The welfare state and social solidarity

After the Jessica Gilbey episode, more evidence that (depending how you look at) shared participation in the welfare state is the basis of social solidarity, or that welfare hand-outs bring out the ugly, grasping, envy-ridden side of human nature:

“The fact that I’ve fallen through the cracks has absolutely destroyed me,” says Melbourne documentary maker Kerry.

“The most annoying thing is feeling like I’m the only one, like everyone else is getting it but me,” says PhD student Chris.

“Self-funded” retiree Stuart is more measured: “I was disappointed in as much as the Government loves to advertise the good bits but I think they keep the nasty bits away from you. I could have done with it for repairs to our home,” he said.

Genuinely self-funded citizen Andrew of Carlton did not receive the $900, and was not interviewed for the article, but if he had been he would have said that he was glad not to have further added to Australia’s already far-too-high budget deficit.

Should welfare recipients be able to claim tax deductions to make them welfare eligible?

The Age this morning reports on a Federal Court judgment that opens the way for welfare recipients to claim as tax deductions expenses incurred in maintaining their eligibility for welfare.

The case was brought by Symone Antsis, a former Australian Catholic University teaching student. In the tax year in dispute, she earned about $15,000 working for the Katies retail chain and about $3,600 from Youth Allowance. In her tax return, she claimed work-related self-education expenses which included depreciation on her computer and spending on university textbooks.

The rule on self-education expenses is that the deductible expenses have to be related to your current employment. Her expenses were clearly unrelated to selling women’s clothes. But she argued that they were necessary to undertake the studies necessary to maintain her YA eligiblity, and therefore she ought to be able to deduct them.

Amazingly, Justice Ryan of the Federal Court accepted this argument:

Continue reading “Should welfare recipients be able to claim tax deductions to make them welfare eligible?”

The ATO and social solidarity

Jessica Gilbey, a 25-year-old PHD student, won’t see a cent of the payments even though she lives on a piecemeal casual income that is often less than $100 a week. Technically, she did not pay any tax in 2007-08 so she will not receive the payment.

“I was completely devastated,” she said. “You feel left out, you feel like you’re not a citizen.”

SMH, 6 April 2009

Ms Gilbey strikes me as a truly pathetic individual if her sense of social solidarity and citizenship comes from whether the tax office sends her a handout, which is a symbol not of social membership but a once-off do something, anything response to a slowing economy.

And what is ‘technically’ paying no tax? I think what they mean is that ‘technically’ she did pay some small sums in 2007-08, but the ATO has already given it back to her, meaning that her net tax payment was zero.

I’ve heard quite a few complaints along these lines, none of which I have any sympathy for. It’s just an example of how the welfare state brings out the worst in people, encouraging them to whinge about not getting handouts instead of working.

Jessica Gilbey says she was misquoted.

Your taxes at play

Yesterday The Australian added anecdotal evidence to the statistical evidence that Youth Allowance is middle-class welfare.

STA Travel has also released sales to entice students to splash their stimulus cash offshore.

The company’s product and marketing director, Basil Hyman, said anecdotal evidence suggested inquiries for travel to short-haul destinations such as Bali, Fiji and Vietnam had shot up since the handouts had begun reaching bank accounts. “I think it has helped to stimulate overseas travel,” he said.

We are still waiting to see if Gillard will, as the Bradley report suggested, make YA a less rortable scheme.

How newspapers report old news

In the SMH this morning, there is a story on the rorting of Youth Allowance. With an added error*, it is the same story reported on this blog several weeks ago. We both got it from the Bradley report.

But because the Bradley report is old news, we get this formulation:

There was “strong evidence” that the allowance was “quite poorly targeted and inequitable”, the authors of the Bradley review into higher education told the Federal Government.

Leaving vague when they told the federal government, and by what means they told the federal government.

If something is important, I don’t think there is a great problem in reporting it later if it was missed the first time. But I dislike media reports that make the original source unclear.

* The error is this: “The Government is considering a significant tightening of the payment to bring it in line with the Family Benefit payment. The change would mean some 27,000 students now receiving it would be ineligible.” In fact, this is a reference to making more students eligible (not ineligible) by lifting the amount parents can earn before students start losing their benefit. The added ineligibility would come from tightening the “independence” criteria.

Youth Allowance reform

Though the Bradley report fails on the key funding issue, not all of it is bad.

Earlier in the year, we debated the ‘independence’ test for Youth Allowance. I thought it should be tightened to exclude those satisfying a soft work test, but really still living at home dependent on their affluent parents.

The report provides new information on this issue. It shows (p.52) that ‘independent at home’ has been the only growing class of YA recipients over the last few years, though there was a small lift in other categories over 2006-07. Work Bruce Chapman carried out for the review using HILDA data found that 36% of Youth Allowance recipients were in households earning more than $100,000 a year. By contrast, only 32% of recipients were in households earning less than $50,000 a year. It’s quite a small sample (136 students), but supports other evidence that YA has turned into middle-class welfare rather than a program that assists genuinely needy people to attend university.

Sensibly, the Bradley report recommends abolishing these ‘independence’ categories, but lowering the age of automatic independence from 25 to 22. Money would be diverted to increasing how much parents can earn from $31,400 to $42,500, increasing the amount students can earn, and increasing benefits by an unspecified amount. Existing rorters of YA can, however, rest easy – current recipients will be ‘grandfathered’ out.

Should scholarships be exempt from Centrelink income tests?

One popular theme in the submissions to the Bradley review of Australian higher education policy is that scholarships paid by universities ought to be exempt from Centrelink income tests. The problem is that if the scholarship gives a student on Youth Allowance more than $118 a week it will be caught by the YA income test, and so the scholarship saves the government 50c in the YA dollar. The universities reckon that this provides a disincentive to provide income-support scholarships.

While the frustration of universities is understandable, there should be no special treatment of scholarship income. The main function of scholarships is positional competition between universities. Mostly they compete for the very bright students. Often these students come from privileged backgrounds, but even when they do not their high intellectual ability means that they are likely to do very well in life whether they get a scholarship or not. The public policy case for sending special extra financial rewards their way, through exempting them from welfare reductions that all other students must suffer, is very weak. Indeed, exemption would be a particularly egregious example of the generally regressive nature of higher education subsidies. Continue reading “Should scholarships be exempt from Centrelink income tests?”

Marriage for money

Intimacy for money is a taboo, which is why when newspapers want to dramatise student poverty they talk about student prostitutes or, in The Age today, fake marriages to qualify as ‘independent’ for Youth Allowance:

JOHAN Stutt never planned on getting married at the age of 18 – let alone to someone he didn’t love. Some might say it was a matter of survival.

Stories like this have been around for decades – 20 years ago there were ‘TEAS marriages’ [Tertiary Education Assistance Scheme, a Youth Allowance predecessor], though usually in the version of the story at the time between gays and lesbians, whose marriage rights weren’t worth anything anyway (another reason for gay marriage – reduce welfare rorting!).

But a quick check of the marriage statistics shows that this is not likely to be a growing problem. The teen marriage rate is in long-term decline, and teenage men have a less than 1% probability of getting married for any reason. In 2006, there were 423 marriages by men aged 19 or under (and at a guess, most of them will never enrol in any degree).

We don’t need to worry much about this kind of Youth Allowance rorting, as not many people who would marry someone they did not love. It’s the easy work/earnings test I want to tighten up, and I am quoted saying that right at the end of The Age article. Unsurprisingly, I am the only person going on the record suggesting that in some cases we spend too much, rather than too little, on student income support.

What is independence from parents? (part 3)

Backroom girl has been vigorously contesting my view on who should be counted as ‘independent’ of their parents for welfare purposes.

I’d say that the following are normally signs of independence:

* receiving no or trivial financial support from parents
* moving out
* starting own family, marriage and especially own children

Under the current independence test, only children will get you straight onto the welfare roll, though if you have been married or [corrected; comment 1] in a de facto relatationship for 12 months you can also get YA in your own right.

Moving out doesn’t make you independent, unless your parents are a threat to you. However, even if your parents help with the bills I’d say living away from your parents does require self-sufficiency in many other respects.

However working 30 hours a week for 18 months or 15 hours a week for two years does make you independent, though the latter does not in my view meet any reasonable test of what ‘independence’ means. A low-skill worker could not earn enough to live independently on 15 hours a week, even in a shared expense household. As the AVCC student finances report found, that’s routine hours for undergraduates and means that many of them would qualify as ‘independent’ for YA after 2 years at uni, despite their actual circumstances not changing at all.
Continue reading “What is independence from parents? (part 3)”

Should students be considered ‘independent’ of parents?

A bit of a debate is raging in the Youth Allowance post about how dependent students are on other members of their family. Sinclair points out that most 15-24 year olds live with their parents. Based on a mix of census and DEST data, I have estimated in the past that around 60% of late teen uni students live with one or both parents. Of those at home, they are an affluent bunch: median household income is $104,000 a year.

But how much sharing goes on within the household? The AVCC/Universities Australia student finances survey asked this question, referring to parents and partners. For ‘often’ relying on non-cash assistance, for full-time undergraduates:

Meals: 60%
Accommodation: 58%
Telephone: 53%
Use of car: 31%
Clothing: 20%
Textbooks: 28%

38% of full time undergraduates classed themselves as ‘financially independent’.

The 2006 General Social Survey found that of the people who had children aged 18 to 24 living away from home, 58% provided them with support: Continue reading “Should students be considered ‘independent’ of parents?”