Wealthy fare well from welfare
In 2013-14, the Australian Government dispersed a Robin Hoodesque $105 billion across the community through income support payments. That’s roughly 30% of its tax revenue. Unlike Robin, however, Kevin, Julia, Tony and their merry men gave much of their loot to the most fortunate, rather than to the poor.
Based on research conducted by the Australian Productivity Commission, the wealthiest half of households received just as much income support as the poorest half. And whilst the poorest decile (10%) received the most support, those in middle upper wealth households (50th to 80th percentile) received the lion’s share.
The distribution of government support to wealthy households is largely driven by Aged and Family pensions, whilst Unemployment, Study and Disability payments go some way to balancing out the situation.
Newstart allowance (a.k.a. the dole) and Study Support programs are tightly targeted based on income and wealth of the recipient. Disability payments are also largely provided to less wealthy households. This leads to claims that the Australian Welfare system is one of the most targeted in the world.
However these two payments only make up 7% of all income support provided by the government.
The majority of the loot is given away in the form of Aged Pensions (44%) and Family Payments (26%).
Unlike the dole, Aged Pensions and Family Payments are much looser in their targeting. As a result, more of these benefits are paid to the top wealth brackets than to the poorer households.
Unfortunately, this appear to create an entirely misguided system in which the wealthiest households in Australia receive more welfare than those with limited resources, to the extent that the amount paid in Aged Pensions to the top 20% of households is $1.2 billion more than the entire unemployment benefits.
This is not to suggest that pension need cutting, nor that the Australian welfare system is over-inflated.
Rather that we’re failing to funnel funds to support those in the greatest need.
 Productivity Commission – Tax and Transfer Research Image credit: hktang – Flickr – / CC BY – Modified
Interesting article. What proportion of people receiving the aged pension have moderate to high wealth but low income? Of these, what proportion have the majority of their wealth tied up in the family home?
How would you change policy to make payments of govt pensions and benefits more equitable?
A large proportion of the pension recipients would be low income/ high wealth. If you analyse some of the figures above by income rather than wealth, in particular for age pension, you get very different results. Furthermore, wealth analysis conducted by the Dept of Social Security, which does not include the family home as “wealth” also paints a very different picture. From this it can be assumed that the family home is a large part of pensioners’ wealth.
The questions of whether one’s home should be taken in consideration when deciding a person’s need for welfare is an interesting one. And I suppose that was a large part of what this post was attempting to encourage people to do.
Not counting it as wealth may be encouraging the elderly to invest in expensive personal homes, holding on to houses which are beyond their need, increasing housing utilisation, and diminishing the flow of cash investments across the community. It does seem an artificial lever which alters the market towards less efficient solutions.
On the other hand, there are bound to be positives and negatives on both sides to be considered.
I think they are both worth considering, to perhaps arrive in a better position.
Pd: The post also attempts to raise the issue that while many point to ‘dole’ and Austudy recipients suggesting there is too much welfare in Australia, the vast majority of payments are actually being handed to the aged and families. Thus, tightening the belt on unemployment benefits would have very little impact on the overall cost of welfare support.