Will COVID-19 kill the 'lifters and leaners’ welfare trope?

In today’s post, Sue Olney (@olney_sue) examines developments in Australia’s welfare-to-work system and rhetoric during the COVID-19 pandemic. She argues that the premise on which the system is built – that unemployment is an individual problem and that anyone the government deems capable of working can find a job if they’re pushed hard enough – has to change.

COVID-19 has claimed lives and livelihoods worldwide. While it is first and foremost a health crisis, measures to slow its spread have stopped major economies in their tracks simultaneously. Estimates of its socio-economic effects are grim, with the UN Secretary General calling the pandemic “a defining moment for modern society”.

The pace of decision-making in Australian governments in response to the crisis has been staggering. In mid-March the Board of the Reserve Bank of Australia noted "it was likely that Australia would experience a very material contraction in economic activity, which would spread across the March and June quarters and potentially longer." Within three weeks, the Australian Government had committed 13.3 per cent of annual GDP to cushion what was by then the inevitable economic fallout of the pandemic for households and businesses.

As businesses began to close their doors, fault lines in Australia’s welfare-to-work system were laid bare. Long-term jobseekers who had been pushed to the margins of the labour market, society and the economy were in crisis, and an army of newly unemployed people were joining their ranks. Despite determined campaigns to raise the rate of income support, unemployment benefits had not increased in real terms since 1997. The rationale from successive governments of all political persuasions for keeping the rate of what is now called the JobSeeker Payment below the poverty line was that it was a transitional payment designed to encourage people to seek work. The repeated message was that the best form of welfare is a job, and that anyone willing to work could find work.

The flaw in that premise was clear long before COVID-19. Rolling policy changes had gradually moved people facing complex barriers to work from other benefits into the employment services system. At the end of 2019, more than 700,000 unemployed people were looking for work and a million underemployed people were seeking additional work. Over a similar timeframe, changes to the nature of work, the rise of the gig economy and the growth of contract, part time and ad hoc employment in industries like retail, hospitality, health, social and community services, ICT and education saw the number of Australians in insecure work without paid leave entitlements rise to an estimated 37 per cent of the national workforce.

Combined, these factors posed significant health and economic risks as the pandemic emerged. Governments have faced economic challenges and pandemics before - the Spanish Flu, the Great Depression, the recessions of the 1980s and 1990s, and the GFC - but COVID-19 produced new and complex challenges for governments trying to sustain economic activity in a global marketplace with entire populations out of circulation and in need of health care. As close to one million people entered Australia’s welfare system without warning – casual and permanent employees who lost their jobs, sole traders, contract workers and the self-employed - it was clear that the practice of attributing unemployment to individual inadequacies and providing unemployed people with punitive levels of income support had to change, and change quickly.

In line with a number of other countries, Australia has temporarily and substantially increased income support for jobseekers, streamlined and accelerated access to income support, and allocated supplementary payments to welfare recipients. This has gone some way toward keeping people out of crisis and has been widely welcomed as unemployment becomes a universal risk. But as the trope of the work-dodging ‘dole bludger’ is swept aside, there are questions about how long this financial commitment can last. History shows that a reduction in the unemployment rate is likely to lag behind economic recovery, and that the nature of work changes after prolonged disruption to the labour market.

New initiatives like the JobKeeper Payment - a temporary subsidy for employers to continue paying their employees through a period of ‘business hibernation’ – have kept around 3.5 million workers out of the pool of jobseekers to date. This payment has been criticised for its perverse incentives, exclusion of some industries, neglect of the precariously employed and its shaky financial estimates, but it has kept money in the hands of people who keep it circulating in the economy. Time will tell if it proves to be an effective strategy to revive businesses quickly post-pandemic, but scepticism is reasonable in the meantime. With a longer view, the fledgling JobMaker plan for economic recovery will focus on targeted skills development and industrial relations. However, this calls for careful use of policy levers to ensure no one is left behind. Even in times of skill and labour shortages, there are groups of people who face persistent discrimination in the job market. Indigenous people, people with disabilities, young people, older jobseekers, people living in rural areas, people with caring responsibilities and people with a non-English speaking background are at particular risk of long-term unemployment in the wake of this pandemic, with potentially far-reaching consequences.

It’s too soon to know the full impact of COVID-19 on employment, but we have already seen policy action in the welfare-to-work arena that was unthinkable three months ago. Proposals that have been simmering or tested in different contexts, like Universal Basic Income, have gained traction. As this health and economic crisis plays out, some people who lose their jobs may be drawn into new industries, different types of employment and different ways of participating in the economy. However, it’s likely that many will stay on the margins of, or outside, the labour market. There are tough times ahead for businesses and for people looking for work, and it is imperative that the burden is fairly distributed to avoid significant social and economic consequences. The premise that unemployment is an individual problem no longer holds up.

Content moderator: Megan Weier