Social Security: A case for reform

Julia Perry

Current paymentsPensions

Age pension Disability Support Carer Payment Bereavement Allowance Parenting (Single) Widow B (closed) Wife (closed) DVA service pensions for

veterans, wives, widows and carers

Plus 12 Family Payments

Benefits Newstart Sickness Special Parenting (Partnered) Youth Allowance Austudy (anomalous) Abstudy Partner Allowance (closed) Widow Allowance (closed)

Rates

0

100

200

300

400

500

600

700

800

900

single no child partnered sole parent over 60

$ a

fort

nig

ht

Carer (with CA)

Age/DSP

Bereavement

PPS

NSA

Austudy

Asylum seeker

Income testsPension Benefit

Single Rate (% of min wage)

$154.20 (69.2%)

$226.65 (47.1%)

Free area $69 $31

Taper rate 40 cents per dollar of income

50/60 cents per dollar of income

Principles for social security Community Acceptability Adequacy Equity Maintenance of incentives and

encouragement of self provision Administrative feasibility and financial

sustainability.

Adequacy Minimum living standard Percentage of wages? Average or

minimum? Comparison with two income family? ‘Basket of goods’ – CPI or low income

index, what is in the basket of goods?

Equity Redistribution of income and wealth –

advantaged to disadvantaged Rights of citizens to protection against

poverty Equal assistance to those in equal need More assistance to those in greater need Family dependence?

Incentives to work

Activity test Rates below wages Graduated income test withdrawal In-work benefits Enabling programs Eligibility rules

Problems with existing system Different payments do not form a

comprehensive system of support for the needy

Inequities between pensions and benefits, benefits are inadequate

Work incentives vary unsystematically Enormous complexity Perverse incentives

Single Payment structure One payment based on low income and

wealth Rates would vary according to household

circumstances, dependents and special needs

Income tests would apply consistently Activity test would be applied

Conclusion Basic income Guaranteed Minimum Income Conditional Minimum income

New System

Labour force barrier add-on

Other add-ons

Disability Add-on

Housing add-on(private rent and home buyers)

Family payment (children)

Living alone and sole parent add-ons

Base rate

Income test

• Based on individual not couple

• Income includes imputed income from wealth

• Threshold $50 a week

• Taper rate 50% then 40%

• People in low paid work eligible on basis of income