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Youth Allowance: background briefing.

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Medial Release


Australian Council of Social Service

Australian Youth Policy and Action Coalition

Australian Catholic Social Welfare Commission

Brotherhood of St Laurence

National Youth Coalition for Housing

Welfare Rights Centre






The Youth Allowance involves complex changes to income support for young people and their families, and produces both winners and losers. It is important to note, however, that some of the losers will be losing all access to income support. This briefing focuses on the group that are most adversely impacted by the Youth Allowance - young unemployed people and their families.


The young unemployed


Over 45,000 unemployed people aged 18-20 will have their unemployment payments reduced or cancelled from 1 July according to the Governments figures.

This number - 45,000 - makes up almost half the total number of unemployed people in this age group. They will be...


forced to become newly dependent on their families where they can...


Most of this adverse impact will be as a result of parental means testing under the Youth Allowance.


These people will not be from wealthy families in most cases. In some families, parental income need only exceed $23,400 per annum to start reducing the $87 weekly payment of a young unemployed person.


Furthermore, the young person could have lived away from home for a long period of time and still be affected. First, they will be required to obtain financial information from their parents, which could be a source of conflict in many families. Then, if their payment is reduced, they will have to decide whether they can afford to live away from home on the reduced payment, or whether it is possible for them to move home. If they choose to move home, their payment could be reduced yet again or even cancelled.


forced to meet unrealistic independence criteria...


In order to avoid parental means testing, a young person will have to satisfy independence criteria. We welcome the broadening of these criteria during the passage of the Youth Allowance legislation, however we believe that the existing criteria still do not take sufficient account of young people who have only been able to obtain intermittent employment since leaving school, but who have firmly established their independence in other ways, including through being financially independent of their parents and through arranging their own accommodation. In addition, it is illogical that the Youth Allowance contains such a strong presumption of financial dependence on parents for people aged 18-20 while other government programs assume financial independence at age 18 - for example the Family Tax Initiative and the Child Support Scheme.

Forced to face rental costs alone with no assistance…


Furthermore, under the Youth Allowance, Rent Assistance will only be available to young people who can prove that they must live away from home for work or study. Rent Assistance will not be available for young unemployed people who cannot meet this requirement, even if they have been living away from home for a long period of time.


Rent is a particular burden for young people on low incomes, few of whom benefit from either home ownership or public housing. We call on the government to extend Rent Assistance to all Youth Allowance recipients living away from home.


forced back to school or off payment...


With some exceptions, unemployed people aged 16 and 17 who have not completed year 12 will be required to undertake full-time education or training from 1 January 1999.


For many young people, education and training is an appropriate choice. However many others will not benefit from this approach, and may be reluctant participants. There is the potential for serious disruption in schools and families, and for significant hardship among young people who do not fit into this restrictive regime and consequently lose access to income support payments.


The government has delayed the implementation of this requirement until 1 January 1999. We welcome this delay and we further welcome the resources the government has provided to ensure that schools and other educational institutions are better prepared to accommodate these young people.


However, once again we call on the Government to reconsider this one-size-fits-all model, and to provide for a more diverse range of pathways to employment for young people through case management.


and forced to bear the burden of Government cost-cutting


The 1998-99 Budget showed that the Government estimates that it will save $428.1 million over 4 years through reduced unemployment payments to young people, as result of the introduction of the Youth Allowance, despite the package being an overall spending package ($299.2 million over 4 years). Young unemployed people should not bear such a disproportionate burden of this package.


Increased burdens on families


The introduction of the Youth Allowance will increase the financial burden on low income families and worsen low-income ‘poverty traps’, by removing assistance from unemployed young people in these families, and by increasing the families’ effective marginal tax rates.


Families with incomes from as low as $23,400 will be facing the prospect of setting aside more of the scarce family resources to help support a young person who was previously considered independent, but whose unemployment payments have now been reduced or cancelled. This will also affect older people who care for grandchildren, as a result of family breakdown or for other reasons.


These families will also face low income ‘poverty traps’ through increases in effective marginal tax rates - for every dollar they earn, they will lose another 25 cents in total family income. If they have younger children for whom they receive Family Allowance, they could face marginal tax rates of well over 100 per cent on some income. High effective marginal tax rates can act as a major disincentive for families to increase their earnings.


This problem already exists for families with children in both the Family Allowance and Austudy systems. We acknowledge that the Government has committed itself to addressing it in the tax reform process. However, tax reform may take years - meanwhile, more families will face this problem from 1 July.


For further information phone AYPAC Carol Croce Ph 02 6247 1666

Fax 02 6247 1799 Email or phone NYCH Penny Drysdale Ph 02 6257 1555