To Rebuild a Universal Welfare State, We Need to Scrap Means-Testing

When welfare and public services are means-tested, it makes them less efficient and less accessible. Worst of all, by limiting access to the “deserving poor,” means tests undermine the idea that social welfare is a right.

Long lines extend outside Centrelink, the Australian government's welfare agency, in Melbourne in March 2020. (WILLIAM WEST/AFP via Getty Images)

In January of this year, a severe shortage of free rapid antigen tests (RATs) was exacerbating Australia’s largest wave of COVID infections. To the majority, it seemed obvious that the federal government should distribute RATs for free — but not to opposition leader Anthony Albanese. Although Labor shifted its position later, Albanese initially only called for free antigen tests for low-income Australians. This is to say that Albanese wanted to apply a means test to determine who should and who shouldn’t receive free access to COVID tests. It was a response that revealed Labor’s long-standing obsession with means-testing welfare.

Australia’s welfare system has always been heavily means-tested, especially when compared to universal welfare states built on the Nordic model. As socialists have typically pointed out, this is a major deficiency. Means-testing undermines public services and makes them less accessible, over time eroding the social rights that the welfare state should guarantee. Indeed, as the last fifty years of Australian history show, means tests are at best a built-in vulnerability. At worst, means tests are the thin end of a wedge intended to impose austerity and chip away at the universal provision of welfare.

The Hawke-Keating Years

In the postwar period, the view of welfare as a social right gained popularity. Consequently, Liberal governments relaxed means tests and took steps toward making social benefits universally available. In the campaign that led to his 1972 electoral win, Labor’s Gough Whitlam went further, promising a massive expansion of welfare and the end of all means-testing. In his short, three-year term in office, Whitlam abolished university fees, raised entitlements across the board, and established a universal, publicly funded health care scheme, Medibank.

In 1974, Whitlam went on to abolish the income means test on the age pension for those over seventy-five, as well as reducing the eligibility age to seventy the year after. However, his plan to gradually abolish means-testing over a six-year period was thwarted by a constitutional coup in 1975. Despite this, Whitlam’s universal age-pension policy was so popular that Malcolm Fraser’s Liberal government abolished the age pension asset test. For a while, it seemed as though Australia was maybe heading toward a universal welfare state.

These hopes were soon quashed, however. Immediately after taking government following Whitlam’s dismissal, Fraser moved to water down Medibank by making it possible to opt out and purchase private health insurance. In 1981, he moved to scrap Medibank altogether, provoking a further backlash from the labor movement, ultimately contributing to Bob Hawke’s win in 1983.

Hawke’s Prices and Incomes Accord offered the union movement a deal: the unions would stop pushing for “excessive” wage raises and, in return, the Labor government would introduce a “social wage” in the form of expanded social services. Building a universal welfare state, however, was never part of this plan.

To be fair to Hawke, he did increase welfare spending from around 7.8 percent of GDP in 1983 to 10 percent in 1991. He also introduced a range of new benefits such as the Family Income Supplement, the Supported Accommodation Assistance Program, and the Home and Community Care Program to fund disability services. Importantly, he restored Medibank, now called Medicare. Yet at the same time, Hawke reintroduced the asset test for the aged pension, scrapped free higher education, and strengthened means-testing across the board. In many ways, it was the Hawke government that accelerated an era of neoliberal austerity that still dominates Australian welfare policy today.

For example, the Hawke governments introduced stringent measures to police people’s welfare. He introduced rules forcing job seekers to prove their willingness to find work and subjecting welfare recipients to mandatory interviews. In 1986, Hawke even floated a “work for the dole” scheme that would make eligibility for unemployment benefits contingent on carrying out unpaid labor. Hawke’s successor, Paul Keating, carried out this vision by giving the Commonwealth Employment Service — the forerunner to Centrelink — unprecedented powers to suspend and cancel payments for unemployed workers if they failed to carry out the requirements now attached to payments.

Labor politicians defended their newfound love of means-testing on the basis that it was a necessary cost-saving measure. Even to this day, it is common to hear pundits like Brendan Coates of the Grattan Institute claim that tough means-testing keeps welfare fiscally sustainable. The reality is that Labor’s turn toward heavy-handed means-testing under Hawke and Keating eroded social solidarity and undermined the welfare state.

Rights are universal. If welfare is not universal, then it is not a right. By reinforcing means-testing, Labor made Australia’s welfare system more vulnerable to conservative attacks. It’s much harder to roll back a right once it’s been won. However, when welfare is means-tested, it suggests that only some people deserve social benefits. This, in turn, encourages the conservative view that welfare takes money out of the pockets of hardworking people and gives it to the undeserving poor. At the same time, means-testing both makes it far more difficult to access services and necessitates a bureaucracy to assess claims.

Labor Against “Middle-Class Welfare”

After taking power in 1996, Liberal prime minister John Howard furthered the attacks on welfare. He reduced the Medicare rebate, and it became increasingly common for patients to pay out-of-pocket expenses for standard treatments. At the same time, he introduced generous rebates to encourage people to pay for private health insurance and announced billions in federal funding for private schools.

In 1998, Howard made Hawke’s vision of a “work for the dole” scheme a reality while further privatizing employment services and increasing the burden of “mutual obligations” imposed on those receiving unemployment payments. While Hawke and Keating wished to restrict welfare to the poor, Howard went further, designing tests to distinguish the deserving poor from the underserving. He also subjected single parents and the disabled to these demeaning requirements.

Despite these attacks, Howard rarely pushed for further means tests on welfare, largely because by then it wasn’t necessary. Mutual obligations already gave Centrelink the power to cancel a recipient’s payments at whim, and thanks to funding cuts and increasingly stringent rules, Centrelink’s phone wait times soared, making it harder to reverse a wrongful payment-suspension decision.

Indeed, Howard marginally relaxed means tests on family benefits and the age pension. Big business, conservative pundits, and conservative intellectuals were incensed — but it was widely seen as a successful vote-winning strategy. Labor, now completely invested in the supposed virtues of means-testing, saw an opportunity to attack Howard from the right. In 2006, Labor proposed means-testing as part of the Family Tax Benefit, in opposition to what Tanya Plibersek called “outrageous welfare entitlement.”

Under Kim Beazley, Labor criticized Howard for indulging in so-called middle-class welfare — that is, for making payments available to supposedly average and above-average income earners. Consequently, Labor adopted further means-testing as part of their platform, despite the fact that, according to parliamentary research, Australia had the lowest rate of “middle-class welfare” of any country in the OECD. Howard rightly pointed out that Labor’s proposed means tests would only save a minuscule amount of money.

Labor’s attacks were fundamentally misguided. There is nothing wrong with well-off doctors or highly paid miners being eligible for welfare. Everyone, regardless of their income or financial assets, should have a right to free health care, public education, and welfare payments like the age pension. Welfare should not be understood as a charity service for the poor or the deserving. Welfare should be for everyone. Besides, with a progressive taxation system, the wealthy will pay more than enough tax to offset whatever welfare they may receive.

When Howard was finally ousted, Labor returned to its means-testing agenda with a vengeance. Kevin Rudd’s government brought in new means tests for family payments like the baby bonus and tightened old ones like the age-pension income test. The worst, however, came from Julia Gillard, who attempted to brand Labor as “the party of work, not welfare.” She argued that extensive reform was needed to combat long-term welfare dependency. This culminated in her decision to cut parenting payments for over 150,000 single parents and their kids, forcing them onto unemployment payments. This cut their income by $205.60 a fortnight and subjected them to obligations like resumé-writing classes, mandatory job searches, and penalties for failing to comply.

Means-Testing Today

Successive Liberal governments have happily followed Rudd and Gillard’s lead on means-testing, implementing increasingly cruel attacks on welfare since 2013. Notably, in 2015, the Liberal prime minister Tony Abbott strengthened means-testing on the age pension with — disgracefully — the support of the Australian Greens. Today, only 62 percent of the eligible population receives an age pension, and of this number, 32 percent have their payments cut thanks to means tests.

Far from preventing a transfer of wealth to the rich — as is implied by rhetoric about middle-class welfare — means-testing hurts poor and middle-income citizens the most. The administrative hurdles involved in accessing entitlements often exclude those who most need them. And for those who just barely fail the means test, being denied a payment can be very consequential.