Running head: SOCIAL SECURITY IN AUSTRALIA

Social Security in Australia

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SOCIAL SECURITY IN AUSTRALIA
Social Security in Australia

The social security system in Australian has a long history dating back to the early

1900s. The system replaced the state schemes and has developed incrementally, starting with

the aged and disability pensions. The expansion in the 1940s and the 1950s led to the

inclusion of widows’ pension, child endowment, sickness, and unemployment benefit

(Althaus, Bridgman, & Davis, 2007). The Commonwealth government of Australia strives to

achieve inclusivity and equality by ensuring that all individuals eligible for social welfare

have access. Therefore, the main purpose of the social security policy in Australia is a tool for

ensuring that all residents attain the minimum adequate standard of living irrespective of

one’s income level, age, and health status. As one of the country’s most successful domestic

program, the Australian social security system has experienced numerous challenges and has

reached a critical point where citizens believe that it may no longer serve its purpose of

fairness and equality because nearly every senior citizen is making contributions and hence

entitled to benefits at some point in their lives.

According to Marston, Cowling, and Bielefeld (2016), Australia offers a vast array of

benefits and allowances which are means tested and paid out to its citizens who are elderly,

disabled, ill, unemployed, or earning low incomes. When carrying out the means test, the

government does not take into consideration valuable antiques, cars, houses, and other

property. As a result, this eliminates the issue of bias when awarding the benefits and

allowances to the people. Individuals migrating into the country must wait for at least two

years to start receiving benefits apart from the Medicare system. Between 2004 and 2005, the

social security payments totalled $82 billion and had risen by approximately $12 billion by

2008. As more people continue to seek social security benefits and allowances, the budget

allocated for this function has increased rapidly particularly due to the recent welfare reforms.

In response to the issue of fairness, it is important to focus on how employment, housing,

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health, education, and the social security policy determine one’s eligibility to the welfare

benefits and allowances in Australia.

The government has a difficult task of deciding the most appropriate indexing

approach that will be used in ensuring that benefits and allowances payments reflect the

changes in the community’s living standards. For instance, the disability support pension,

age, and house payment are indexed based on the people’s wages and level of incomes. On

the other hand, family payments and income-support payments are indexed to the prevailing

prices. As a result, the Australian government aims at reducing the proportion of the

population receiving the payments by changing eligibility rules or cutting the average

benefits. By cutting the rates of payments, the lower income earners would end up being

disadvantaged. In this case, the government tightens the income tests and this may be

counter-productive particularly because the recipients minimize their incomes due to reduced

incentives to work. For an individual to be eligible to receive the payments, one must fall into

a defined category, which is mutually exclusive. Therefore, a person can simultaneously have

a disability and over the age of 65 but is only eligible for one defined category of the benefits.

As a result, the social security policy appears to be unfair to such individuals.

Based on the structural functionalism theory, the Australian society thrives by

coordinating and collaboration at various levels. In this case, society is structured in such a

way that they can effectively meet their social and biological needs. The social institutions

established are focused on meeting certain needs of the society including education, family,

economy, and healthcare. In Australia, the social security program is one of the institutions

that make sure all residents live comfortably irrespective of the differences in income, age,

employment status, and disability (Nolan & Whelan, 1996). According to the federal

government, a lack of access to income is not only an indicator of poverty but also an

indicator of economic and social exclusion. People receive income in diverse ways such as
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through formal employment, personal businesses, or dividends earned from savings and

investments. Others acquire income from the government through allowances and pensions.

In Australia, social security is connected to tax transfers ad this explains why taxes are more

progressive in the country compared to other OECD nations. According to Parsons (2017),

this leads to a noticeable distribution of income in Australia and ultimately creates inequality

when it comes to the distribution of pensions.

The social security system offers a means-tested income support to single parents,

retires, the unemployed, the disabled, and low-income employees with children. However,

the largest share is spent on the payment of pensions. As Hoeller et al (2012) point out, the

transfer play a vital role in the redistribution of income and creates a more equal Australian

society. In 2016, the cash transfers accounted for more than 75% of the overall redistributive

impact and taxes accounted for the remaining 25%. According to the Australian government,

the social security and welfare represent approximately 35% of the expenditure, which is a

significant percentage of the total budget (Kenny, 2011). Recently, the Parliament has raised

concern over the rising costs of social security, citing its lack of sustainability. In the 2016-17

fiscal year, the government spent more than $158 billion on social security and the total is

likely to increase to around $191.8 billion by the 2019-2020 fiscal year.

According to the Australian government, the welfare expenditure as a percentage of

the Gross Domestic Product ranks relatively lower at 19.5% compared to other OECD

nations. Recently, single parent allowances and disability payments have been tightened with

the aim of ensuring that only fewer individuals can claim the benefits and pensions (Gruber

& Wise, 2000). One of the key problems is that the government has no evidence that this will

increase workforce participation. Australian citizens are being transferred to the inadequate

Newstart payment which has numerous conditions. Although the social contract is designed

to ensure that all Australians acquire basic needs and enjoy a decent standard of living, the
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social problems have become more redefined as specific problems continue to increase

discrimination and inequality. Therefore, Klapdor (2014) proposes what constitutes a good

social security system by indicating that it should not leave individuals living below the

agreed poverty level. Also, he postulates that the paid work incentives should remain intact,

well-targeted by performing the function it is supposed to accomplish and should be

administratively efficient. Nolan and Ive (2009) assert that all citizens should be treated with

respect and that the social security policy should have high regard for social work

professionalism discretion.

According to Stanford and Taylor (2013), there will always be a portion of the poor in

the population and hence the government should ensure that the social security system is not

punitive to this group of individuals. Although the proposed changes in the policy require

stringent reporting requirements from the recipients, it is imperative for the government not

to discriminate those living in lower standards given that their contribution to the tax revenue

is insignificant (Walker, 2004). Based on the 2016 poverty report, approximately 36 per cent

of the Australian population receiving social welfare payments was below the poverty line.

Additionally, around 55 percent of these individuals were getting Newstart Allowance,

approximately 51 percent receiving lone parent payment, 13.9% receiving age pension, and

36.2% receiving disability support pension (ACOSS Poverty Report, 2016). Taking into

account the housing costs, then 213.3% of the entire population (2 million) live below the

poverty line. From 2012 to 2014, the poverty proportions for children coming from single-

parent families increased and around 57 percent of the individuals below the poverty line

depended on social welfare as their leading source of earnings (ACOSS Poverty Report,

2016).

The 2017 budget did nothing to address the issue of inequality and fairness in the

distribution of social security payments. Since the Global Financial Crisis, the long-term
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unemployment has nearly doubled and hence an indication that income inequalities will

continue to bring inequalities in Australia (McClelland & Smyth, 2014). As a percentage of

the country’s GDP, the government spending on various social programs such as health

education, housing social safety nets and subsidized transport has increased by a significant

margin. According to the government, the Newstart payment and youth allowance will be

called jobseeker payment by March 2020. Additionally, the punitive welfare restriction

procedures will vilify individuals entitled to social benefits and ultimately make life even

harder for those impacted. For example, the inclusion of drug trials, longer waiting periods,

stricter tests, and demerit systems will disadvantage those living below the poverty line. In an

era of slowed economic development and the issue of ageing populace, Hockey (2012);

Laczko and Phillipson (1991) assert that countries offering social security programs might be

facing major problems. Despite the creation of more job opportunities, a significant portion

of the population will continue to depend on the financial support provided by the

government.

In order to meet the needs of an unequal society, the Australian government should

revise its policy provisions on social security to ensure that all people receive benefits and

payments accordingly. For instance, the government will need to re-examine the potential

combined impacts of people subjected to multiple conditionality policies as this could have a

substantial impact on the lives of the parents (Maddison & Denniss, 2013). Also, it is

essential to expound on the role of health, education, and caring professionals in determining

whether income support recipients should be approved to get benefits and payments. Lastly,

the Australian government should develop a framework where the social security system can

be implemented effectively given that society is being faced by changing social norms.

In conclusion, the social security system is meant to improve the living standards of

all the residents in a fair manner. However, the constantly changing social norms have made
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this objective difficult to meet, particularly in Australia. Based on the structural functionalism

theory, the Australian society is grounded in values of equity and equality, inclusiveness,

social justice, cooperation, social transformation, and sustainability. Currently, the social

security system is experiencing significant changes which might end up increasing the level

of inequality in the country. In this case, people making constant contributions towards the

support of the system will end up demanding their inclusion. Therefore, the Australian

government should revise its policy to guarantee inclusivity and fairness in the distribution of

social benefits and pensions to its citizens.

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References

ACOSS Poverty Report. (2016). Poverty – ACOSS. Retrieved October 24, 2018, from

https://www.acoss.org.au/poverty/

Althaus, C, Bridgman, P and Davis, G. (2007). The Australian Policy Handbook. Sydney:

Allen & Unwin.

Gruber, J., & Wise, D. (2000). Social security programs and retirement around the world.

In Research in Labor Economics (pp. 1-40). Emerald Group Publishing Limited.

Hockey, J. (2012). The end of the age of entitlement. Address to the Institute of Economic

Affairs, London, 17.

Kenny, S. (2011). Developing Communities for the Future. South Melbourne: Cengage.

Klapdor, M. (2014). Changed indexation of pensions and tightened eligibility for all

benefits. Parliament of Australia [Online]. Available at: http://www. aph. gov.

au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubp/rp/B

udgetReview201415/Indexation (Accessed: 2 December 2014).

Laczko, F., & Phillipson, C. (1991). Changing work and retirement: Social policy and the

older worker. Milton Keynes, UK: Open University Press.

Maddison, S., & Denniss, R. (2013). An Introduction to Australian Public Policy (2nd ed)

Melbourne: Cambridge University Press.

Marston, G., Cowling, S., & Bielefeld, S. (2016). Tensions and contradictions in Australian

social policy reform: compulsory Income Management and the National Disability

Insurance Scheme. Australian Journal of Social Issues, 51(4), 399-417.

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McClelland, A., & Smyth, P. (2014). Social Policy in Australia. Melbourne: Oxford

University Press.

Nolan, B., & Ive, M. (2009). Economic inequality, poverty, and social exclusion. In The

Oxford handbook of economic inequality.

Nolan, B., & Whelan, C. T. (1996). Resources, deprivation, and poverty. OUP Catalogue.

Parsons, T. (2017). The present status of “structural-functional” theory in sociology. In The

idea of social structure (pp. 67-84). Routledge.

Stanford, S., & Taylor, S. (2013). Welfare dependence or enforced deprivation? A critical

examination of white neoliberal welfare and risk. Australian Social Work, 66(4), 476-

494.

Walker, R. (2004). Social Security and Welfare: Concepts And Comparisons: Concepts and

Comparisons. McGraw-Hill Education (UK).