Sustainable Safety Nets Australia s Experience

Transcription

1 Sustainable Safety Nets Australia s Experience Multi-Pillar Systems of Social Safety Net Seoul 6 December 2006 Dehne Taylor

2 Social Welfare Design Redistribute income through the taxation and social security systems Equity considerations Challenge is to achieve in the least distortionary manner Relationship between growth and equality is complex 2

3 Four questions about design Will the system deliver adequate assistance? What will be the impact on behaviour? How effective is the redistribution? How sustainable is the design? 3

4 Four questions contd. Look at each question through the prism of equity versus efficiency Assess whether More is better against Too much is dangerous 4

5 Adequacy level of income and services that, at least, meets basic survival needs Equity Horizontal and Vertical equity Regional equity Intertemporal equity Intergenerational equity But large disparity across countries Scandinavian systems versus US system 5

6 Behaviour 6 Too generous can lead to labour market problems Active versus Passive systems Time limited or indefinite Individual tailoring and complexity Complexity aspects include: Regulatory complexity Pace of change Compliance impact Adaptive systems

7 Redistribution How are benefits and costs shared across different groups Empirical testing is it redistributing to the less well off; or is the impact random; or is it middle class welfare? Is there an intergenerational impact? Are there viable alternative proposals? that achieve better distributional impact or lessen efficiency costs 7

8 Sustainability Globalisation and Ageing two main pressures on industrialised countries Globalisation structural change Product Market reform migration Demographic Ageing slower economic growth from lower labour supply implications for high expenditure countries 8

9 Australian Social Security System - Overview Federal system of government Commonwealth, states and territories and local government Social Welfare spending Commonwealth funds per cent Health, Education and Housing spending majority funded by states and territories 9

10 Australian System Overview contd Paid on a categorical basis age and veterans pensions unemployed parents people with disabilities Large family assistance programs Benefits are means tested No time limits 10

11 Australian System Overview contd Moving from Passive to Active system for many working age payments Mutual Obligation Principle - Activity tested job search Work for the Dole 11

12 Rating Australia s system against four design questions Adequacy Payments appear low by international standards; but tax free and accompanied by non-cash benefits (e.g. health and transport concessions) Payments indexed real value of allowances maintained pensions linked to living standards 12

13 Rating against four design Behaviour questions contd Income testing can lead to high EMTRs Recent Policy Changes lowering EMTRs focus on move from passive to active system System tailored to individuals but can become complex to understand rules and entitlements 13

14 Rating against four design questions contd Redistribution Australia s system is highly redistributive Australia appears to redistribute more to the poorest 20% of the population than any other OECD country. (Whiteford, 2005) Australian welfare state redistributes substantial resources from rich to poor. (NATSEM, 2005) It appears that there has been no significant change in income inequality from the mid 1990s to (Aust Bureau of Statistics, 2005) 14

15 Rating against four design Sustainability questions contd Recent changes to the Australian social security system have their genesis from the projections of the 2002 Intergenerational Report (IGR) The IGR highlighted Australia s forthcoming demographic challenges 15

16 Future Challenges Policy choices Budget balance falls and debt increases Tax:GDP ratio increases Policy response Pass the problem to future generations Lower cost budget programmes Faster GDP growth 16

17 The 3 Ps Components of GDP Total population Population Share of population 15+ Participation rate Unemployment rate Participation Employment (hours) GDP Average hours worked Capital deepening Multifactor productivity Productivity 17

18 The Policy Response Welfare to Work Significant number of working age Australians on passive welfare Activation improves individual well-being as well as a source of labour supply Targets groups are: mature age job seekers parents people with minor disabilities 18

19 Conclusion Cultural and societal norms matter As do existing institutional arrangements but leadership can shift opinions Labour market flexibility and the shape of the social security system are often interrelated Two distinct activation models seem to work but both are being reformed Danish flexicurity and anglo-models 19

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21 GDP Growth GDP = 1 ) Pαρ( u hπ P: Population α: Proportion of population of working age ρ: Participation rate u: Unemployment rate h: Average hours worked π: Average labour productivity Population Participation Productivity 21