It is reasonable, in fact imperative, for a prudent and responsible government to reform the disability pension, given Australiaʼs growing and ageing population.
In the institutionalised arena of conflict that is modern politics, calls for reform of existing fiscal arrangements are invariably countered by strong resistance by those with pecuniary or ideological interests to conserve the status quo.
Nowhere is this battle more evident than in discussions about reforming the welfare state.
Animated in no small part, it seems, by a concern about the reasonable capacity of taxpayers to afford ever‑growing welfare expenditures, the Minister for Social Services, Kevin Andrews, has floated several ideas to change the disability support pension (DSP).
It is fair to say there have been some adverse responses to the Ministerʼs various proposals for a more financially sustainable welfare state, including Greg Jerichoʼs latest piece on the ABC Drum website which questions the merits of more DSP reform.
Looking at the growth in the absolute numbers of DSP beneficiaries, from 138,818 in 1972 (when it was called the Invalid Pension) to 821,738 in 2013, is not without its merits, but as Jericho says it is helpful to look at these numbers in broader contexts.
In the first instance, he does this by presenting data about the DSP population as a share of the overall working‑age population, showing a slight trend increase in the prevalence of beneficiaries under the pension scheme since the early 1990s.
Using data from 1992, Jericho also observed that changes in the pensioner to working‑age population share has been largely flat from the early to mid‑2000s, at least compared with the 1990s.
Jericho seems to argue the moderation in the population share of DSP beneficiaries, and a trend of falling annual percentage growth in the benefit population, invalidates further measures to restrain the DSP.
In his view, it seems, Julia Gillard tightened DSP eligibility criteria in 2011, and so all avenues for reform since that momentous time are exhausted.
But the ad hoc range of statistics presented does not illuminate some of the more important underlying characteristics of the DSP regime, and nor does Jericho shed any great light on the broader circumstances informing the calls for reform.
Jericho mentions mental illness (ʻstressʼ) conditions twice in his piece, and does not mention musculo‑skeletal (ʻbad backsʼ) conditions at all, even though these complaints account for about 57 per cent of the total number of DSP recipients in 2013.
Another notable feature of the DSP population is that 25,774 people were transferred to the DSP from another welfare payment in 2013, with about 70 per cent of those people formerly on the Newstart unemployment allowance.
The DSP clientele is skewed towards older age brackets, with about 64 per cent of the DSP population aged between 45 and 64, and another four per cent of DSP recipients in their retirement age.
Finally, once a claimant gets onto the DSP roll, there is a good chance he or she could stay on it for a lengthy period of time, judging by Department of Social Security statistics showing that, in 2013, about 56 per cent of the DSP population received payments for at least a decade.
Against the background of strong economic growth, at least until recently, a generally healthier population, shown by a declining death rate for the Australian working‑age cohort, broad policy concerns about the extent of DSP uptake have not been invalid.
And to ensure that DSP spending does not pose as an intolerable burden upon the taxpaying public is a matter that governments should rightly contemplate, at all times.
There is no question that some people are inhibited by profound disabilities and some severe instances of psychological and musculo‑skeletal problems do exist, but these latter ailments are also often difficult to diagnose accurately and, in any case, can sometimes diminish in their severity over time (including as a result of rehabilitation).
It does not seem unreasonable to contend most people would agree that DSP recipients, particularly with milder or less severe ailments, should be encouraged to seek and attain work, in instances where they can reasonably do so.
This applies, for example, to working‑age people laid off work, including from manufacturing jobs, and who succeed in moving from Newstart to DSP to enjoy a higher payment rate and less onerous work requirements.
Employment not only avoids the fiscal burden of DSP payments but delivers economic and social benefits, including the opportunity to cooperate with others in providing economically valuable products, and an ability to earn an income through oneʼs own exertions.
Jumping the DSP dependency hurdle into work can also, other things being equal, depress the relative income inequality that Greg Jericho openly worries about.
Tackling the problem of extensive DSP dependency right now is also appropriate, given the risk that todayʼs younger DSP recipient becomes tomorrowʼs DSP recipient living among an older populace with relatively fewer taxpayers to support continuing welfare state growth.
Jericho wants to defend the status quo on the basis that further DSP reform would worsen inequalities and economic growth.
But the IMF study , which Jericho uses to defend his claim, does not square with the message, in the very same paper, that excessive redistribution does, in fact, hamper the growth performance of an economy (a point noted recently by Tim Worstall of the Adam Smith Institute):
when redistribution is already high … there is evidence that further redistribution is indeed harmful to growth … further redistribution seems to start having a negative direct effect when it exceeds about 13 Gini points.
As Worstall notes, France redistributes by 19 Gini points and Sweden by 17, which exceeds the threshold at which redistribution dampens growth. Australia happens to be just over the edge of the threshold, with its redistribution policies reducing its Gini coefficient by 13.2 points.
In the final assessment, the challenge that Jericho lays out in front of prospective reformers of the gargantuan DSP system is an empty one.
Welfare reform was not unreasonable in 2011 under Julia Gillard, and would not be unreasonable in 2014 under Tony Abbott and Kevin Andrews.