Income support

The geographic distribution of welfare payments in Australia

Speaker: Carolyn Brennan

Authors: Carolyn Brennan, Helen Swan, Dennis Byles.

Overview of Presentation

• Aims of the report• Data and limitations• Some key findings:

1. The big picture2. Some regional differences in total welfare payments3. The distinction between Working Age Payments and the Age Pension4. Spatial differences in Working Age Payments and the Age Pension5. Some explanations

• Concluding remarks

Aims of the report

• To show the distribution and trends in five major welfare payments, comparing states and territories, remoteness classes and statistical local areas (SLAs).

• To compare our results with other literature in this field.

• To explore the relationship between income support and economic growth at a regional level.

Main data source

ABS Experimental Estimates of Personal Income for Small Areas (catalogue number 6524.0.55.001).

• Includes all types of individual income and five welfare payments

• Information is provided for Statistical Local Areas (SLAs) for the financial years 1995-96 to 2000-01.

Data limitations

• Data set does not include: Veterans pensions or Community Development Employment Project (CDEP) payments.

• The population size of Statistical Local Areas varies.

• Age of the data set.

Some key findings

• Part 1: The big Picture

Compared to other OECD countries, Australia’s expenditure on its welfare state is relatively modest.

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1980 1985 1990 1995 2000 2001 2002 2003

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Australia Canada Japan United KingdomUnited States OECD 28 Scandinavian Average

Welfare payments, as a proportion of GDP, have been at approximately the same level since 1993.

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OPEC oil crisis

RecessionRecession

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Baby bonus

Part 2: Some Regional Differences• Welfare payments are not evenly distributed by remoteness.

• Source: ABS Cat. 6524.0.55.001

Source: ABS Cat. 6524.0.55.001

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1995/96 1996/97 1997/98 1998/99 1999/00 2000/01

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Major Cities Inner Regional Outer Regional Remote Very Remote

Individual payments by remoteness 2001

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Major Cities Inner Regional Outer Regional Remote Very Remote

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Age Pension Parenting Payment Disability Support Pension Newstart Youth Allowance

Source: ABS Cat. 6524.0.55.001

Part 3: There is a basic distinction between payments to the working age population, and payments to the elderly.

Age Pension vs Working Age PaymentsAGE PENSION• Recipients have retired, so no

expectation that they will become economically active again

• Contrary to media hype, there is no ‘Ageing Tsunami’: – Although the population is ageing,

so is the wealth of retirees• Lower levels of disadvantage

WORKING AGE PAYMENTS• Includes: Disability Support

Pension; Parenting Payment; Newstart Allowance and Youth Allowance.

• Recipients are working age, and receipt is often temporary.

• Associated with higher levels of disadvantage

Issues and Trends

AGE PENSION• Increasing numbers of the

elderly potentially means greater health expenditure

WORKING AGE PAYMENTS• Newstart has been declining,

along with unemployment• Family and child benefits have

increased a lot over time; however, parenting payment appears reasonably stable

• But, recipients of the disability support pension have been increasing faster than the disability rate...

In fact, numerous studies show a relationship between disability support pension and negative labour market conditions – particularly for low skilled older males.

But, Australia’s been having a boom – why is the rate increasing?• The bulk of jobs growth has been for skilled workers.

• Bob Gregory argues low skilled work, particularly for older males, has not experienced growth in the new economy.

• A recent trend is the increasing numbers of women joining the DSP.

Part 4: Spatial differences in different payments

Working Age Payments vs Age Pension 1996

Working Age Payments vs Age Pension 2001

Part 5: So much for egalitarianism – why are there such big regional differences?• Explanation 1: Regional economic differences. Changes to

industry create winners and losers.• Explanation 2: Migration of the skilled and talented to

metropolitan areas.• Explanation 3: Welfare-led migration. Retirement and

lifestyle, especially for low incomes. • Explanation 4: Residential planning and neighbourhood

effects

But before you thought the solution was simple• Even though there is some evidence that working age payments,

in particular, DSP and unemployment payments, increase when economic times get tough, the reverse is NOT true.

• So, boosting regional economic growth will not necessarily reduce welfare in those areas. Instead, the jobs may go to outsiders!

Concluding remarks• Welfare payments in Australia are moderate by OECD

standards.• Australia is better equipped to handle its ageing population than

many other nations.• Australia does have an issue with disability support pension.• There are stark geographic differences in welfare dependency.• As long as payments are not fixed geographically, some people

will move to places which are more affordable and offer better lifestyles - and why not?

• Policymakers need to take account of this in planning services for the future.

BITRE’s report on Income Support will be released later this year.