Who ‘deserves’ income support and why? An important new study on the social legitimacy of benefits sheds light on why some groups and some benefits are more favoured than others. This helps explain why the Newstart Allowance is $160pw less than the pension, why there are periodic ‘moral panics’ over the so-called ‘rorting’ of the DSP, and why people are concerned when millionaires receive Age Pensions. It also helps inform the design of social security payments.
It’s well known in Australia that some social security payments receive more support from policy makers and the public than others. For example, people receiving Age Pensions attract more support and respect than those relying on Newstart Allowance. Also, some groups of recipients (such as older unemployed people) are looked upon more favourably than others (such as younger unemployed people).
A new working paper from Wim van Oorschot and Femke Roosma from the University of Antwerp called ‘The social legitimacy of differently targeted benefits‘ explains why. It provides a useful framework for predicting which benefits and groups who attract the most (least) support. These issues are always at the back of the minds of social security officials as they design and reform benefits, and front of mind among politicians and the media. It’s time we understood them better.
Who is ‘deserving’
The paper begins by gathering the research evidence on public support for different social security payments and social groups in Europe and the USA (but the arguments are very relevant to Australia). It starts with common stereotypes about groups considered ‘undeserving’ of benefits: the ‘undeserving poor’, ‘lazy unemployed’, ‘black welfare queens’ (in the US), and migrants (especially in Europe). It then divides social security payments into those deemed more legitimate (pensions for retired people, payments that extend universally, payments for people with disabilities) and those deemed less so (payments for unemployed people, payments for single parents – especially in the US, and heavily means-tested payments).
All familiar stuff! It gets more interesting when they look at the history of European benefits. In virtually all wealthy nations, including Australia, the first social security payments were the ones that are still regarded as the most legitimate today:
‘from the end of the 19th century onwards first the schemes for the commonly most deserving categories of old, sick and disabled people were introduced, than family benefits and unemployment compensation, and lastly (if at all) social assistance for the least deserving category of poor people.’
Another revelation – religion played a role:
“social assistance arrangements in the Catholic European countries differ from those in Calvinistic countries based on different perceptions of the poor: in the Catholic perspective the poor are more seen in a traditional Christian way as a pitiful and deserving group of ‘children of God’, while in the Calvinistic perspective poverty is associated with the laziness and immorality of an irresponsible and therefore undeserving ‘underclass’.”
How benefit systems strengthen (and weaken) their own legitimacy
What they’re saying is that notions of deservingness were inscribed into the structure of social security payments from the beginning, and remain with us today. In Australia, the original Age Pension legislation required recipients to be ‘of good character and deserving of a pension’ . In the US, pensions for retired people are called ‘social security’ while payments for low-income sole parents are called ‘welfare’. The implication is that benefit categories can reinforce the stereotyping and stigma faced by many recipients.
Most wealthy countries have social insurance benefits where employees, employers and governments contribute jointly to social security funds to cover social risks such as old age, disability and unemployment. These contributions lend legitimacy to payments, since the recipients at one stage contributed to their cost – in accord with the principle of ‘reciprocity‘.
The trouble with these systems is that they are costly (since payments are often based on previous wages and are usually not means tested) and people unfortunate enough to lack a recent employment history (such as many unemployed young people, recently separated sole parents, and people with disabilities) miss out.
Almost uniquely, Australian social security payments are funded out of general public revenue. That means they are less legitimate in the eyes of many, but the system is more cost efficient in preventing poverty, and (in theory) noone in financial need is left out.
Yet the Australian system still classifies people according to a well-known hierarchy of deservingness:
- At the top are ‘pensions’ for older people, people with disabilities and caring roles which mean that people (supposedly) can’t undertake paid work.
- In the middle are family payments, traditionally paid regardless of the employment status of the parent.
- At the bottom are ‘allowance’ payments (formerly called ‘benefits’) for people who are deemed ‘able to work’.
Pensions are about $160 a week higher than allowances, despite the fact that financial disadvantage is more common among people on the lower allowance payments.
See the logic? Pensioners have a good ‘excuse’ for not supporting themselves financially through paid work. They are too old, or have disabilities or are caring for someone. Unemployed people don’t have a good excuse. This is the ‘control principle‘: payments attract less support the more we assume that recipients have control over their circumstances. It explains the ‘moral panic’ over the so-called ‘rorting’ of disability pensions by people who have less visible or easily classified conditions such as a mental illness or back pain. If they’re ‘able to work’, they don’t deserve a pension.
On the other hand, a recurring theme in Australian social security debate is our anxiety over ‘middle class welfare’. We have grown so used to having the most tightly targeted (means tested) social security system in the OECD that extending payments to people deemed well-enough off to look after themselves is frowned upon. Hence our concern about millionaires claiming Age pensions and families on $150,000 a year or more receiving family payments. This is the ‘need‘ principle.
Five tests of ‘deservingness’
In all, the paper identifies five dimensions of ‘deservingness’ that have an impact on social security policy (shown below): need, control, identity, attitude, and reciprocity.
This is of more than academic interest. If deservingness is inscribed into the payment structure as the diagram below suggests, then the benefit system itself may be reproducing and magnifying common stereotypes. Policy makers and the media quickly work out which payments are for ‘bludgers’ or the ‘undeserving or ungrateful poor’ and set out to make reliance on those payments ‘nasty, brutish and short’.
The pension – allowance divide
The historic distinction in Australia between pensions and allowances is based on deservingness. The idea behind this payment hierarchy is that people who ‘can’t work’ can be ‘looked after’ without encouraging long term reliance on benefits among those who can. The McClure Report’s proposal to introduce an intermediate stream of payments for people who ‘cant’ work right now but could with some help, including people with partial work capacity and parents caring for a school-age child, is a refinement of this idea.
Of course, policy makers claim economic and fiscal benefits for the present benefit hierarchy: that keeping payments low for unemployed people improves work incentives and reduces social security spending. The main problem with proposals for a universal ‘basic income’ that’s paid regardless of work capacity or job search effort is that people might not be encouraged to do what they can to support themselves.
As I explained in a previous blog, there are several problems with the pension-allowance hierarchy. An obvious one is that it undermines a core principle of our social security system that payment levels should be based on financial need.
Another serious challenge to the present payment structure has emerged in the last two decades. ‘Employment participation’ or ‘activation’ policies call into question the very basis on which people are classified into pension and allowances. Put simply, we no longer assume that people with disabilities, and parents of young children ‘can’t work’ (paid work, that is). Public policies over the last two decades have tried to remove barriers to employment for people who were previously excluded. This is a good thing.
Activation policies – requiring and supporting people on income support make the transition to employment – are a better solution to the so-called ‘free rider’ problem in social security than imposing poverty upon people. People who have at least some employment capacity can be helped through training, job placements, and other support to find stable employment. In return, it’s reasonable to expect that they take up those opportunities.
Trouble is, the pension-allowance distinction throws up hurdles to activation. If you have a disability and receive the DSP you stand to lose $160 a week once assessed as ‘able to work’ and transferred to Newstart Allowance. Activation strategies require governments to keep moving the goalposts between the two systems as more groups are ‘activated’. Sounds fine in theory but until the labour market adjusts to employing people with disabilities, these ‘welfare to work’ policies have left around 100,000 people on lower benefits with no improvement in their job prospects. The same goes for the 100,000 or sole sole parents shifted onto Newstart a few years ago, many of whom struggle to find paid work that is secure (not casual) and fits in with their caring responsibilities. Meanwhile they and their children have to live on a payment that’s at least $60 a week less than they would receive on the former ‘pension’ for single parents (now called Parenting Payment).
There’s another flaw in the system: two thirds of people on the lower Newstart Allowance are long-term unemployed. They have received this very low payment for more than a year. Not all of them have a disability or caring responsibilities. Many are simply the wrong age, have the wrong skills, or live in the wrong place to secure a job. And when the labour market is as ‘slack’ as it is now, even young, highly skilled workers face a high risk of prolonged unemployment.
Here’s where the categorical system falls down. We can’t invent a payment category to deal with every ‘legitimate’ reason that a person relies on income support for a long time. Nor can we accurately predict in advance which groups are most likely to do so. As activation policies are extended to more people who previously received pensions, the population on Newstart Allowance starts to look more and more like yesterday’s pensioners.
The explanatory power of ‘deservingness’
What policy insights can we glean from the research on perceptions of legitimacy of social security payments? It’s easy enough the say the present system’s unfair but the reality is that these perceptions of legitimacy drive much of the social security policy we’ve seen in recent years. Social security policy is shaped by stereotypes as much as rigorous analysis and research. These stereotypes are based on anecdotes, gossip, and often the family backgrounds and experiences of key Ministers. This wouldn’t be accepted in economic policy, but it’s par for the course in social policy and has been so for many years.
Why else has it proved so hard to raise the level of Newstart Allowance when every expert knows it’s way too low to meet basic living costs? Why did the previous Labor government review and increase pensions but not allowances? Why did the present Coalition government propose in last year’s Budget to remove income support altogether from young unemployed people for six months of every year? The answers are to be found in studies like this one rather than dry economic debates about the perennial trade-off between adequacy and work incentives (important as these are). Behind every work incentive argument lies a shadow debate over deservingness.
The paper cites research suggesting that perceptions of the legitimacy of benefits are deeply rooted in human psychology:
“in pre-historical, small-scaled societies we developed the skills to detect reciprocators who contribute to food sharing, and cheaters who violated the rules of cooperation by taking advantage of the collective gains. Dealing with these reciprocators and cheaters is assumed to have structured cognitive categories and created judgmental shortcuts, called ‘deservingness heuristics’ .Today we still apply these heuristics, which allows us to make more or less instant judgements about deservingness, also in relation to deservingness of social benefits. In these deservingness heuristics emotions play an important role.”
This doesn’t mean that social security policy is destined to be dominated by shock jocks and TV current affairs producers. The paper offers a way out:
‘deservingness heuristics can be ‘learned’ in the sense that being exposed to a certain ideology, culture of institutional setting leads to the development of certain deservingness logics.’
Tips for social security reform
The question this raises for social security policy – and it’s a topical one now that the Government is considering the proposals in the McClure Report – is ‘how can the benefit system be re-designed to improve fairness and workforce participation while at the same time reduce stereotyping and restore legitimacy?’ The stereotypes will always be there, but the social security system need not reinforce them in the way it does now.
Here are some suggestions:
1. Continue with the ‘activation’ strategy and strengthen it by investing in better employment assistance and training for people who have a longer road to travel to reach employment.
Activation is consistent with the ‘reciprocity principle‘: if it is implemented in a balanced and not harsh way it should strengthen the legitimacy of payments for unemployed people. It’s also a better way to maintain work incentives than keeping benefits too low to live on.
2. Remove the distinction between pensions and allowances for people of working age.
The base rate of payment for everyone of working age in need of income support should be the same. Additional costs faced by, for example, people with disabilities and sole parents, can be met using supplements that target those costs. This is consistent with the ‘need‘ principle.
It removes the ‘beauty contest’ over which groups ‘deserve’ a higher (or lower) level of payment. It also means that people can be ‘activated’ without bumping them down to a lower payment.
3. Retain population based categories to help determine what, if any, activity requirements should apply.
One potential problem with a standard base rate of payments from a legitimacy point of view is that the whole population of income support recipients might come to be viewed as ‘undeservedly poor’ (as are recipients of Municipal ‘welfare’ payments in many parts of Europe). Factors such as disabilities and caring roles do affect people’s ability to secure employment and this should be publicly acknowledged and taken into account. One way to do so is to retain payment categories such as disability, parenting and caring, and use them to decide what activity requirements (if any) should apply rather than levels of payment.
4. Keep family payments separate from income support payments for adults.
The purpose of family payments is to help parents with the costs of children. This purpose has more social legitimacy than income support for adults of working age, who might be able to support themselves (the ‘control’ principle). If blame is being apportioned for unemployment, children share no part of it.
Social security policy-makers of the 1980s and 90s were wise to separate family payments from income support, if only for this reason. Another strength of the family payment system is that it extends more broadly than a ‘welfare’ payment, to middle income families. This is widely accepted – provided they don’t extend to high-income families – since this is how the tax-transfer system takes account of the costs of children.
Extending family payments to middle income families also forges a bond between low and middle income families, consistent with the ‘identity‘ principle.
5. Be careful with language.
Call them social security payments, not ‘welfare’.
It’s time to end ‘welfare as we know it.’