that costs too much you can base it on a income test that roofs out at the top marginal tax rate, instead of the $~50,000 the current YA qualified for. This seems to me to be a much more equitable solution.

    Then again, under that solution I wouldn’t be rorting the government for aus study for the last two years of my degree while living at home so…. maybe we should just leave things the way they are.

  • 21
    Andrew Norton
    May 24th, 2009 15:17

    lomlate – I agree on lowering the age of independence, though most people don’t do five year degrees (perversely, those who do are likely to come from relatively privileged families). Hopefully they modelled it based on age of completing students rather than picking a number that sounded right, though knowing the history of higher education policymaking I fear it is the latter.

    Nobody is being ‘shut out’. The only difference is that people who are clearly not demonstrating any real independence are no longer going to be deemed independent anyway. If you work 30 hours or more a week for 18 months you get full YA. And keep in mind that more students will become eligible for full YA under this scheme without any need for an independence test.

    If there can be a workable rural test I am prepared to support it – possibly the current navigation technologies could be adapted to provide quick assessments of who is eligible in relation to which campuses.

  • 22
    lomlate
    May 25th, 2009 00:20

    The 90 minute test is used by scholarships that universities have. There is also a ‘rural’ test that the government has which lists every postcode in the state and gives it a rank out of 6 for rural-ness. But I don’t think that’s as applicable in this situation since someone moving from Geelong wouldn’t be classed as rural even though to get to monash clayton it would be an impossible drive.

    The 90 minute test seems fair to me. The way it works is that the student has to print off a bus timetable or whatever to prove that it would take that long every 6 months. I can’t remember which scholarship it’s used for but it is used for some sort of government hand out.

    I think you’d have to couple it with an income test though. If you earn over a certain amount you should be able to afford to pay for your kids to move to go to uni.

    The question is, which would be more expensive: having a rural test or lowering the independence age to 22? If it were a fight between them I know which one I’d pick – the one that left me out in the cold transfer payment wise!

  • 23
    Andrew Norton
    May 25th, 2009 07:19

    Lomlate – Having spent many hours last year getting my head around the various student support schemes, one lesson I took from it was the importance of simplicity, both for the applicant and for Centrelink. A test that unis use to hand out a relatively small number of scholarships to one institution with staff dedicated to handling it is not necessarily suitable to Centrelink staff dealing with numerous different payments and students from many different unis. That’s why I’d be looking at online tests where both applicants and staff can put a home address and a campus address in a computer and instantly get an answer.

  • 24
    Andrew Norton
    May 25th, 2009 07:44

    Former YA recipient Allan Tieu defends the changes.

  • 25
    Russ
    May 27th, 2009 00:36

    I think it is a mistake to conflate independence tests with the problem of having to live away from the parental home. Students could be assessed for rent assistance – in relation to the costs (rent, base payments for bills) and benefits (reduced travel time and cost) of living away from their parents – independently of whether they need a living allowance.

    My concern with the changes is in relation to the point DD made earlier, and one ignored by the Tieu in the above article, Coulter in the Age the other day, and the Bradley report. There is a substantial number of students, mostly doing science or similar, who are at university 25-35 hours a week, and cannot possibly work the 15-20 hours a week being done by students in the other faculties. Changing the threshold for when payments are reduced isn’t going to do anything for them. Leaving aside whether the government is getting good value for the funding being put into universities, when the students aren’t preparing for (or even attending) most of their classes so they can work instead.

  • 26
    Andrew Norton
    May 27th, 2009 07:15

    Russ – The benefits rates do assume that students work some hours (or have some other income source). Overall, however, the changes move in the direction of more students getting higher rates of YA via the parental income test. This is a budget neutral reform, so it is a straight redistribution of benefits in ways that will be fairer overall.

    There has never been a faculty test, though as some of my other comments suggest I am very wary of trying to finetune for every possible situation because of the added complexity it creates.

  • 27
    Russ
    May 27th, 2009 16:14

    Andrew, I don’t disagree on the problem of complexity. I do disagree that it is fine-tuning. The three biggest determinants of a student’s well-being are going to be their parental supplementary income, the necessary added expense of travel and living costs to attend university and their earning capacity. The potential differences in this last factor are almost as great as the differences in the first.

    To give a sense of the scale, the students I am teaching have 12 hours a week contact, are expected to (but don’t necessarily) do 24 hours of external study, and have no exams. The veterinary science students I live with have 30 hours a week contact (plus lunch breaks), are expected to do 30 hours of external study, have 4 weeks of exams and 2 weeks of full-time work experience per semester.

    Those are somewhat extreme examples, but since most of the courses requiring heavy workloads are in the same areas the government expressed an interest in improving student numbers, there is a confluence of interest in increasing payments.

    As for complexity, amongst the reams of information Centrelink takes from students, one of them is the course they are doing. I wouldn’t think it is a great change to ask the universities to provide average internal and external study hours for their course, and assess payments against that.

  • 28
    C
    June 6th, 2009 10:10

    Will students already receiving YA (qualified in 2008) be affected?

  • 29
    Andrew Norton
    June 6th, 2009 16:02

    C – No