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OECD growth warning highlights failure of 'welfare to work'

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Media Release

Penny Wong Labor Senator for South Australia Shadow Minister for Employment and Workforce Participation, Corporate Governance and Responsibility

Thursday 25 May, 2005

OECD growth warning highlights failure of 'welfare to work'

The OECD's Economic Outlook for Australia is another reminder that stronger incentives are needed to move people from welfare to work, Shadow Minister for Employment, Penny Wong said today.

"The Howard Government's 'welfare to work' scheme actually decreases incentive for welfare recipients to engage in paid work," Senator Wong said.

"It seems that everyone except the Howard Government understands the need to increase incentives for participation.

"Instead of increasing incentives, the Howard Government is simply creating new dole payments - moving people from one welfare payment to a lower welfare payment.

"Under the new doles created for parents and people with a disability, benefits will begin to be withdrawn earlier and at a higher rate than under existing payments.

"As Labor has established this week, working single parents will be far worse off under the new welfare regime when they are forced onto the dole.

"Parents who move onto the lower Newstart payment will face higher effective marginal tax rates than they otherwise would have on the Pension Income Test.

"That means that under the new scheme, welfare recipients keep less of private income earned than they would under the existing system - robbing them of the incentive to work.

"By contrast, Labor has proposed a Welfare-to-Work Tax Bonus which increases incentive to move from welfare to work by increasing the tax-free threshold to $10,000 for people earning up to $20,000.

For further information:

• John Olenich 02 6277 5789 / 0408 841 850