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Mutual obligation and the welfare responsibilities of government.

Introduction

Significant external and internal forces mean a reassessment of the welfare responsibilities of governments. In the English-speaking countries especially this involves a move away from the broad postwar social contract between citizens and the state, toward more specific contractual arrangements between particular individuals (or groups) and agencies of the state. One result is a change in the power relationships between vulnerable individuals and government agencies and a transfer of responsibility for dealing with risk from governments to individuals (Mitchell 2000). The welfare reforms introduced by the Howard Government, and some aspect of the reports of the Reference Group on Welfare Reform (2000a&b) illustrate these trends. An emphasis on mutual obligation has been a key feature, alongside a focus on participation and more individualised assessment and service delivery.

This paper examines whether mutual obligation, as it has been understood and implemented by the Howard Government's initiatives, will allow for the welfare responsibilities of government to be effectively fulfilled. It first explores the meaning and scope of welfare and government responsibility, turning next to the current situation in Australia. Finally, it examines what this means for the present Government's responsibility and for the application of mutual obligation.

The meaning of welfare and the welfare responsibility of governments

The progressive development of welfare states in Western industrialised countries reflected the increased recognition of the responsibility of governments for the welfare of their citizens. Esping-Anderson sees a welfare state (compared, for example, with a law and order state) as `predominantly concerned with the production and distribution of societal well being' (1990:1). Yet substantial differences in welfare state regimes (Esping-Anderson 1990) reflect differences in ideologies about what constitutes individual and societal well being as well as differences in the perceived responsibility of government for their achievement.

At the individual level, well-being is often measured in subjective terms, with life satisfaction, sense of mastery and avoidance of misery being key elements (Western 1999). However, subjective life satisfaction can be a very conservative measure as people adjust to their circumstances. Travers and Richardson (1993) suggest that notions of positive freedom that involve the capacity to attain satisfaction are also important. Personal life satisfaction may be too one-dimensional. Well being encompasses how individuals fare in a range of domains or spheres of life such as living standards (or material well being) access to information, social participation and family relationships (Western et al. 1995). Travers and Richardson (1993) focus on material well being, but they also examine the relationship between material well being and other aspects of well being, specifically, happiness, health and participation (including family relationships and social support). Along with other studies such as Western (1999), they find a relationship between material well being and life satisfaction, however the correlation is not strong.

While aspects of life other than from material well being may have a greater direct effect on overall well being, material well being is still influential. In affluent countries this is likely to be mainly through its impact on family relationships and stress, on self-esteem and on one's sense of mastery or autonomy (McClelland 2000a, Western 1999). This paper mainly concentrates on individual material well being and its distribution (poverty and inequality) as it is the aspect of well being most relevant to the welfare responsibility of government and the application of mutual obligation.

Material well being generally equates to a capacity to consume goods and services or to achieve a given standard of living. Travers and Richardson (1993) see it as that aspect of life that can be affected by a change in produced goods and services. It includes cash income, assets or wealth, time available to earn income (leisure), and the value of goods and services provided by government and from other sources, for example through fringe benefits (from employers) and home production (from household members). However, material well being is also affected by a person's capacity to acquire resources and to convert them into things of use and value (Sen 1999). This emphasis on capacity is very relevant to current policy including mutual obligation and the welfare responsibility of government.

Responsibility for material well being in Australia is shared amongst the market, individuals and family members, community organisations and governments. The market is meant to promote material well being through the efficient production of goods and services and also through its capacity to provide employment at wage levels that provide reasonable living standards. Through self-help and the exercise of choice, individuals promote their own living standards and usually those of other family members. Community organisations have traditionally had the role of emergency assistance plus some long-term support for more vulnerable people. Recently they have taken on a greater role in capacity building, for example through employment and education assistance programs.

Keating (1998) outlines three objectives of government that relate to material well being.

* To promote sustained income and economic growth per capita;

* To promote employment growth and job security; and

* To promote a just distribution of income with access to certain basic services

While this paper focuses mainly on the third objective, governments need to achieve an appropriate balance between the three and especially pursue policies that minimise conflict between equity (the third objective and, to some extent, the second) and efficiency (the first and second objectives). A relevant consideration is whether mutual obligation assists governments to do this.

Different views about distributive justice will affect how governments should respond to the third objective. Travers and Richardson (1993) cite Walzer's view that distributive justice is compromised if one's standing in one of the spheres of life dominates one's standing in another sphere (for example if having a low standard of living affects one's capacity to have meaningful relationships or to exercise one's political rights). Similarly for Sen (1999), justice is compromised if substantive freedoms relating to political and civil rights, economic and social opportunities, the transparency of arrangements and institutions and protection from misery, are not available. Drawing on these understandings, this paper poses three aspects of a given income distribution that may be either unjust, or have harmful consequences for societal well being. Avoidance of these aspects of inequality would therefore be the particular welfare responsibility of government.

The first is inequality associated with unacceptable misery and that may compromise a person's capacity to achieve well being in other domains of life. The second is inequality of opportunity, meaning that people's socio-economic background should not determine their life chances (or, drawing on Sen., their capacity to achieve critical freedoms). The third is when inequality undermines the achievement of shared values and experiences so essential to social relationships and social cohesion. This can have a longer-term impact on the capacity of political, institutional, and legal arrangements to develop individual and societal well being (and thus to achieve critical freedoms).

The current situation in Australia: trends in poverty and inequality

A number of significant and interrelated changes are dramatically affecting the future prospects for poverty, inequality of opportunity and social cohesion in Australia and worldwide. The key drivers are globalisation, economic and technological change, changes in family formation and changes in the role of institutions that promote values and opportunities for inclusion. They are affecting poverty, inequality and people's lives through their impacts on employment, housing, communities and family life.

While there is no up to date information about the distribution of the value of government services (an important contribution to material well being) there is recent research indicating in increase in inequality of disposable incomes of families in Australia (Johnson & Wilkins 2002; Harding & Greenwell 2002). These and other studies point to some important points about changes to inequality in Australia.

First, changes to inequality have been accompanied by an increase in relative poverty, or at the very least, no reduction in relative poverty over a long period despite a substantial increase in national income (King 1998; Harding & al 2001). Recent estimates are that in 2000, around 13% of Australians were in families with incomes below the half-average poverty line and almost 9% were below the half-median poverty line (Harding & al 2001). Over that time there has been a change in the composition of poverty with a growing concern about child poverty, including long-term child poverty (McClelland 2000b; King 1998). [Note however that over the period 1982 to 1997-98, Harding & Szukalska (2000) estimate that using the half-average poverty line, child poverty declined from 17.4% to 14.2%].

Second, a key factor behind the increase in inequality and poverty has been the increase in inequality from labour-market earnings (Johnson & Wilkins 2002) associated with increased unemployment and joblessness (Harding and Richardson 1998; Dawkins et al. 2002), under-employment (including part-time and intermittent employment) (Eardley 1998) and an increased dispersion in the earnings of full-time workers (Saunders 2000). Key factors include the continuing impact of the recession-induced increase in unemployment in the early 1990s and changes to the nature of the labour market. During the 1990s job growth was almost entirely in either part-time employment for low-skilled low-paid work or full-time employment in high-skilled, high paid work, thus contributing to a polarisation of the labour market (Borland et al. 2001).

Third, at least until recently, government payments and services substantially moderated the increase in inequality of labour market earnings with a much lower increase in inequality of disposable incomes and living standards than in earnings from work. Fourth, the growth in inequality over the 1990s has been primarily due to the vastly improved labour market position of the top 20% of income earners in relation to low and middle-income earners. (Johnson & Wilkins 2002; Borland et al. 2001). Finally, alongside the trend towards greater income inequality has been related increases in locational inequality (Baum et al., 1999), inequalities in health status (Walker 2000), inequalities in the educational participation and attainment of young people (Kirby 2000) and a growing divergence in the circumstances of families with children in terms of income and work (McClelland 2000c).

These changes in poverty and inequality are likely to have harmful impacts on individual and societal well being. For many (although not for all), hardship and misery accompanies below poverty-line incomes (Taylor 1999). The research findings about health, educational and spatial inequalities provide compelling reasons for a concern about growing inequalities in opportunity particularly when combined with the changing labour market and the growing discrepancies in the family circumstances of children in Australia in terms of income and parent's paid work. Social cohesion may also be declining although this issue needs much more research. Increased inequality at the top may mean that those with wealth and political power have different lives and a declining interest and support for the welfare of others and for state funded or provided services and institutions. A recent OECD report (Healy & Cote 2001) suggests a two-way causal relationship between inequality and social capital and social cohesion.

Implications for the current welfare responsibilities of government

The key drivers of inequality will continue to exert a strong influence for the foreseeable future. Ongoing changes to the nature and distribution of work associated with economic change and globalisation will continue to influence the severe disadvantages faced by low-skilled workers. Family life will also be changeable and uncertain as members are faced with the risks of loss of relationships and loss of paid work at some period in their life. What could change however is a reduction in the state-based protections that moderated the negative impact of change on the immediate lives of many Australians over the past 25 years. During the 1980s and early 1990s improvements to income support arrangements and to government provided or funded services, such as child care and health care were critical in either moderating or containing the increase in poverty and inequality in Australia (Johnson et al. 1995, Harding and Szukalska 2000). But cut backs to service delivery and reductions in access to income support could compromise this protective role of the state. The salient point is that all the important areas of life and institutions that have previously provided protection for the vulnerable, and also social support and opportunities for social inclusion, now are less able now to do so (Goodin 2001). Work that is stable, certain and sociable is much more difficult to obtain, families and community organisations are under strain, and the role of governments is being constrained.

This reinforces the continuing importance of the protective role of government. The critical challenge however is to balance continued protection with two other important responsibilities of government in relation to distributive justice and to containing poverty and inequality. These are the responsibility of government for capacity building (which also includes assisting people to make transitions at critical points in their lives) and for promoting social cohesion.

A focus on capacity building points to the significance of the (neglected) social investment role of government in Australia (Cass 1999). This neglect is reflected in the failure of governments to develop the skills, opportunities and capacities of individuals, families and communities to be able to function effectively in a changed and much more demanding environment. During the post-war settlement public investment both encouraged economic development and also ensured that different parts of Australia have an opportunity to share in that development (Cass 1998). However the new information-based economy means that social investment in the development of human and social capital is a key driver of economic development and for social and economic opportunities. This requires much greater attention to education and training, childcare, health care and regional and community development and is central to maximising efficiency and equity objectives.

Increasingly policies to develop capacity must respond to the fragmentation of working and family life and the management of transitions (O'Donnell and Hancock 2001). People no longer have certain and linear pathways from one stage of life to another, informed by clear norms and customs. There is much greater diversity in how these transitions occur. This includes transitions to parenthood, to child care or pre-school, to primary school, leaving school and the transition to work and adulthood. A clear example involves the increasingly diverse pathways young people now take from school to work. There is a lack of clear responsibility for ensuring that all young people can make such transitions. Other transitions can include transitions back to work from caring activities, from one job to another, from one relationship to another (for parents and children) and from work to retirement.

Promoting social cohesion is related to the trend to increased diversity and is also connected to the vastly improved position of high-income earners who may be less prepared to fund and participate in the services and institutions that are important to the rest of society. This can undermine understanding and linkages between different groups and also undermine equality of opportunity. The way key institutions are structured (for example, labour market) and the way services are resourced and delivered (especially education and health) have the potential to accentuate rather then limit inequality.

The extension of mutual obligation

Up to the late 1980s the work test represented the only requirement (or obligation) of unemployed people to retain eligibility for income support. This was extended to require the undertaking of certain activities with the introduction of activity tests, first for young unemployed people and later in the early 1990s to long-term unemployed people, as part of the `active society' approach embraced by the Minister for Social Security, Brian Howe (Perry 2001). The active society approach recognised the need for capacity building and was advocated by the OECD and by the Social Security

Review (SSR) in Australia (Cass 1988). It was seen to be irresponsible not to provide active assistance (such as training and work experience) to those unemployed people with limited prospects of otherwise obtaining work. In the mid-1990s following the recession, this approach was revitalised and extended through Working Nation under the Keating Government. The Working Nation package included a significant extension of the range and type of assistance available to long-term unemployed people, a more individualised approach to assessment and delivery, and the introduction of `Reciprocal Obligation' with the extension of penalties if obligations were not met (Keating 1994). Under the Howard Government, the range and quantum of labour market assistance was reduced, the obligation requirements extended and the term "mutual obligation" introduced with mutual obligation also supported by the Reference Group on Welfare Reform (2000b).

These changes to the expectations and requirements of welfare recipients over time are partly related to the introduction of capacity building initiatives for welfare recipients. However there are critical differences between current and past understandings and applications. These differences go the heart of the central question as to whether mutual obligation (as currently applied) is integral to the undertaking of government responsibility for capacity building and thus the development of societal and personal well being.

Three critical differences are pertinent. First the expectation in the 1980s was not so much that welfare recipients were obliged to make a contribution to the community in return for income support (Centrelink 1999a: 35). It was more the expectation, that welfare recipients, as with other members of society, had the responsibility to take advantage of support and assistance that would improve their situation. Previous applications accord more with Marshall's views that along with social rights, citizens also had the social responsibility to improve their position where possible (Mitchell et al. 2001). In contrast with the present, the obligation requirements were more explicitly geared to capacity building and self-advancement. Secondly, and related to the previous point, under the Howard Government mutual obligation has been applied in a more restrictive and coercive manner. Recipients have been required to take part in one or more Of a set of activities, that offer limited choice with reduced accountability for positive employment outcomes (Curtain Consulting 2000). For example, the Howard Government has introduced job seeker diaries and Work for the Dole and expanded the use of employer contract certificates (ACOSS 2000a). While in theory a range of options are available, in practice these can be very few due to strict eligibility requirements (Centrelink 1999b). Such requirements have the potential to be extremely onerous and to humiliate rather than to promote capacity and autonomy. There are strong doubts about the effectiveness of frequently relied upon requirements such as Work for the Dole, especially their capacity to generate positive employment outcomes (ACOSS 2000b).

Further, mutual obligation is now being applied within a broader institutional context that is much more unhelpful for many welfare recipients. As Mitchell et al. (2001) note, the Howard Government has dismantled the more integrated social policy approach of the previous government to wages, taxes and transfer policies. And the current application of mutual obligation is geared towards helping (and coercing) welfare recipients adapt to current institutional arrangements rather than examining their effectiveness and inclusiveness. The operation of the labour market is particularly relevant (McClelland 2001) given the critical changes identified earlier that are making paid work more precarious and difficult, especially for low-skilled people. The Reference Group on Welfare Reform (2000a) recognised some of these changes. It noted the poor prospects for low-skilled people, the spatial division of work opportunities and the growth in causal and part-time work, but its focus was almost entirely on how Australia's income support arrangements can adapt to these changes. It neglected to deal with the critical issue of how the labour market may better meet the needs and aspirations of those moving from welfare to work. [To the extent that the Reference Group examined broader changes they were mainly related to work and family arrangements and opportunities for people with disabilities]. Yet, mutual obligation now means that welfare recipients are increasingly required to accept any kind of work. How much should we require people to undertake activities that may not be of any great long-term benefit and what is our obligation to ensure that the labour market operates more effectively for them?

Overall the Reference Group assumes a labour market which is beneficial to people and does not question the impact of changes such as labour market deregulation on the quality of lives of former welfare recipients. It also assumes upward mobility once in a job, but the reality may be very different. We have very little information about the long-term work experience of former welfare recipients in Australia. But the evidence from the United States is that of limited long-term gains in terms of employment stability and career advancement (Butler 2000). The acceptance by the Reference Group of an extension of mutual obligation in the context of a more hostile labour market is in marked contrast to the approach taken by the SSR in the 1980s. Then, an equitable labour market was seen as a critical component of any social security changes that emphasised the importance of work for people's long-term futures. As the Consultant Director for that Review noted
 .... the capacity for work/welfare combinations to take on the coercive
 aspects of `workfare" arrangements, as in some USA schemes (Handler 1987)
 shows the importance of a strong union movement in improving and protecting
 the wages and conditions of low paid work. Strong and protective welfare
 arrangements require strong union involvement in wage fixation in a
 regulated labour market (Cass & McClelland 1989:72).


Conclusion: The implications of the current and proposed application of mutual obligation for the welfare responsibility of government

The current application of mutual obligation is likely to undermine and not enhance the government's welfare responsibilities of protection, capacity building and social cohesion identified above. Mutual obligation substantially compromises the protective role of government, given its potential to deny income support to a greater range and number of welfare recipients through the application of penalties. According to the Australian Council of Social Service (ACOSS 2001) the three years from 1998/99 to 2000/02 saw a 189% increase in social security penalties with an estimated 349,100 penalties applied to unemployed people in 2000/01. Many very vulnerable people including homeless people, people with psychiatric conditions, Indigenous Australians and people with low literacy skills, experienced penalties. The Independent Review of Breaches and Penalties found that such penalties were imposed without sufficient regard and investigation and that their impact was `often too severe, thereby causing unnecessary and unjustifiable hardship' (Pearce et al. 2002:4). Changes recently introduced and proposed would extend mutual obligation to groups of sole parents and some with a disability, further compromising government's protective role.

As currently applied mutual obligation will unduly limit government's capacity building role. In many cases individual choices are constrained rather than enlarged and personal agency thus reduced. Mutual obligation assumes that individuals have the option of not taking up payments and the accompanying requirements. But choice requires the availability of a reasonable and viable alternative a condition absent in many (if not most) cases. Further, if the activity requirements associated with mutual obligation are not helpful and differ from those kinds of activities normally undertaken or expected by other community members, then mutual obligation has a stigmatising and humiliating impact, also not conducive to the development of autonomy and capacity. As the Independent Review of Breaches and Penalties noted, "there are many occasions in which its [the system's] operations in relation to particular jobseekers can be reasonably described as arbitrary, unfair or excessively harsh. There are also many occasions when it diminishes people's capacity and opportunity to continue seeking work and become less dependent on social security (Pearce et al., 2002:4).

But most importantly, the current application of mutual obligation puts most of the focus on capacity building on the development of the individual and not sufficiently also on the development of the capacity of institutions and organisations to ensure that they are relevant and effective. As Jayasuriya (2000) notes, the range of choices open to individuals is determined by the kinds of social structures and institutions they inhabit. If individuals are compelled to relate to institutions within which they have limited power then their autonomy (and future well being) is compromised not enhanced. Alongside problems identified earlier in relation to the labour market, a neglect of the effectiveness of services provided by both community organisations and government departments also seriously undermines the development of capacity of both individuals and organisations. This neglect is evident in the Final Report of the Reference Group (2000b), which proposes many actions previously attempted, but does not examine evidence about the effectiveness of past approaches. [For example it fails to provide any detailed analysis about the effectiveness of past attempts to provide individualised assessment and support, such as though case management under Working Nation]. As Saunders (2001) comments, this neglect of lessons from the past contributes to a lack of attention to issues of practicality which is a feature of policy development in Australia and which compromises the capacity of policy to achieve its intended objectives.

Finally, mutual obligation compromises the ability of government to fulfil its responsibility for developing social cohesion. The language surrounding and supporting its use by the Howard Government fuels growing divisions in Australia and elsewhere, between those who fund government activity and those who receive payments and services (Scherer 1998). Further, mutual obligation responds only to the social exclusion of people receiving welfare payments. It diverts attention away from the impact of the decline in shared values and experiences more generally that result from the combined impact of globalisation, growing inequality and an increase in diversity more generally. Such trends could compromise the capacity of societies to form common goals and aspirations so fundamental to the collective activity inherent in welfare states, and to a broader view of the welfare responsibilities of government. Social exclusion and social cohesion is also connected to the inclusiveness, equity and responsiveness of our institutional arrangements such as the education and training systems, the labour market and our health and social support arrangements. Here, government action has been to reduce the inclusiveness of these institutions. The industrial relations environment is now much more fragmented with the encouragement of individual and enterprise bargaining. Action in the health and education areas has been to encourage an opting out of public provision by those with the means to do so alongside worrying trends towards greater inequality of opportunity, particularly in education participation and attainment.

Governments has always had a challenge to balance the goals of providing protection for the vulnerable with the development of individual self-reliance and capacity in a way that promotes community support and cohesion. It is an ongoing and difficult tension. And there are legitimate criticisms that, in the past, a focus only on structural and institutional capacity has denied sufficient attention to individual capacity development. But mutual obligation, and the broader context in which it is being introduced, has produced an imbalance in the other direction. This imbalance will compromise the key welfare responsibilities of government. It will limit its capacity to protect the vulnerable, to develop the capacity of individuals and organisations to operate effectively in a changing world and will reduce, and not promote, social cohesion.

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Alison McClelland, LaTrobe University
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