Interactions with Low Wages: The Australian Approach to Work Benefits

Abstract

It is not always well understood that Australia has a comprehensive set of social security arrangements with the potential to significantly supplement low wages, especially for families with children. These provisions have evolved over a long period, beginning with the introduction of child endowment in the 19-10s. During the past twenty-five years, the coverage of income transfers as a supplement to earnings has been significantly expanded, such that it now provides support for partners as well as for children and, in some cases. for low-paid full-time workers themselves. The Australian approach differs in a number of ways from approaches typically taken in other countries. This paper outlines how the Australian system of wage supplementation has evolved over the last century. It charts the evolving relationships between the income support system and minimum wages and highlights the influence of key policy changes on those relationships and the consequent financial incentives to take low-paid work. In conclusion, the paper reports recent evidence from the OECD which finds that Australia and New Zealand are among a small group of countries that consistently provide higher relative incomes for low-wage earners than comparable arrangements in most other developed countries.