Symposium: The 2002–03 Federal Budget

Disabling employment policy

David Abelló, University of New South Wales
Jenny Chalmers, University of New South Wales

Changes outlined in the 2002–2003 Commonwealth Budget mean that continued access to income support for many people with a disability will be based on their undertaking activities such as rehabilitation, training, part-time work, and job search. Rather than apply pressure to these people without changing their financial position, the changes will lower their take-home income. Further, as they enter the labour market these people will keep less of the income they earn because of a harsher income test.

The success of this policy change depends on a number of factors. Will it reduce long-term reliance on income support? Do we have the right employment services and are there enough of them? Are there jobs available? At what cost to some of the most disadvantaged Australians?

Changes to income support

The effect of these changes will be twofold. Many income support recipients with a disability will substitute unemployment payments for the Disability Support Pension (DSP), reducing the level of financial assistance they receive. Further, income support for these people will be conditional on their undertaking specified activities.

Eligibility criteria for DSP

The changes to qualification requirements and procedures will apply to all new claimants and existing DSP recipients, except those within five years of Age Pension age. They will have the effect that:

  • people expected to be able to work at least 15 hours per week within two years of assessment will no longer qualify
  • people who can improve their ‘work ability’ following medical treatment (for example, a pain management course) will receive unemployment payments rather than DSP
  • the range of training and support services considered in determining work capacity will be widened to include employment assistance and rehabilitation services
  • local labour market conditions will no longer be considered in determining eligibility for DSP for people aged 55 and over. This change, the government hopes, will signal the expectation that older workers are expected to remain active in the labour market.

Activity testing for unemployment payments

Changes will lower the take-home income of some people with disability.

Activity testing is what the government requires a person to do in order to continue receiving unemployment payments. Activities include job search, training, study, and participation in Work for the Dole or voluntary work. Under current arrangements, if DSP recipients were transferred to unemployment payments they would almost certainly be classified as incapacitated and thus exempt from activity testing. However from September 2003, the criteria will change to ensure that those who receive unemployment payments rather than DSP will be activity tested. These changes will ensure that people with a disability participate in special interventions designed to improve their capacity to work, such as rehabilitation, the Personal Support Program (PSP), and some Disability Employment Services.

As a result of the changes, the government will focus more attention on matching individuals with activities designed to facilitate their re-entry to the work force. For example, income support payment for those with drug or alcohol dependency will be conditional on their undertaking rehabilitation. From September 2002, all claimants will be profiled for their level of ‘risk’, based on factors such as their medical condition and age, transience of accommodation, number of breaches, and consecutive episodes of incapacity.

Implications of moving from DSP to unemployment payments

Currently, a DSP recipient is paid more than a person with similar income and assets receiving an unemployment payment. For example, the maximum rate of DSP for a single person is $53 more than the maximum rate of Newstart Allowance (NSA). Further, while unemployment payments are taxable, DSP payments are not, and the unemployment payments income test is substantially harsher.

Figure 1 shows weekly net income under current arrangements (after tax and rent) for a single person over 21who pays $150 per week in private rent and receives either NSA or DSP. Note that DSP is received over the entire earned income range shown, while NSA cuts out at around $375 per week.

Figure 1: Relationship between earned income and net income for
a single person (after housing costs), NSA versus DSP (May 2002)

Source: Department of Family and Community Services (FaCS),
Hypothetical Effective Marginal Tax Rates Model (20 March 2002).

Another difference is that DSP recipients receive a Pensioner Concession Card (PCC) while unemployment payment recipients receive a Health Concession Card (HCC). Both entitle the cardholder to prescription medicines at the concession rate through the Pharmaceutical Benefits Scheme. Cardholders can also use pensioner concessions available in the State or Territory where they live, such as transport and energy concessions. However the range and value of concessions available to HCC holders is substantially less than those available to PCC holders. Further, those who receive DSP for nine months or more can keep their PCC for one year if their payment ceases as the result of earnings. In comparison, HCC holders who receive payment for 12 months or more only keep their cards for six months following cancellation of their payment.

Currently, a DSP recipient is paid more than person receiving an unemployment payment.

The difference between the two payments shown in Figure 1 reflects policy makers’ belief that unemployment payment recipients should be actively discouraged from remaining on income support while working part-time or casually; rather, they should exit income support completely by accepting full-time work.

However Wilson et al. (1999: 21) cite qualitative research undertaken by the former Department of Social Security suggesting that while families do perform financial calculations to determine the returns from working, such considerations are not always the primary influence in workforce participation decisions. Moreover, Cowling (1998: 28) finds that the loss of allowances, discounts, and concessions is much more significant in the decision-making process than any consideration of thresholds and tapers.

Changes to employment support for people with disability

The government plans to create over 68,000 new places in rehabilitation, specialist disability employment assistance, the Job Network, the Language Literacy and Numeracy Program, and the PSP. Will this increased funding help deliver economic self-reliance for people with disability, and will access to these services and programs be equitable?

People supported in open employment tend to have very low weekly incomes. In 1998–99, 52 per cent had jobs paying $200 or less per week, almost four times the national rate. Nearly one-third were working 15–30 hours per week (Anderson, Psychogios and Golley, 2000), yet under the proposed changes these people would not be eligible for DSP.

The government has announced an increase in places for Disability Employment Services. These are regulated by the principles and objectives of the Commonwealth Disability Services Act [1986] (DSA), which appear out of step with the stance of the government and the discourse it is currently promoting. Self-determination underpins the principles of the DSA, which reflect the ideas of desegregation and normalisation of the 1970s and the aspirations of the disability rights movement of the early 1980s. Voluntary participation in employment programs is one casualty of the proposed changes.

As part of changes introduced in last year’s Budget, employment service providers will oversee and implement Work Capability Assessments (to determine the service to be provided to people with disability). The tender documents for Work Capability Assessments providers make it clear that labour market conditions should not be taken into consideration when tests are undertaken (FaCS, 2002). Presumably this means people with a disability may be assessed as able to work more than 15 hours per week in nonexistent jobs and industries.

Voluntary participation in employment programs is one casualty of the changes.

Increased funding for the Job Network will create around 4,600 new places to cater for people expected to be displaced from DSP onto NSA. There is potential for further savings from penalties imposed on these people by Job Network providers in recommending to Centrelink a breach of activity requirements. More than half the recommendations that result in the loss of all benefit (a third breach) come from Intensive Assistance providers (ACOSS 2001). Research conducted by ACOSS and the National Welfare Rights Centre suggests that among those most affected are people with mental illness, people who have acquired brain injuries, and people with drug and alcohol related problems (ACOSS, 2001).

The experiences of people with disability in the Job Network are difficult to assess. Program performance figures once freely available under the former system are now ‘commercial’ secrets. The convention of reporting rates of service access and outcomes for ‘equity groups’ has also been abandoned. Research suggests that the competitive nature of the Job Network is encouraging disability, racial, and other forms of discrimination in the labour market, and reducing disadvantaged job seeker access to job vacancies (MacDonald and Abelló 2001; Eardley, Abelló and MacDonald 2001).

In promoting the PSP, the Department of Family and Community Services has acknowledged that most of those targeted (long-term unemployed people not suitable for Job Network Intensive Assistance) have a mental illness. These include many of the unemployment payment recipients who currently submit medical certificates to be exempted from activity requirements. There is chronic over-demand for the health services of States and Territories. There are few if any free psychological services, and the services available focus on those with the highest support needs. Community Support Program providers (the precursor to PSP) say community health and community mental health services are unavailable or have long waiting lists.


Not only are local labour market conditions missing from the determination of eligibility for benefits and assessments of work capability, they are also missing from the government’s whole strategy. Any reference to systemic problems faced by people with disability is notable by its absence. The inaccessibility of buildings, transport, training and education services, and workplaces, and the promotion of disability-friendly work practices (such as job redesign, flexible hours, workplace modification and assistive and adaptive technology) are not on the agenda. Widespread employer and workplace discrimination (particularly against older workers disabled by workplace accidents) are not part of the formula either.

The government’s discourse suggests it is only the ‘dependence’ of people with disability that keeps them in receipt of income support, and there are no labour demand problems. It suggests those on income support do not make any useful contribution to their communities, and they have made no effort to get suitable work when they are able. The spectre of a crippling level of disability related income support expenditure in the future is another part of the argument, though it has not been substantiated in any way.

The capacity of work to relieve poverty and reduce ‘welfare dependence’ is questionable.

The question that remains is, why should people with disability be made to pay for the government’s reelection campaign in 2001, and how does reducing the incomes of the poor motivate them to work? Those who do empirical research on the long-term unemployed and other disadvantaged job seekers see that poverty exacerbates unemployability. Accumulated social disadvantage, insecure housing, inadequate diet, inability to afford a ‘normal’ standard of presentation and self-care, and the high cost of job search, particularly transport costs, are just some of the factors that reduce a person’s capacity to compete in a labour market that is increasingly less regulated and exploitative.

Research suggests the capacity of work to relieve poverty and reduce ‘welfare dependence’ is questionable. The personal costs associated with disability, to which there has been a poor policy response, further undermine the possibility of escaping poverty through a low paid, casualised job. The efficacy of the government’s employment services and their capacity to help remains uncertain. Other client support services that might be used by ‘caseworkers’, such as community health and mental health services, are nonexistent or under considerable pressure. We are left to wonder whether the purpose of the government’s strategy, particularly with the changes to income support announced in this year’s Budget, is to enhance the quality of life of people with disability, or just another cost-saving venture.


Anderson, P., Psychogios, C. & Golley L. 2000. Open Employment Services for People with Disabilities, 1998–99, AIHW, Canberra.

ACOSS 2001. Breaching the safety net: the harsh impact of social security penalties, ACOSS Info 305, Australian Council of Social Services [Online], Available: [2002, June 6]

Cowling, S. 1998. ‘Understanding behavioural responses to tax and transfer changes: A survey of low-income households’, Melbourne Institute Working Paper No. 15, The University of Melbourne.

Department of Family and Community Services 2002. The Provision of Medical Assessment Services and Work Capacity Assessment Services Request for Tender.

Eardley, T., Abelló, D. & MacDonald H. 2001. Is the Job Network Benefiting Disadvantaged Job Seekers? Preliminary evidence from a study of non-profit employment services, Social Policy Research Centre, Discussion paper No. 111, University of New South Wales, Kensington, [Online], Available: [2002, June 6].

MacDonald, H. & D. Abelló 2001. ‘How is the Job Network impacting on the operations and orientations of community-based non-profit agencies?’ paper presented at the Virtual 8th National Unemployment Conference, September 2001 [Online], Available: [2002, June 6].

Wilson, K, Pech, J. & Bates, K. 1999. ‘Parents, the labour force and social security’, Policy Research Paper No. 2, Department of Family and Community Services.

David Abelló and Jenny Chalmers are researchers at the Social Policy Research Centre, University of New South Wales. The authors thank Bruce Bradbury and Peter Saunders for helpful comments on an earlier draft. The views expressed here do not represent any official position of the SPRC.

View other articles in this symposium:

View other articles by David Abelló: