Housing costs, housing assistance and work disincentives: attitudes to work and employment decisions

Summary

Attitudinal data from this project indicate that although some were willing to work even if it meant less money, four in five unemployed housing assistance recipients were looking for a clear financial benefit of over $100 per week above current income support earnings. While financial disincentives were most important, other problems including poor location, poor skills and age discrimination reduced the incentive to work for housing assistance recipients. For housing assistance recipients, on average, the net financial benefit after tax from working (taking into account additional costs of work such as transport costs, loss of concessions and higher rent or reduced Commonwealth Rent Assistance) was found to be marginal.


Project Number: 70073
Research Theme: Economics_Modelling
Project Leader: Randolph, Bill
Funding Year: 2001
Research Centre: UNSW-UWS

Research and Policy Bulletin

Research & Policy Bulletin

Issue 063: Housing assistance and workforce participation

The measured disincentive effect of housing assistance programs upon workforce participation is not large. Nevertheless, when comparing the workforce participation of public tenants and private tenants receiving Commonwealth Rent Assistance with income support recipients not receiving any housing assistance, small disincentive effects are apparent. These disincentive effects are financial, geographical, and discriminatory in character.

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Description

This research aimed to assess the effect of housing costs, housing subsidy structures and housing administrative requirements on the capacity of unemployed people to gain employment. The research therefore needed to assess the contribution of the housing assistance system in creating the "unemployment trap" - the situation where unemployed households find that their net disposable income in work (including any in-work benefits) is less, or only marginally more, than that received when unemployed. This effect may extend when in work - the "poverty trap" - where there may be a range of earned incomes where the withdrawal of assistance and the impact of tax and other deductions overlap to significantly reduce the net gain from being employed. The research would therefore target one of the core issues of social exclusion - economic participation.

Developing social policy to increase economic participation represents one of the key strategic objectives of the Department of Family and Community Services. The study also directly targeted a key issue of both the current national housing assistance framework and the welfare reform debates - do housing cost structures together with current housing assistance systems act as a disincentive to job take-up. The research also aimed to have relevance for the more general debate on the role and impact of housing assistance and the future reform of the housing subsidy system and rent setting. More specifically, the research looked at how the housing costs that unemployed people pay in various tenures (renters and home owners), and the assistance available to them (rent assistance, rent rebates and mortgage assistance programs), assist or inhibit the transition to work, especially the net effects of withdrawal of such assistance/support as income rises through paid employment.

The research project explored these and other related issues through an integrated methodology:

  • A desk based literature review of both national and international research on this area;
  • A desk and interview based review of the current policy and assistance framework;
  • A tracking survey of a sample of 200 short and long term unemployed people in Victoria and New South Wales recruited through Mission Australia and Salvation Army Job Network offices;
  • A series of four focus group/workshops to explore the situation of public housing tenants in more detail.
  • A nationally based microsimulation modelling exercise using an elaboration of the NATSEM STINMOD tax-benefit model to calculate and analyse the impact of housing assistance measures on the incentives for households and individuals to increase their labour supply, either by moving into employment or increasing earnings from employment.
  • Policy Workshops with key stakeholders in Melbourne and Sydney.
  • The modelling also included calibration of the model to use data gathered in the survey and will provide scenario modelling on the impacts of a range of proposed changes to the current system to achieve more equitable outcomes.

The overall research method was designed to use the survey material drawn from two states in a nationally focussed modelling exercise. The research was also designed to explore both the financial/economic and the behavioural aspects of the issues being studied.

 

More Information

Download now Research and Policy Bulletin: Issue 063: Housing assistance and workforce participation
64 KB PDF Document

Download now Positioning Paper: No. 063: Understanding the roles of housing costs and housing assistance in creating employment disincentives
1.3 MB PDF Document

Download now Final Report: No. 067: Work disincentives and housing assistance
641 KB PDF Document

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