Category: Welfare

Are fewer uni students getting Youth Allowance?

~ Andrew Norton ~ 16 Comments

An article in this morning’s Age reports on research from the On Track survey of recent Victorian school leavers finding that:

Thirty-seven per cent of regional students told the survey for State Government initiative On Track they were waiting to qualify for an independent Youth Allowance before studying, compared with 15 per cent of city students. The easiest way to qualify is by earning about $18,000 over 18 months before starting.

For eighteen months now I have been curious about why university students seem to be starting at a later age, with this kind of playing the Youth Allowance system being high on the list of theories.

Unfortunately, there was no data released for 2005 on the ages of students ‘new to higher education’, so I had to use the commencing student data (which isn’t as good, because it includes people transferring from other courses). While the trend of an absolute enrolment decline in ‘young’ commencing students, which I define as those aged 16 to 18, stopped and their numbers started to climb again, they continued to decline as a proportion of all commencing students aged 16 to 21. If the 16 to 18 year olds had maintained their year 2000 market share of all commencing students 21 and under in 2005, there would have been about 6,600 more of them at university than in fact was the case. Continue reading “Are fewer uni students getting Youth Allowance?” →

Will the public support conditional welfare?

~ Andrew Norton ~ 30 Comments

Today in The Australian my CIS colleague Peter Saunders comes out in favour of ‘conditional welfare’, in which some welfare payments for parents deemed irresponsible or incompetent are restricted, so that they can only be spent on items the government deems appropriate.

So far as I am aware, this is not an idea that has been directly tested in an opinion poll. But based on answers to other questions we can take an educated guess as to what the public might say if asked.

Most of the people to whom conditional welfare would apply would presumably be on unemployment or single parent benefits, two groups which have not inspired enthusiasm among Australian voters. For example, a 2001 Saulwick poll asked about benefit levels for various beneficiary groups. Majorities supported higher payments for those who could not reasonably expected to work, the aged and disabled. But only 22% wanted more for single parents, and only 17% for the unemployed.

Both groups, perhaps, are seen as vulnerable to the moral hazards of welfare. Continue reading “Will the public support conditional welfare?” →

Who thinks that they have low status?

~ Andrew Norton ~ 8 Comments

If leftists support “political programmes that seek to eliminate status differences or moderate their impact” then the best way to reduce the left’s opposition to free markets would be to sever the link between income and status.

Don Arthur, 10 June.

But how strong is the existing link between income and status? This issue can be approached from two directions. We can ask people what weight they give income when assessing the status of another person – I am not aware of research on this, though I’m sure somebody must have put the question in a survey. We can also ask people how they perceive their own status and compare that self-assessment with their income. A question in the Australian Survey of Social Attitudes 2005 asks:

In our society there are groups which tend to be towards the top and groups which tend to be towards the bottom. Below is a scale that runs from the top to the bottom where the top is 10 and the bottom is 1. Where would you put yourself on this scale?

Overall, whatever others may think of them, most people do not think they are on the ‘bottom’ of society. Only 2% rate themselves as ‘1’ and only 18% below 5. If we thought of society as having 10 status deciles, 40% should rate themselves below 5. Consistent with an egalitarian ethos, few rate themselves too highly either. Only 3% of respondents put themselves in the top 20% of society.

Low income is, however, associated with lower status. Continue reading “Who thinks that they have low status?” →

The winners and losers from tax and spend

~ Andrew Norton ~ 33 Comments

Yesterday the ABS released the latest of its surveys of the winner and losers of Australia’s taxing and spending, covering the 2003-04 period.

And the winners are…unemployed single parents with children under 5, taking in on average $878 more a week in income transfers and welfare services than they pay in tax, most of which is indirect tax (it has a statistical caution on the number, but despite low overall tax this group scores the highest payment on ‘tobacco products’, consistent with previous research showing the poor pay a disproportionate share of ‘sin’ taxes).

And the losers are…the top 20% of households by income, who pay on average $571 a week more in tax than they receive back in benefits and services.

As with previous surveys, this one finds that the bottom 60% of households are net beneficiaries of the tax and welfare system, ie they receive more in income transfers and welfare services than they pay in tax. The Australian gave this aspect its lead story, with the heading ‘Tax take helping Howard battlers’. The poorest 20% get more than 40% of all social assistance, and the richest 20% only 9%.

But the redistributive aspect of policy is driven by income transfers rather than government services. Continue reading “The winners and losers from tax and spend” →

The fiscal burden of Family Tax Benefits

~ Andrew Norton ~ 35 Comments

In the executive summary of the second Intergenerational Report, released today, it says after noting various fiscal pressures that will build over the next 40 years:

It will be important to focus on the efficiency and effectiveness of government spending

I couldn’t agree more. Unfortunately, the government isn’t heeding its own advice, as the Integenerational Report itself shows. In an appendix on spending projections the Report compares spending forecasts made in the first report five years ago with those Treasury makes now. Back then, they thought that Family Tax Benefits A and B would consume 1.3% of GDP in 2006-07. In the second Report they say FTB spending will be 1.6% of GDP in 2006-07. In a trillion dollar economy – as various government Ministers for some reason keep telling us – that 0.3% is a lot of money. In real per person terms, it’s gone from $613 per person to $790 per person, or about a 29% increase.

Now what do we have for all this money? According to the Report:

Continue reading “The fiscal burden of Family Tax Benefits” →

The political case against big-government conservatism

~ Andrew Norton ~ 26 Comments

I’ve posted regularly on the Howard government’s big spending habits. While I think much of this spending is unwarranted on policy grounds, it’s going to be hard to resist while Liberals still believe that it works politically. In this morning’s Weekend Australian I outline an argument as to why big-government conservatism isn’t a viable long-term strategy for the centre-right (there’s more detail in my Policy article).

The argument has parallels with the mummy party/daddy party thesis. Voters view political parties in stereotypical terms, seeing Labor as stronger on ‘welfare’ issues such as health, education and social security, and the Liberals as stronger on tax, defence and immigration (Newspoll’s list is the most accessible). Like most stereotyped views they are not completely immune to reality, but as the general public often has a poor grasp of actual trends they tend to form judgments based on their general perceptions of the parties, rather than their real record or (for Oppositions) their alternative policies.

This is one reason why despite increasing spending more quickly than the Keating government on education, health and social security over the last few years, and at a considerable rate by any standard, the Coalition still trails Labor as the better party on these issues. Using the Australian Election Study measure, the Coalition has recovered some of the ground lost as they cut the Budget deficit in the mid-1990s, but they are not back to their 1996 position. And as I say in the Weekend Oz:

Continue reading “The political case against big-government conservatism” →

Does diversity affect what we think about the welfare state?

~ Andrew Norton ~ 20 Comments

As part of his well-deserved early career award from the Academy of the Social Sciences, Andrew Leigh was asked to write a paper for their journal Dialogue. As he explains on his blog, he chose to write on something a ‘bit provocative’, the possible negative effects of ethnic and linguistic diversity. One of these possible negative (sic) effects is reduced support for the welfare state.

For this hypothesis, he draws on the work of Alberto Alesina and Ed Glaeser, who argue that one of the major reasons for the much smaller welfare state in the US compared to Europe is that the US is more racially diverse. Or to put it more bluntly, the wealthy white majority isn’t too keen on giving money to the poor black minority. Extrapolating from this, Andrew notes that Australia’s welfare state is small compared to Europe’s, and that our linguistic diversity is higher than either the US or Europe, and therefore ‘our high level of linguistic diversity helps explain Australia’s relatively small social welfare sector’.

I doubt it. Indeed, you only need to keep reading Andrew’s paper to find at least one reason for doubt. Using answers to a question in the Australian Election Survey about whether people agree or disagree with the proposition that ‘income and wealth should be redistributed’ he finds that only in Queensland is there are a statistical relationship between disagreeing with the proposition and levels of local ethnic diversity. This he puts down to the relative success of ‘racially-driven politics’ in that state, with One Nation its most public manifestation. But what about all the other states? They, after all, contain the vast majority of seats in the Australian Parliament.

My CIS colleague Peter Saunders has argued that this analysis of the comparative welfare states misses important cultural differences between the ‘Anglo’ countries and Europe. The Anglosphere countries have much older and more powerful traditions of individualism than Europe. Alan Macfarlane wrote a well-known book on this, The Origins of English Individualism, tracing it back many hundreds of years. In particular, the Anglo countries have a much greater belief in self-reliance. Continue reading “Does diversity affect what we think about the welfare state?” →

The rise of political familism

~ Andrew Norton ~ 50 Comments

As a single and childless male I know an election year won’t be good for me. On both right and left, the trend is toward political familism, with the interests of people with kids put above those without.

On the right, the main trend has been toward income transfers. This year the Howard government plans to spend a staggering $28 billion on financial assistance to families with children. It’s the second-largest item in the federal budget after the aged pension, and does not include indirect benefits such as schools and health care. This largesse has helped make the Howard years exceptionally good for people with kids. In the latest NATSEM study Ann Harding calculates that real disposable income has increased by 29% for couples with kids over the last decade, for single parent families by 26%, for couples without kids by 23%, and for single households by 15%. This of course isn’t just government benefits; rising real wages and increased labour force participation are important too. But family benefits payments have undoubtedly skewed the income distribution further away from the childless. Everyone pays unnecessarily high taxes, but only those with kids get money back.

On the left, the main trend is toward advocating further intervention in the labour market in the interests of families. Kevin Rudd has enthusiastically embraced this agenda. In his first speech to Parliament as Labor leader, he said: [restored from NLA website]

…families are such a basic social institution that they deserve special protections. When you instead have a set of laws which says that you can be told to work at any time of the day, at any place and for virtually whatever rate of pay, that it can include weekends or whatever and that you can have your shifts and rosters changed at a moment’s notice, just pause for a moment. Let us think through where that all goes in terms of the impact on working families.

As yet, it is unclear exactly how this might translate into policy. Late last week, Julia Gillard floated the idea of pressuring employers of people with kids under six years of age to permit part-time work without the disadvantages often associated with it, such as less training. Barbara Pocock’s book The Labour Market Ate My Babies, cited by Rudd in his CIS speech, proposes that:

…Australian labour law should be amended to increase the time autonomy of workers, especially those with care responsibilities. …within a framework that restricts long working hours … [including] new capacities for changes in working hours that are initiated by employees…all parents [to have] an opportunity to take up to two years out of paid work with income support on the birth of a child.

Obviously making half a million people a year eligible for income support (250,000 births times two parents) has fiscal implications, and means higher taxes for others or less spending on other things. But this kind of labour market intervention also has significant implications for other workers, who must fill the gaps left by people who decide, without reference to others, to vary their hours of work. Inevitably, the childless or empty nesters will pick up most of the slack, lacking the ‘childcare centre shuts at 5.30pm’ and other excuses of workers with kids.

The basic concerns behind political familism have been widely accepted, even if the major political parties do not have the same policy responses. But these concerns do not seem to me to be compelling enough to warrant the redistributions of time and money occurring or being proposed.

As the NATSEM research shows, families with kids have higher incomes than other kinds of households, receiving about $250 a week more on average than the next most affluent household type, couples without kids. In my article on ‘big government conservatism’ I report research from the mid-1990s showing that at that time people with kids had above average satisfaction with their financial situation. Yet for all the spending, it is hard to see any significant trends in the basic family statistics except for increased use of formal childcare.

Obviously parents need time to look after their kids, and many surveys have shown at least a large minority of people perceive some conflict between work and family. But this in itself is not a policy, as opposed to personal, problem. For most people, there are more things they could do with their time than there are hours in the day or days in the year. Inevitably, trade-offs need to be made between competing uses of time. But the ‘right’ trade-offs cannot be set in Canberra or by academics. They depend on a wide range of personal, family, and work circumstances, which will vary greatly from household to household and within households over time.

For example, in the 2005 Australian Survey of Social Attitudes about a third of respondents said they would like to spend less time in their paid job and 70% said they would like to spend more time with their families (implying some other activity ought to be reduced). But only 10% agreed that they would rather ‘work fewer hours and earn less money’, with twice as many saying they would rather ‘work longer hours and earn more money’. So while in a constraint-free world we would have more of everything, in the real world of trade-offs work is more preferred than it might appear if we just looked at questions about work and family. In the kids interviewed for Pocock’s book about their parents’ work hours the same pragmatism is on display. Many would like to spend more time with their parents (particularly boys with their fathers), but they also accept that their parents need to work, often for money but also because they enjoy it.

People also adjust without intervention from above. In an analysis based on HILDA data, between Wave 1 and Wave 2 (about a year) about 30% of those described as ‘conscripts’ to long hours (50 hours a week or more) went to shorter hours, along with about a quarter of those described as long hours ‘volunteers’. There are several ways this can occur: the long hours were just a spike in work which went away, employers take on more people to reduce hours (when demand increases, employers often work existing staff harder and take on more workers only when they are confident the higher demand will last), or workers change jobs. There is also considerable movement (about a fifth of each group) moving between ‘volunteer’ and ‘conscript’, showing changing preferences for hours worked but not the fact of long hours.

It’s far from clear to me that blunt rules imposed by policymakers can improve on this dynamic process of trade-off and adjustment. Prohibiting long hours might help ‘conscripts’ to reduce work. But it would be bad for those who enjoy their work, or need the money, or both. There would also be flow-on effects for those who rely on the work done by long-hours employees. These will be worst in occupations where there are existing labour market shortages, and no spare workers to make up for the hours not worked. With such shortages widespread in health professions, much longer waits to see medical professionals may not seem so ‘family friendly’.

Political familism doesn’t just disadvantage single people to provide added assistance to families who do not necessarily have greater needs. It is an attempt to replace individual judgments made by people in and out of families with collective judgments made by social critics and politicians. Liberals – small ‘l’ and large, welfare and classical – should resist these intrusions into the private sphere.

And she was how old when she had her baby?

~ Andrew Norton ~ 30 Comments

The Victorian police have laid charges over a fire that killed a man and destroyed 11 homes deliberately lit bushfire. But do the maths on the accused:

A teenage boy and his mother have been charged with arson after a fire in Gippsland, south-east of Melbourne.

The 29-year-old woman and her 15-year-old son also were charged with reckless conduct endangering life, allowing a fire to remain alight on a day of total fire ban and impeding an investigation.

There was something to be said for the old system in which such boys were put out for adoption, rather than following this all-too-predictable path to the criminal justice system, via educational failure.