Money for nothing? Australia in the global middle class welfare debate

• Luke Buckmaster
• Parliamentary Library

Read the full text

Photo: Andrew Jeffrey

10 June 2009This research paper seeks to contribute to understanding of key issues in the debate about middle class welfare through an examination of comparative research into different welfare systems.

• Middle class welfare has been a controversial issue in policy debates in Australia in recent years

• The research examined in the paper suggests that the issues relating to middle class welfare are more complex than generally suggested in the various debates on this topic in Australia and overseas

• First, the paper finds that access by the middle class to the Australian income support system is relatively low compared with other countries. Nonetheless, there is significant use of welfare benefits and services by the middle class

• Second, the paper argues that welfare systems that have high levels of middle class involvement are associated with good outcomes in areas such as redistribution, productivity and support for welfare institutions. The paper also examines evidence on the issue of social cohesion but the absence of comparative data makes it difficult to draw firm conclusions.

• Further, targeting through means testing is not necessarily the panacea that many suggest it to be (particularly, where it gives rise to high effective marginal tax rates, poverty traps and other unintended consequences)

• Importantly, arguments in favour of universal welfare systems should not necessarily be seen as arguments for middle class access to particular welfare programs -- indeed, arguably, in some cases, middle class welfare might be said to undermine key objectives of universal welfare systems

• Finally, the paper suggests that the global economic crisis is likely to give rise to increasing debate about the fundamental nature of the Australian welfare state in coming years and that this will most likely involve significant discussion of issues related to middle class welfare. These debates are more likely to be productive if they take into consideration evidence from comparative welfare studies, as well as the need for clarity about the values and objectives underpinning particular perspectives.