The welfare debate scapegoats the unemployed and disabled and ignores the rising number of Australians on the age pension

The announcement on Tuesday by the minister for social services, Kevin Andrews, that the government was commissioning a review of the welfare system, brought with it a lot of attention-grabbing figures, but not a great deal of context.

The problem with any debates on welfare is they are invariably loaded. The use of “welfare” as a term is itself suggestive that the recipients are getting something for nothing – perhaps even undeserving. Using “government benefits” is not much better.

Also, the complexity of the system and the large numbers involved provide politicians and commentators ample opportunity to issue dire warnings on the basis of the total numbers of those receiving some level of support.

On Tuesday, for example, Andrews suggested: “We’ve got to ensure in the future that we're able to sustain the welfare system, otherwise we’ll find ourselves in 10 or 15 years time in the situation that some of the countries in Europe are in.”

For Australian conservative politicians “Europe” is pretty much code for complete destruction of your economy due to layabouts on welfare not being bothered to do an honest day’s work for an honest day’s pay, etc etc.

Of course, our government welfare system is vastly different to that used in Europe. For a start we means-test our welfare payments much more stringently than do other nations.

When we look at the level of cash benefits paid by all levels of government throughout the OECD, Australia in 2013 ranked a mere 30th out of 35 (Turkey was not included as its most recent data is from 2009):

Even when we look at the growth in amount of payments over the past 20, 10 and five years, we find that Australia has not experienced any major change over that period. Back in 1993 we were ranked 24th out of 28 OECD nations.

The reality is Australia is not and has never been a high welfare-paying country. So we need to rid ourselves of such doom.

But aside from fallacious comparisons with other nations, the other big propaganda watch with welfare is when the big numbers get used.

Take for example the claim that the growth has exploded over the past five years. The Australian reported on 21 January:

Mr Andrews said the 10-year report – Income support customers: a statistical overview 2012 – revealed that, in 2007, 4.5 million received a payment from Centrelink. “Under Labor, it increased dramatically, peaking at just over 5 million in June 2012,” he said. “This relentless growth in recipient numbers is not sustainable.”

The article also noted that this was now “more than one in five Australians”.

All that sounds pretty alarming, but while the number of recipients has reached five million (it did so in 2011), the percentage of the population on welfare has fallen significantly over the past decade. In 2002 it wasn’t one in five on welfare, it was one in four. Since 2008, rather than an unsustainable growth, the percentage of those on welfare has risen from 21.6% to 22.1%.

And if we look at the “dramatic” increase since 2007, a rather different picture emerges than one Andrews would suggest wherein the major problem is the growth of people on disability support pensions (DSP) and Newstart:

Seventy-one percent of the increase in welfare payments from 2007 to 2012 was in age pension payments. Rather oddly, this is the one payment area which Andrews is ruling out being considered in the review chaired by Patrick McClure.

The focus on DSP is not surprising, but it does feel a year out of date. In 1992 only 2.2% of the population was on DSP; by 2002 it had reached 3.4%. After a continual drop in the growth of those on DSP from 2002 to 2007, the numbers did spike significantly until 2010.

In 2011, however, the Gillard government introduced some controversial changes to DSP eligibility. The intent was to reduce the growth in DSP numbers and it certainly seems to have worked. In 2012, DSP numbers grew by only 1.1%, and includes around 3.6% of the population.

Andrews is right to note that one issue is the difference in the indexing of the Newstart payments and DSP. Newstart is linked to the CPI, while DSP is linked to average wage growth. This ensures that over time DSP will increase faster than Newstart, and as Andrews noted, creates a perverse incentive for some to try and move from Newstart to DSP.

At the very least, putting the payments on the same index will reduce this incentive and also the false implication that those on DSP are “faking it”. But these problems remain the minor part of the mid- to long-term issue. In 2002 the age pension accounted for 37.4% of all welfare recipients; by 2012 this number was up to 45.3%.

The ageing of the population comes in sharp focus when you look at the ratio of those on the pension and those in the labour force:

Twenty years ago there were almost six people in the labour force for every person on the age pension. Now it is down to 5.3 people per pensioner and the trend is heading further down.

The welfare problem is by and large an ageing population problem. And it is a problem that will be much better served with a bit more context and a lot less of political parties blaming each other, the unemployed or those on disability pensions.