The Guardian 21 September, 2005
Disabled targeted in
vicious new work-enforcement scheme
Peter Mac
The Howard government’s new "welfare-to-work" scheme, due to commence next year, will cause severe financial hardship to Australia’s disabled citizens who apply for government assistance after June 2006.
Under the scheme, disabled people applying for government assistance, whom the government considers could work between 15 and 29 hours per week, will be receive Newstart Allowance or Youth Allowance benefit (i.e. the dole) rather than a disability support pension.
This will apply even in cases where there is no local employment for the disabled. Failure to seek work will jeopardise a disabled person’s right to allowance benefits. Failure to find work will inevitably result in accusations of unwillingness to seek employment. Welfare groups have warned that finding work for disabled people is extremely difficult already, and that the massive increase of those looking for work next year will be stressful and heartbreaking, and in many cases fruitless.
The scheme makes no allowance for the differences in employment prospects for disabled men and women. In 2003 some 57 percent of disabled men were employed, compared to 47 per cent of women.
The new scheme will savagely reduce the income of the disabled. The "allowance" schemes offer lower payments than the pension (an average difference of $46 per week), and are taxed, whereas pension income is untaxed. They’re also subject to a more severe income test. Pensioners lose $1.50 per week for every $1000 by which their assets exceed $157,000. However, those on an allowance lose it altogether at the $157,000 level.
The National Centre for Social and Economic Modelling (NCSEM) has released a study which reveals that the disposable incomes of single disabled people could be up to $120 per week lower under this arrangement than under the current pension system, and that the effective marginal tax rates of those affected will increase sharply.
Allowances and disability pensions are both reduced if the recipient earns private income. However, a pensioner may receive $64 per week before reduction occurs, compared with $31 for those on allowances.
Moreover, pensions are reduced by 40 cents for each dollar earned, whereas allowances are initially reduced by 50 cents, and by 60 cents for private income over $125. Pensions cut out when total income reaches $706 per week, whereas allowances cut out at $398 per week.
The disability pension is also indexed according to increases in average weekly earnings, whereas the allowances are linked to consumer price index, which is usually less. The difference in pensions and allowances is likely to widen in future.
Those transferred to an allowance will still be entitled to a pensioner entitlement card, but will lose this entitlement at lower income level, because of the lower cut-out point for allowances. They will also lose their Health Care Card, thus losing access to concessional pharmaceuticals.
Disabled people on an allowance will be transferred to Austudy if they under take full-time study, and will not receive the educational supplement available to pensioners. Their income will therefore fall by about $80 per week, compared to pensioners.
Because of differences in taxation, the Medicare Levy and other tax allowances, the NCSEM report indicates that the income of disabled people on allowances will fall by more than $100 per week for those with private earnings of between $196 and $448. Those earning $393 per week will lose $122 per week. Those earning $290 in private income per week will receive a total income of $290 per week, a drop of 26 percent in living standards.
Those on also allowances face terrible taxation rates. Allowance recipients face a 50 percent effective marginal tax rate due to the allowance income test, combined with a 15 percent EMTR from the effective withdrawal of the allowance tax offset and the payment of income tax.
The NCSEM notes that "People with disabilities with weekly private incomes between around $31 and $64 a week face an EMTR of 65 percent under the new system, compared with a zero EMTR under the current system. That is, for each additional dollar of earnings in this range, people with disabilities will keep only 35 cents under the new system…". For those with private incomes of between $125 and $200 per week the EMTR rises to a staggering 75 percent.
These figures are way in excess of the 48.5 percent effective tax rates of the wealthiest taxpayers, whose income exceeds $125,000 per annum.
The income figures are under a cloud, because they are based on the current minimum wage determinations, which may be scrapped if the Howard government implements its industrial reforms.
The government will benefit handsomely from these new arrangements. The NCSEM worked out that a disabled person earning $191 in paid work will actually lose $111 of it because of a reduction in the Newstart Allowance combined with income tax payments. The same person will actually receive only an extra $34 per week compared with the income of a disability pensioner. Some disabled pensioners will actually be earning only $2.27 per hour, according to one report.
The government is also putting the boot in to parents of the disabled, by withdrawing Parenting Payment support for parents with disabled children older than 6 years, where they consider that the parent can work 15 hours of work per week. The government has attempted to justify this on the assumption that the parent will immediately return to the workforce, even when the child’s condition may not allow that to happen, and even when the parent themselves suffers from some disability.
According to the National Welfare Rights Network, up to 50,000 sole parents of some 84,000 disabled children may be affected by this aspect of the government’s so-called "Welfare to Work" policy.
Welfare organisations have estimated that up to 300,000 people will be adversely affected by these ruthless and miserly policies. Church and welfare organisations have warned that it will force the disabled and their carers into a poverty trap, rather than enabling them to improve their situation.
Marie Coleman, a representative of the National Foundation for Australian Women, described the new policy as "wicked, inappropriate and entirely unnecessary", and "a massive fiscal punishment system …which has been thought up by a human being with no grasp of what it’s like to live with a disability."