Book review

Who killed social insurance in Australia and why?

25 Aug 2011

Kemran Mestan reviews A Decent Provision: Australian Welfare 1870-1940 for APO


The term ‘nation building’ is not used in Murphy’s history of the Australian welfare state up to 1940, but this is one of its major concerns nevertheless. A nation is not just built on hard infrastructure or common identity, but also the institutions and policies that impact on people’s standard of living.

Welfare policy is about protecting and promoting the well-being of anyone who has to work (most people), anyone who cannot work (e.g. people with severe disabilities), as well as those who should not work (e.g. elderly people). Welfare policy is therefore one of the most consequential elements of governance for the majority of people in any nation. In comparison to Australia’s early military activities, a fraction of books have been written about the emergence of Australia’s welfare state, but early welfare policies arguably had a bigger impact on people’s lives, and undoubtedly the reverberations on contemporary living standards are far more significant.

Murphy does in fact examine the connection between Australia’s military and welfare histories, specifically how repatriating veterans of the first world war created a parallel welfare state. Detached from issues relating to the deserving and undeserving, a theme that hampered other welfare benefits, war veterans were perceived as entitled to welfare benefits. These benefits included pensions, employment training, housing, and health-care, which usually extended to widows and children. Australia was more generous to its veterans than most nations, and this policy, combined with the fact that Australia suffered a proportionally greater toll in the war, meant that paying the bill left little money to develop the general welfare state. Hence, Murphy argues, the Great War was implicated in turning Australia from a social laboratory (having implemented wage arbitration and old-age pensions), to a social policy laggard.

Political debates about welfare benefits have revolved around the same themes and questions from pre-federation to this day. How should we judge who is deserving of, and should have access to, welfare benefits? Should promoting self-reliance be privileged over giving sufficient support to all in need? What is the most dignified manner to support those in need? Should welfare benefits be given as a right, or should conditions apply.

Murphy approaches these perennial questions by tackling the issue of Australia’s welfare policy exceptionalism, New Zealand aside. The central question for him is why Australia did not establish a contribution-based social insurance scheme, like many other western nations. Instead Australia implemented means tested welfare benefits funded through general revenue, which remains the case today, apart from Superannuation. At its best the book reads like a ‘who done it’; social insurance died, and Murphy uncovers who killed it and how it was done. And the plot has plenty of satisfying twists and turns. A social insurance bill was introduced in the 1920s, only to be defeated. Then in 1938 legislation was actually enacted, only to be revoked by the same government the following year.

In both instances, Murphy invokes path dependency. In a twist of wicked irony, Australia’s early innovation in developing a wage arbitration system interfered with the adoption of social insurance as well as other social policies that advanced nations had recently implemented, such as child endowment. Business groups were concerned that they could be made to pay twice: firstly paying their contribution to employee social insurance, and then secondly be forced by the Arbitration Court to pay higher wages to enable employees to make their own contributions to social insurance.

In applying a path dependency framework, Murphy avoids the determinism that some explanations can suffer from. He acknowledges other factors influencing policy, such as political failure, but his argument could have benefited from greater explicitness about the comparative importance of the various factors. Without the research method of comparative case analysis, which social policy researchers (such as myself) may find themselves craving, he is forced to restrain his causal claims, therefore sometimes slipping into vagueness..

Murphy explains how political failure prevented the enactment of social insurance. In the first incarnation of social insurance as a bill, the arbitration system produced strong opposition from business groups and friendly societies (whose own insurance operations would have become redundant) and these groups proved too adamant for the government to combat. The second time the policy failed, in 1938, was largely the result of the United Australia Party and Country Party Coalition government not adequately negotiating with these now somewhat less opposed interest groups, which were influencing internal party divisions. Murphy shows how we ended up with the welfare system that we now have, and how easily it could have been otherwise.

During the Depression, rather than unemployment payments, people were offered in-kind sustenance support in exchange for engaging in work relief programs, which became known as ‘work for the dole’. Much of the work performed in the work relief programs replicated public works projects that were employing people at full wages shortly prior. Although after the Depression the Labour government did introduce unemployment benefits, social security was to be a very low hanging safety net, to somewhat soften the fall from ‘wage-earning welfare’. However, despite the abandonment in the 70s of the full employment policy implemented by Labour Prime Minister Chifley, Australia is still left with the same residual welfare system from the 1940s.

Murphy refrains from beguiling the reader by framing welfare policy within broader themes and ideas, nor does he continually remind the reader of the resonances of early policies on current issues (such as maternity leave), only in the conclusion are resonances mentioned. However, through lucid and succinct description, he is able to reveal the intrinsically interesting nature of Australia’s emergent welfare state. What could have been a book solely for a narrow audience of specialist historians and policy wonks, actually makes for engaging reading for anyone with an interest in the development of the Australian nation.

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Kemran Mestan is a PhD student at the Institute for Social Research, Swinburne University of Technology

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