African community leader: "Centrelink is to blame"

There is no shortage of bleeding-heart types who continue to support Australia's massive and generous welfare system which is administered by thousands of public servants who work for Centrelink. Supporters of the Australian welfare system usually defend the $91bil annual budget by saying "Centrelink does good", "It helps people in need", "We should help the struggling" etc etc.

Well.. there is some merit in those arguments. It is a good thing to help out people who are struggling but trying valiantly to build their lives, and temporarily need assistance.

Thats 1 point in favor of the welfare fans.

But. The debate is far from over there.

Is that the *only* thing that Centrelink accomplishes ? Social workers, journalists, writers and leftists all seem to think so. Economists, and other keen observers, seem to notice other effects in play. This is best described as perverse incentives, or moral hazard.

• Centrelink payments are phased out as the welfare recipient starts to earn income. This creates massively high Effective Marginal Tax Rates, as high as 70% or 80%. For a welfare recipient to decide to start earning income, they only get to keep a small share of it, so they are faced with a massive disincentive to work.
• The flip side to the policy of targeting welfare towards those most in need, is that it subsidizes and encourages the individual to maintain a lifestyle that qualifies for the welfare payment
• Young women can receive thousands in the form of a baby bonus for each child they have.
• Retirees who find themselves with no investments at the age of 65, will receive a $27,000 annual pension if they have no other form of income. For any individual who is happy to survive on such an income, they need not work or save at all over the course of their lifetime to prepare for retirement.
• Teenagers can become school leavers after Year 10, and even parents and receive hundreds of dollars per fortnight, as long as they convince Centrelink that they have been looking for work. This is a fairly easy thing to do, even if they spend the entire day watching TV or down at the beach surfing.
  

The most visible drawback to welfare is the cost - billions of dollars forcibly ripped out of the hands of the rightful owners, the people who earn income and would have otherwise spent the amount on things that they value. An army of Centrelink workers, administrators, bureaucrats are needed to implement such a vast system. Last year alone, there were 700,000 people who qualified for the disability support pension. Also, the millions of welfare recipients need to engage in all sorts of activities that they otherwise wouldn't have done under a free market. They need to show Centrelink that they have been looking for employment. They need to spend their time in contact with Centrelink and performing paper work, and their tax returns are further complicated because they have to declare welfare payments. Welfare recipients need to inform Centrelink whenever their details change.

So instead of spending time looking for, and engaging in productive employment, hundreds of thousands of people use their resources and efforts to go to a job interview every now or then, fill in paper-work or make phone calls to Centrelink and sometimes go to extreme efforts to earn undeclared income via the black market (cash in hand).

Along with supporting the current welfare payments, a large segment of the voting public also support easy immigration laws and believe that once immigrants arrive here, they should qualify immediately for welfare payments.

When you couple this with welfare payments, you get a fairly predictable result - thousands of immigrants from poor countries are motivated to come to Australia, not because of all the opportunities that exist in our advanced economy, but because of the generous welfare payments and public schooling and health that they can receive.

Another perverse incentive is that young teenagers who run away from home are qualified to receive an extremely generous welfare payment. So although the intention is to help those in need, the actual result is that you encourage, subsidise and promote individuals to put themselves in a situation of need.

These comments lend support to my claims (hat tip - AWH):

Aguer Raul of the African Community Development Centre said that's the only way they would get discipline, because laws in Australia left parents unable to control teenagers once they turned 16. He said one option they wanted to put to the Federal Government was repatriating teens who dropped out of school and lived on the dole away from their families or guardians.

"They have been unable to settle here. If they were back in Sudan, they would have discipline - the discipline of the elders and local laws they could not ignore," he said. They will be good citizens there but here they will create problems, for their families and for the Australian community."

A knifing at a Keysborough cultural festival a fortnight ago has added to concerns raised by a brawl last year between Sudanese and islander youths in Sunshine.

Mr Raul has blamed government services, including the police, Centrelink and Department of Human Services, for protecting teens who want to move out of the family home after age 16.

He claimed parents or guardians were not being properly consulted when these agencies took action over breaches of the law or custody issues.