Labor MP endorses Howard labour plan

A LABOR MP has backed a Howard-era program allowing welfare recipients to keep more of their payments if they do temporary work.

A LABOR backbencher has called for the expansion of a Howard-era program that allows welfare recipients to keep more of their payments if they are prepared to undertake temporary work, after he produced a study to show it had been a huge success.

Andrew Leigh, member for the ACT seat of Fraser and an economist, has co-authored a study with Roger Wilkins from the Melbourne Institute of Applied Economic and Social Research on the study that shows the Working Credit program increases employment rates and earnings for individuals on income support.

Associate Professor Wilkins said that, while estimates depended on the evaluation method used, most showed the proportion of unemployment benefit recipients who gained employment in any given fortnight rose about two percentage points.

He said there had been an increase in the percentage of single parents employed of between five and 10 percentage points in a fortnight. About 30 per cent of single parenting payment recipients report earnings each fortnight.

"Most estimates of the effects on the level of earnings of income support recipients show an increase in average fortnightly earnings of between $10 and $80," Professor Wilkins said.

Dr Leigh said he wanted to see more help for the long-term unemployed. "I'm pretty passionate about anything that reduces long-term unemployment," he said. "The scarring effect of joblessness grows over time, and long-term unemployment is strongly linked to serious disadvantage.

"So while the government has done quite a bit to reduce long-term unemployment . . . and while there clearly aren't rivers of gold flowing into Treasury, this (Working Credit) is the kind of policy I'd like to see expanded when fiscal circumstances allow. There are few higher priorities for me than reducing long-term joblessness."

Introduced by the Howard government in September 2003, Working Credit is open to most workforce-age welfare recipients. The program allows people with accrued credits to earn additional income without reducing their benefit entitlement. Credits are accrued in fortnights in which earnings are less than $48, up to the maximum Working Credit balance of 1000. Credits are "used up" when earnings exceed the applicable income test "free area" -- $62 a fortnight for Newstart Allowance. For example, a recipient of Newstart Allowance with 500 credits can earn $562 for one fortnight only without losing any benefits. The program therefore creates increased incentives for welfare recipients to undertake temporary work.

"Our findings clearly show that Working Credit improves labour market engagement of income support recipients, and this is highly likely to improve their longer-term employment prospects," Professor Wilkins said.

"We conclude that Working Credit compares favourably with other labour market programs."