The state of Australia – welfare and inequality

The Australia’s welfare state is the system that has been put up by the government to effectively bridge the income gap. It aims at uplifting the income status of the low-income earners and the unemployed to help reduce the dependency rate. For long, the system has provided pensions for the poor and the underpaid in the community focusing on having them obtain dependency through the program. However, questions have arisen concerning sustainability of this system since the dependency rate does not seem to improve. This led to adoption of a system in which the poor are not literary provided for but allowed to engage in activities that give them pathways to employment.

Esping-Andersen Three Models of Welfare States

Esping-Andersen provides a stratification on the intensity of solidarity redistribution and its level of universality as imposed by welfare states. He identifies and provides a distinction between liberal, conservative-corporate and social-democratic welfare states. According to Esping-Andersen, distinction between the three regimes is the extent of de-commodification and the type of stratification that these regimes produce in the society. Hence, liberal states are characterized by assistance that is means-tested, transfers and insurance plans that are by far modest and universal. It aims at benefiting mainly the lower-income client in the working class and those who are dependent on the states. They benefit from this through minimal redistribution of incomes. The liberal model is, therefore, formed on the basis of market dominance and provisions from private entities. State interference is only to ameliorate poverty and basic needs provision. This means that comparing the state benefits and stratification, the benefit is low while the stratification is high (Esping 1990).

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Conservative-corporatist states exercise moderate de-commodification in that they have a direct influence on the state restricted to maintenance of income. The benefits in this case are related to occupational status of the client. It employs the principle of subsidiarity in which the states interference is only possible when the household has been incapable or is exhausted. With the moderate de-commodification, this model emphasizes on the principle of decentralization and is dominated by social insurance plans (Goodin & LeGrand 1987).

Social-democratic states have a high level of de-commodification. It is highly universal and redistributive in that the benefits do not depend on anyone’s contribution. Access to benefits and services is largely based on citizenship. It provides citizen autonomy at a relatively high degree. The policies in this model are perceived as against the market (Nethercote 2001).

Liberal Welfare State

Liberal welfare state is largely redistributive. However, these have not in any way created equality. Its establishment was not based on egalitarian reasons and was mainly on the conservative reformer who just wanted to reproduce the existing social policies without having to necessarily alter them. Liberal welfare state was established after the socialists pushed for a policy that would ensure better conditions for workers. This is the main reason why it involves the working class. It seeks to get rid of poverty and social inequalities (McMahon 1996).

However, according to Barr (2001), this model of welfare states is a piggy bank that insures workers against social risks. This means that the issue of equality is out of question and is not part of their mandate. The only aspect of equalization is present in redistribution policy, whereby a balance between amelioration of need and poverty and reduction of welfare disparities is struck (Barr 2001).

Redistribution in Liberal Welfare State

Social insurances are generally based on horizontal redistribution. This means that the aim is to seek income allocation across the life-cycle. In this perspective, clients are expected to experience same levels and periods of need and abundance. However, this is not really possible and, therefore, the need for a vertical approach. The welfare states bridge this limitation in two ways; first, it creates an artificial inequality consisting of large populations with no income, such as the retired and those on leave. The model then proposes an estimate redistribution model that is unaffected by social policies. The second approach involves provision of resources to clients in order to positively affect their earning opportunities and potential (Kenworthy 2004).

Economic Theory View of the Welfare State

According to economic theory, welfare state replaces the existing insurance market and effectively covers for market informational failures. It regards governments to be more efficiently placed to insure risks, especially under strong informational disparities. In a global economy perspective, economic vulnerability is heightened and this leads to intensified social risks.

Political Theory View of the Welfare State

In this perspective, redistribution is directly linked to politics and legislation. Income inequalities fuel the need for redistribution, for instance, when median earnings are below the mean there is a need for redistributive policies. However, not all researchers support this idea. Kolberg (1992), argues that if the primary income is unequal, the poor do not expect to gain much from the redistribution however strong the policies may be. According to Erikson and Aaberg (1985), the political theory is irrelevant for pensions and healthcare which are considered large items. This explains the situations in which the poor are not expected to benefit. However, unemployment insurance will be of benefit (Erikson &Aaberg 1985).

Australian Welfare State

The welfare state in Australia is considered liberal, characterized by conforming to the market, long lasting social policies and reforms on the legislation and workforce ideologies. Unlike the liberal state in the United States, Australian welfare state functions as a wage earners’ welfare state (Fritzell 2000). This implies that the welfare provision is a states reward system for clients or citizens’ participation in the work although paid. The main idea here is that when the state regulates wages, there is social economic security. This prevents the citizens from engaging in charitable support seeking and maintain their own income. The welfare state has economic growth as a sure way to fight unemployment, has helped the young people to become useful. This in itself is a concept in the pure liberal state as described above. However, expansion of this in Australian welfare state from providing for the low-income persons and the poor while expecting the middle class to provide for themselves, to the new focus of allowing both groups to utilize the labor market, goes beyond the classical liberal model. This new model promotes work ethics among the youths by providing them with ways to look for pathways for employment rather than giving them money. However, the model still does not offer training opportunities for the citizens to effectively utilize the employment pathways (Fritzell 2000).

For this reason, more Australians are still over-dependent on public support than ever before. Currently, approximately a sixth of working age Australians depend on welfare for their income. A developing welfare state implies higher tax rates. This is expected to bring more taxpayers into the system. The government will, therefore, seek to promote individual responsibility, independence and self-reliance, while providing a safety net (Mendes 2007).

This description of welfare state in Australia does not fit into any of the other two frameworks; rather it represents the liberal model. Although, there are certain differences between it and the classical liberal model, the system can be taken to be a neo-liberal model with the improved characteristics of pathways to self-reliance and employment. The model is, therefore, seen as a new form of delivering welfare to the citizens; not necessarily as a blend of the tree traditional models, but as a hybrid of the classical liberal model which provides welfare to the citizens through allowing them to develop opportunities for themselves rather than giving them handouts. This model promotes long-term self-reliance and with time the poor are able to get out of the system and become independent (Fourage & Layte 2005).


The welfare state in Australia and other countries that originally practiced the liberal model is changing. The change mainly regards realization that liberalism as practiced in the classical model is not self-sustaining. The governments spend a considerable susms to put this practice into the system. The new concept of neo-liberalism gives a new outlook of it, the government helps the citizen to self-develop and either create employment for themselves and others or to acquire pathways for employment. This, in itself, ensures sustainability in that the citizens enter into the tax system and the government obtains revenue that can be used to keep the program running. The success of the approach is that very few of the beneficiaries require support for a long time and, therefore, new entrants can be helped (Kolberg 1992).

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