Myths of welfare reform.

Henman, Paul

Worldwide, the reform of social security or welfare policy is a hotly contested domain. However, despite the diversity of opinion, voices from all sides of politics seem agreed that the various welfare systems need reform. But, as this paper argues, the apparent need for welfare reform is not the only area in which the various proponents agree. The language--the use of `welfare' instead of `social security' or `income security'--and the key questions that are asked of welfare policy have similarly, yet narrowly, focussed politicians and policy makers mind to closely related policy issues. In short, even though there is a diversity of opinion about how welfare should be reformed, there remains an overwhelming sameness that results from at least three shared myths of welfare reform. Although this paper is focussed on current welfare reform debate in Australia, there is a sameness with other parts of the world, especially in Anglo-American countries, and a continuity with welfare reforms ideas and debates since the mid 1980s.

Myth 1: That the Welfare System is Anachronistic and in Disrepair

Typical in arguments for welfare reform is the notion that the current system is broken, or at least not suitable for the present socio-economic environment. Welfare reform advocates correctly point out that today's social and economic environment is very different to that when the welfare state was established. For example, the Minister for Social Security's Discussion Paper on welfare reform explained why Australia's welfare system needed to be reformed as follows.

 `In many ways ... our welfare system is still rooted in the past. It
 embodies assumptions about the structure of work, the structure of families
 and gender roles that look increasingly outdated. It has not kept pace with
 the economic, social and demographic changes of recent times' (Newman 1999:
 3).

Similarly, the independent Reference Group on Welfare Reform states:

 `The social support system has not kept pace with the significant economic
 and social changes [that have taken place]. Although there has been
 incremental reform, the social support system has its origin in a
 fundamentally different economic and social environment.' (2000a: 10).

On the left side of politics, Mark Latham, the maverick Member for Werriwa, claims that:

 `The old world of full employment, steady career paths and predictable
 family life came to an end [after the 1970s]. Globalisation and the
 Information Revolution have produced a new society--full of possibilities,
 but also full of threats. The welfare state is yet to adjust to these
 changes. It continues to be based more on the old world than the new. This
 is why its original goals are not being met.' (2001: 115).

The idea that the welfare system we have inherited came from a different environment in the distant past gives the incorrect impression that the welfare state was created in one major creation ex nihilo and has remained virtually unchanged ever since. This is far from the reality. The welfare state is an evolving project, which has developed over the course of the twentieth century and has constantly changed to meet address new social and economic concerns. Successive governments have progressively introduced major changes. Recent changes in social security have introduced gender equality, ended the breadwinner ideology and moved towards individualised payments. Changing labour market realities have also been recognised through the relaxation of taper rates to make part-time and casual employment more attractive and through greater support to low-wage families in response to real reductions in full-time wages.

Alongside the idea that the welfare state is anachronistic, is the view often expressed that the current welfare state has created the contemporary problems of welfare dependency and increased numbers of welfare recipients.

Although the logic--that a new environment needs a new welfare system--is compelling, it is fallacious for two reasons.

Poverty alleviation and poverty prevention

Firstly, the classical welfare state is predicated on a complex mix of poverty alleviation and poverty prevention. (Other objectives of the welfare states include income and status maintenance, notably in the corporatist welfare regimes of continental Europe, the reduction of inequality and the maximisation of citizenship, notably in the social democratic welfare regimes of Scandinavia.) Since the 1960s, there have been dramatic changes in the labour market and household arrangements that have led to greater precariousness of employment income. Given today's more precarious financial environment, there could hardly be a more inappropriate time than now to conclude that the welfare state objectives of poverty alleviation and poverty prevention are no longer relevant. Granted, the new realities may mean that these objectives might be met through different arrangements, but the need for such objectives is never more important and must be restated and reinforced. Therefore, a telling indication of the agenda of welfare reform advocates is the extent to which they re-affirm the importance of poverty alleviation and prevention, and seek to address these objectives in novel ways.

In this respect, the Howard government has shown its colours by making no reference to the adequacy of income support payments in its terms of reference to the welfare reform review. Instead, it remained more concerned with the self-reliance of individuals and the `sustainability' of government expenditure on welfare. In short, the message is that poverty is not a socio-economic problem to be addressed, but a burden to wealthy taxpayers. This message has been reinforced by several of the Howard Government's policies, including the removal of living standard (ie AWE) adjustments from payments to unemployed persons, the sick and partnered parents, and its actions to undermine and ignore important government-funded research on adequacy (eg Saunders, et al. 1998; Percival et al. 1999). The Government seeks to fudge the issue of poverty by arguing that employment provides the best route out of poverty, thereby ignoring the poverty of those unable to find or incapable of undertaking work.

In contrast, the Reference Group on Welfare Reform (2000b) made repeated reference to adequacy. But as Peter Saunders (2001) points out, given the Group's failure to discuss how adequacy might be assessed and success in achieving adequacy might be determined, their adequacy discourse amounts to little more than vague wishful thinking. In short, its cursory references to adequacy highlight that poverty alleviation and prevention are not central to the Group's policy concerns. Similar comments can be made by Third Way proponents of welfare reform (eg Botsman and Latham 2001).

In the current debate, the Australian Labor Party in opposition has fudged issues of poverty alleviation and prevention. Although such a commitment might be implicit in policy proposals, it is not a clear or explicit objective structuring their policy thinking. In contrast, Peter Baldwin, the previous Labor Minister for Social Security showed considerable interest in both poverty alleviation and poverty prevention (1995). His concern went broader than a consideration of adequate income to include the level of social and economic infrastructure (or social capital) which disadvantaged groups had access to. His policy vision prefigured the active and more comprehensive engagement of poverty and social exclusion which characterises the Blair Labour government in the United Kingdom. These comments are not to suggest that I fully support the policies of New Labour or those envisioned by Baldwin. However, a preparedness to use the `p' word (ie poverty) and embrace it as a serious policy issue reflects an acceptance of its centrality to the welfare state and a willingness to re-think how it may be addressed, rather than a cynical attempt to undermine the welfare state and the legitimacy of the claim that people have for poverty alleviation and prevention.

Joined-up policy making

The second reason why the argument that a new socio-economic environment needs a new system is fallacious relates to the way the welfare state is conceptualised in socio-economic dynamics. At the very heart of the above arguments for welfare reform is the notion that the welfare state simply responds to the social and economic environment. That the welfare state's role is to simply reduce the poverty that results from the complex of labour market dynamics, industry investment, industrial relations, monetary and fiscal policy, education, demographics, etc. Welfare reform advocates point to the rise in unemployment and the number of people receiving income support to `show' that the system is not working. Indeed, some argue that current welfare policy is one of the problems in causing welfare dependency and undermining people's incentives to work (eg Newman 1999). Regardless of their `colour', all welfare reform advocates focus their gaze on welfare policy, and overlook the other factors that construct the socio-economic environment.

In contrast, William Beveridge, the architect of the British welfare state, did not limit himself to the construction of social insurance and social assistance. He advocated policy developments in a wide range of domains to enable and reinforce macro-economic management. The net effect was to construct a self-reinforcing, socio-economic milieu that minimised social risk, maintained full-employment and provided an adequate income for all. For example, contrary to what today's critics would have us believe, the Beveridge system is not predicated on full-employment, but seeks to construct it through a cohesive and coherent policy framework that includes industrial relations, monetary, fiscal, social insurance, social assistance, employment, industry and trade policies.

What is different in today's debates is that the other (policy) domains are regarded as unchangeable givens or the policy settings are focused on achieving other goals. For example, interest rates are set to meet inflation targets rather than to encourage employment growth. Similarly, labour market deregulation supports employers' needs to maximise profits rather than the maximisation of employment. The discourse of globalisation as an inevitable, unstoppable process has further reinforced the view that there is no longer any flexibility for many areas of social and economic policy. Indeed, the dominant view is that these policies must now be set to improve national competitiveness and minimise public sector expenditure, regardless of their effect on unemployment, poverty, inequality and disadvantage.

Seen in this light, we can now appreciate why unemployment and social security support has significantly increased for persons of workforce age. In short, some of the important pillars supporting a cohesive welfare state have been removed. Consequently, high levels of unemployment and welfare receipt are not indicative of a failed or inappropriate welfare system, but of a dismantling of the carefully defined, mutually-supporting system of social and economic policies.

The implication of this is that welfare reform must not focus entirely on income support policy--as it mostly has done--but involve a consideration of the wide range of social and economic policies which influence the capacity of people to obtain a sufficient income. Indeed, what British New Labour euphemistically calls `joined-up government' is what is sorely needed. Once this point is fully appreciated, then it becomes more appropriate to assess whether a new welfare system (which encompasses more than income support policy) may need to be constructed and what shape it should take. However, in contrast to the present debate, such a new welfare system would also construct a new socio-economic milieu, not simply respond to it. Just as Beveridge did, we need to develop a cohesive set of policies across a range of domains so that it mutually constructs a system of social security. This is not a reinvention of the past, but a creation of the future without our hands tied behind our backs.

Myth 2: That Welfare Recipients need to be the Policy Focus

After making the argument that welfare policy needs reform, the gaze of reform inevitability focuses on the behaviour of welfare recipients and their communities. For example, the Reference Group on Welfare Reform argues that the most effective ways of reducing unemployment are `in-depth counselling, financial incentives for those who get a job and job search assistance combined with increased monitoring and enforcement of the work test' (2000a: 24). It is the behaviour of recipients (often in response to the welfare system) and the nature of their communities that is seen as problematic and the root cause of the increase in the proportion of the population receiving welfare payments as their primary source of income.

The reasons given by advocates of welfare reform for the problematic behaviour of welfare recipients may vary from being charitable to derogatory. It may be seen to result from a pathological dependency personality, lack of incentive resulting from the structure of benefits and wage levels, lack of skills to compete effectively in the labour market or barriers to employment such as lack of childcare. But, the focus on the individual's problematic behaviour is consistent. The policy solution is to change people's behaviour either directly or by changing welfare policy and/or welfare services.

Given the welfare reform discourse constitutes welfare receipt as a state of exception that needs to be addressed, it is not surprising that proposed policy responses universally focus on changing the behaviour or capacities of recipients or their communities. Such policy interventions involve changing the nature of the welfare system to either directly act on these objects (eg. through skill acquisition or compulsion and training) or indirectly (eg. by reducing taper rates or increasing access to childcare).

Basis for ineffectual policy

Unfortunately, despite the diversity, these policy solutions are doomed to fail in their aim of decreasing the numbers of people financially reliant on welfare. The proposed policies fail for the simple reason that they do not appreciate that the primary cause of the consistently high levels of welfare receipt is a lack of jobs. In short, there is little point playing with the supply side of labour if there is low demand.

I have elsewhere shown that structural changes in the economy and society are the primary reasons for a noticeable increase of welfare recipients since the mid 1960s. In short, these major factors are: (a) an increase in structural unemployment and underemployment due to a loss of full-time (male) employment and an increase in (female) part-time work; (b) a decline in low-skilled jobs; and (c) a shift to single-adult households, including sole parent households. This has resulted in a trend towards two incomes to high-skilled households and no incomes to low-skilled households.

Given the structural reasons for the increase in welfare recipient numbers, effective policy making and fairness implies that we have two basic choices. One approach is to accept the structural realities and the levels of welfare receipt as given and seek to adequately support those unable to obtain sufficient private income. Through minimising employment and taxes, the provision of welfare enables companies to maximise profits and increase shareholder value. Natural justice then implies that we are not entitled to complain about and berate those who are unable to work and must receive welfare payments. Indeed, we must ensure that the large financial rewards which global free-market capitalism provides for the highly skilled are appropriately redistributed to those unable to access the benefits of global capitalism. But this would require the maintenance of a larger state than free-marketeers desire. If we were to go down this track we must give up our sacred work ethic myth and value people for their other contributions to society (and even for their selves). Certainly this is what others have argued, and may be partly reflected in the advocacy of the Reference Group on Welfare Reform for a participation payment. However, if social participation becomes the basis for one's worth, we must be more consistent about what constitutes social participation. In particular, we need to question jobs that are highly destructive to the social and ecological fabric, businesses and individuals that aggressively minimise taxes, the lack of funding for community-valued organisations and projects, and the activities of non-working, middle class wives.

The alternative is to reduce recipient numbers by altering some of the structural realities, particularly to enhance job growth and minimise job losses. As noted under the rubric Myth 1, this would require joined-up policy making. Under such an approach, we would soon recognise that we would need to move away from our uncritical application of neo-liberal economic orthodoxy--such as competition policy and free trade--which allegedly increases aggregate welfare. Increased aggregate welfare is not a great outcome if this means greater inequality and an increasing joblessness. This is not to mention the many cases when the adoption of neo-liberal economic policies leads to poorer rather than better outcomes. It would also involve properly funding the community projects that we apparently value so much that we impel the unemployed to work on. And it would involve a greater sense of mutuality amongst businesses, governments, communities and citizens in reducing the structural barriers to employment.

In contrast to these two alternatives, welfare reform discourse typically eschews either of these options. Welfare reform discourse does not attempt to change the structural realities caused by such things as economic and labour market policies, but focuses its attention solely on income support payments and services. But at the same time, it acts as if the number of welfare recipients can be reduced without addressing the structural realities.

There are, of course, many approaches to welfare reform. Often their objectives are ambiguous. For example, is Howard's Work For The Dole initiative supposed to reduce unemployment through improving work habits, etc, or it is about accepting structural unemployment while redefining the basis of entitlement by making recipients work for their benefits? One suspects that by making welfare receipt more onerous, policy makers are hoping that recipients will withdraw their claim to entitlements and somehow survive in the twilight zone of market society. The aim may thus be more about reducing welfare expenditure than protecting the vulnerable and disadvantaged.

Although I have argued that significant, positive outcomes for welfare recipients are only going to eventuate by addressing the underlying structural factors, some things can be achieved by policy developments that work on and with individuals. Programs can be developed to reduce geographical and skill mismatch, and to tackle the discriminatory barriers to employment that long-term unemployed persons and others face. Also, the effectiveness of the Job Network in reducing transitional unemployment and job mismatch could be attended to. The failure to seriously engage in these relatively straightforward and very practical issues--instead focusing the policy gaze on the behaviour of welfare recipients--reinforces the conclusion that either policy analysts are captured by an ineffectual policy framework focusing on the individual, or they are participating in a politics of welfare demonisation.

Myth 3: That the Previous System Lacked Obligations on Recipients

Following from the focus on the individual, the third myth common in much welfare reform discourse is that individuals must be compelled to be active. The clear implication is that the present system lacks a form of compulsion. Coupled with this notion that the introduction of compulsion is novel, is the idea that welfare recipients now need to meet their obligations in order to pay for their entitlements.

The Work For The Dole program was the Howard Government's first policy enunciation of the Prime Minister's `mutual obligation' principle. The title directly defines the need for and nature of that obligation, in making recipients of `the dole'--technically the Newstart and Youth Allowances for the unemployed--earn their `entitlements' through unpaid work. Following from its political success, the Reference Group on Welfare Reform was directed to give particular consideration to `the broader application of Mutual Obligation' (2000b: 62). While the Reference Group importantly sought to broaden the focus of the Mutual Obligation beyond welfare recipients, their lack of tangible recommendations reinforced the reality that the primary focus of the obligation rhetoric is welfare recipients.

The Labor party and its Third Way advocates, have used similar obligation language, namely `reciprocal obligation' (Prime Minister 1994) and `mutual responsibility' (Latham 2001). Again, they give the false idea that the obligations are new:

 `The problem with welfare is that it operates too much like charity. ...
 the perception of paid inactivity has turned welfare into a social
 stigma.... Only by staying active can people maintain a proper sense of
 well-being and self-esteem. This is why welfare responsibilities need to
 accompany welfare rights.' (Latham 2001: 119-120).

To be fair, in contrast with the Right, the Left has articulated and enacted a level of mutuality by increasing obligations on government and businesses. These include increased investment in training programs and in-work job subsidies, with British New Labour increasing taxes on privatised utilities to pay for the new labour market programs.

Contrary to the welfare reform discourse, compulsion and obligation are not new in the Australian social security system. Since the 1945 introduction of Unemployment Benefits, unemployed persons have been required to meet the `work test' in order to receive payment. The work test required recipients to be `capable of undertaking, and [be] willing to undertake, suitable paid work; and [to take] reasonable steps to obtain such suitable paid work' (CCH Australia 1983: 115). In addition to a fortnightly reporting of activities, `reasonable steps' included proactive practices such as canvassing prospective employees. In 1988 the work test was upgraded to the `activity test' with the requirement rephrased to `actively seeking' suitable work and included new provisions for additional requirements to be imposed by the government on recipients. These changes recognised that obtaining a job is no longer simply about looking for work, but also involves training and preparing oneself for work. This was an explicit recognition that unskilled jobs had evaporated and that to be competitive in the labour market unemployed persons needed to increase their skill level. Activity Agreements and then Job Compacts were also introduced during the late 1980s and early 1990s to provide for more individualised obligations on and tailored services for (long-term unemployed) recipients. These Compacts made explicit what further activities were required by individuals (and what contributions the government would provide) to support a return to work and their introduction was accompanied with greater penalties for non-compliance (Carney and Hanks 1994: 171-175). `Dole diaries' were introduced in the early 1990s in order to enhance compliance and the activity of unemployed persons. Another form of obligation enacted in legislation for Unemployment Benefits was the requirement that individuals have a good reason for leaving employment; otherwise they face penalties or are ineligible to receive benefit. Similarly, beneficiaries are also penalised if they move to an area of lower employment prospects (Sutherland 1998: 296-360). Since 1977, many indigenous communities have operated the Community Development Employment Program (CDEP), in which indigenous persons work for what is effectively their unemployment benefit. The scheme clearly prefigures Work For The Dole.

Traditionally, the work test obligation has not applied to people who are sick, disabled or caring for children or disabled persons. The rationale being that the sick and disabled are unable to work respectively temporarily and permanently and that care work is a recognised form of activity in itself. Caring for children has been especially recognised as a form of social contribution because parental care has been viewed as important for child development and family stability. From the mid 1990s until 2001, there has also been an easing of activity test requirements for older unemployed persons in recognition of the barriers they face to re-employment and their proximity to Age Pension age. Contrary to the welfare myth, past practices have been infused with obligations on recipients and the recent shifts have been responses to a recognition of changed labour market realities and social values.

The notion of mutual obligation promotes a very specific form of obligation; namely that welfare recipients are obligated to repay their benefits in kind as they receive them. As other commentators have expertly noted, this policy conveniently overlooks other forms of obligation (Goodin 2001; Moss 2001). Not only are obligations on government, business and community conveniently overlooked or effectively sidelined, but it ignores the mutual obligation that all Australians implicitly agree to support those who fall on bad times. This mutuality is based on the notion that we are all at risk of sickness, disability or unemployment, and is more clearly evident in the social insurance model adopted in most other western countries. There is also mutuality in the fact that many recipients of welfare will at some time be workers and pay income tax, and they all contribute to the Goods and Services Tax (GST).

The argument for increasing and widening recipient obligations is that there are new social realities. In particular, to be competitive in the labour market one needs marketable skills and the growth of women's employment creates new expectations of sole parents. Of the first argument, there have already been considerable changes in response to labour market change. However, given the structural factors defining levels of (un)employment it is unlikely that the recent and proposed changes--such as the Work For The Dole and increasing obligations to sole parents--will improve people's job prospects. Furthermore, the Howard Government is hypocritical in increasing obligations to sole parents on the basis of changed social expectations, as it has failed to address the worklessness of many upper middle class women--including the Prime Minister's wife--and the continued payment of a Dependent Spouse Rebate (no children) in the taxation system. Furthermore, this new policy sits uneasily with the Coalition's continued advocacy of choice for mothers and past complaints that the tax-transfer system favoured working mothers.

The current language of mutual and reciprocal obligation is mischievous in suggesting that welfare recipients are receiving something for nothing, that recipients impose rights on non-recipients without obligations. By making them do something--jump more hurdles and leap through more hoops--they may assuage our feelings of fairness. This may be good politics, as it heightens social divisions and increases support for government by demonising unpopular segments of the population. However, it is very poor policy, because it fails to achieve any positive outcome (other than re-election). The political nature of obligation rhetoric, especially amongst right-wing politicians, is reinforced by the lack of mutual obligations by government, business and communities.

Conclusion

The foregoing analysis has highlighted how welfare reform discourse has narrowly framed policy attention. In contrast, I have tried to create a space whereby welfare reform discourse might be widened through a consideration of other areas of public policy and the creation of a comprehensive and coherent policy package that addresses the structural elements which shape levels of (un)employment.

One might be asked why it is that the analytical gaze of welfare reform has narrowly focused welfare benefit policy and the behaviour of recipients, thereby constituting and reproducing the lie that the unemployed can obtain work if only they and the welfare system tried harder. There are several reasons, including the dominance of (economic) `rational' models of human behaviour, the belief that the `invisible hand' of the free market will lead to Nirvana, compartmentalised policy making and the view that economic globalisation has undermined the ability of governments to effect changes to the structural elements of unemployment. In addition, the focus could be seen as a response to the nature of contemporary global capitalism, as Zygmunt Bauman observes:

 ... in the beginning [of the industrial revolution], the work ethic was a
 highly effective means of filling up factories hungry for more labour. With
 labour turning fast into an obstacle to higher productivity, the work ethic
 still has a role to play, but this time as an effective means to wash clean
 all the hands and consciences inside the accepted boundaries of society of
 the guilt of abandoning a large number of their fellow citizens to
 permanent redundancy. Purity of hands and consciences is reached by the
 twin measure of the moral condemnation of the poor and the moral absolution
 of the rest (1998: 72).

The focus on the behaviour of welfare recipients to the blissful ignorance of the structural realities has the effect of demonising welfare and welfare recipients, regardless of whether it is intentional or unintentional, well meaning or malicious. It creates clear divisions within society. It values people solely for the workforce participation. It valorises tax benefits and denounces welfare benefits even though they might be equivalent. It places the onus of responsibility on welfare recipients. It reinforces the idea that recipients are to blame for their own predicament, through which incessant rejection results in a sense of shame, as Viviane Forrester (1999: 6) observes leads to an acceptance by recipients of their worthlessness and of the politics that defines them as such.

Well-intentioned or otherwise, the myths of welfare have created a scary political scenario that has clearly enabled increasingly coercive approaches to welfare recipients without any regard to either the structural realities or the voices and experiences of welfare recipients. Only through the unmasking of these myths and the creation of alternative discourses can new, more egalitarian and effective approaches to society's security emerge.

References

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Carney, T. and Hanks, P. (1994) Social Security in Australia, Melbourne, Oxford University Press.

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Sutherland, P. (1998) Annotations to the Social Security Act 1991, Sydney, Federation Press.

Paul Henman is a research fellow in the Department of Sociology at Macquarie University, Sydney.