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Prevention activities would typically be initiatives designed to encourage continued self-reliance for target groups or change the “identified risk factors” for entry into the system. They would typically be either low cost initiatives which may target broad groups or be highly targeted towards those most at risk.

Intuitive examples would include:

• Overall policy settings that effectively incentivise workforce participation and self-reliance

• Ongoing focus on recent exits from the payment system, to help reduce their chance of re-entering

• Policies or incentives to encourage more years of self-reliance for people approaching retirement

• Behavioural prompts to encourage older workers who are at risk of redundancy due to industry changes or macro trends, to update or refresh their skills

• Early childhood or school age programmes that are designed to address identified risk factors that predict teenage entry to the payment system

Based on early insights from the analysis, we have highlighted the following examples of areas for further investigation:

Table 15: Areas for further investigation of prevention Group Reason

Post-55 entry into working age income support

• The proportion of the non-welfare recipient population who enter or re-enter the system into working age income support hovers a bit above 1% up to age 55, but then rises to around 2% between age 55 and retirement age.

• The group of entrants/re-entrants between 55 and retirement age represents about 20,000 males and 17,000 females each year, with an average lifetime cost of about $300,000.

Exits within previous 3 years

• The average lifetime cost of people who exited in the last 3 years is around

$200,000 due to their chance of re-entering.

• This group makes up around 1.35 million people so a preventative strategy that reduced the re-entry rate by around 10% would correspondingly reduce the pre-retirement lifetime cost for this group by about the same proportion, translating to around $10 billion in reduced lifetime cost.

Teenage entry into studying income

support

• At about age 17 15-20% of the population enter the system for the first time to receive studying income support.

• This group represents about 13,000 males and 17,000 females entering each year, and understanding the profile of this group better could inform strategies for either preventing some from entering the system (if they are able to support themselves while pursuing their studies) or providing more targeted early intervention for those who are at higher risk of later transitioning to working age income support.

Early intervention activities would typically be short term, targeted interventions for people first entering the payment system – tailored to their age, risk factors and reason for entry. The concept of triaging claims and applying different claims management strategies is well established practice in workers’ compensation schemes, though its success is dependent on building a strong evidence base and tools to support effective treatments. Given that both welfare and workers’ compensation systems share the same goal of assisting people back to independence and work where possible, we feel that sharing ideas and research between the industries could be helpful.

Groups of interest

Table 16: Areas for further investigation of early intervention Group Reason

Young carers entering between

ages 15-24

• Around 1,000 people joined the system as carers between the ages of 15 and 24 during 2015, with the most common age at entry being 17. From our exploratory analysis we can see that of about 9,000 carers who had recently entered and were 15 to 24 in 2010/11, around 80% were either still carers or had transitioned to other forms of income support by 2015.

• This group is worthy of further investigation in that our model estimates the people in it will have a high lifetime cost due to their likelihood of remaining as long term welfare recipients. Intuitively, early intervention in these cases to understand the family situation, explore alternative care arrangements that would allow the young person to continue engaging in study or work, and provide appropriate advice and support, may change the trajectory in a proportion of these situations.

Young parents

• About 1,500 females entered the system as young parents between the ages of 14 and 18 during 2015. Our analysis indicates that this group will have an average lifetime cost of around $540,000, due to the level of payments made and their likelihood of becoming long-term welfare recipients.

• This group are worthy of further investigation to understand what early

interventions could be applied to improve their probability of becoming self-reliant in the future.

Intervention at critical stages would involve identifying trigger points at which certain groups of people typically transition to another payment type, and using data analysis to predict which people are likely, without intervention, to become long term welfare recipients.

In considering transitions between classes, we have conducted exploratory analysis that tracks the people in each welfare class “forwards” from 2011 to 2015, to show where the people who were in each class in 2010/11 subsequently moved to. We have also tracked people “backwards”, to show where people in each class in 2014/15 came from.

This analysis in itself shows some interesting insights into pathways through the system, and informs some useful “intervention points” for consideration, including:

Groups of interest

Table 17: Areas for further investigation of intervention at critical stages Group Reason

Parents transitioning to

working age payments

• There were 30,000 females within the 2014/15 working age class that were in the parenting class in 2010/11, with their youngest child aged 1-3.

• This suggests there may be an opportunity for more effective intervention in the year leading up to a parent losing eligibility for parenting payments.

Students who transition to working age

• The majority of people receive studying income support payments for some years and then exit. However a proportion transition to working age payments.

• There may be benefits in exploring the experiences of people who undertake this transition to better understand the challenges being faced by this group and to design effective policy and behavioural incentives for them.

Working age to disability transitions

• Another high cost group are people who enter via the working age class in their 30s and 40s, but progress to DSP, stay on and transition to age pension. We can see from the data that around 14,000 DSP recipients aged 40-49 in 2015 had transitioned from working age income support since 2010/11, representing about 7% of the 2010/11 working age class population who were then aged 36-45.

• It would be worth investigating this group further to see what factors could have predicted this progression, and what different interventions could have changed that trajectory when they first entered the system. Note that with the tightening of DSP eligibility criteria, some of these people may no longer progress to DSP, but may remain in the working age class for longer.

Older people entering carer

payment

• There are a number of people well over pension age who enter the Carer class each year. These people are relatively more costly than age pensioners.

• As the aged part of the population grows, these numbers could increase in future years.

• It would be worth exploring the drivers of this transition and validating that they are consistent with the policy intent.

Some of the graphs from the forwards and backwards analysis illustrate these points and are included in Appendix B.

Intervention for long term welfare recipients is likely to require more investment than some of the other intervention types, for example by providing intensive case management. This type of intervention may also have a lower number of successes per head of intervention population, but with a significant saving for each success. This is also true in the workers’ compensation setting, where these are termed “tail” claims, but successful strategies have nevertheless been deployed with the assistance of incentives for service providers.

This is an area where “try, test, learn” is particularly applicable, and where the investment approach can be used to demonstrate the business case, given the high lifetime cost of people who are long term welfare recipients.

Groups of interest

14.3 A framework for further analysis

We highlight that any model, however sophisticated, is only ever able to be a simplified representation of complex real life situations, and it will therefore always be helpful to conduct more detailed or ad-hoc analysis of groups of interest. In turn, the examination of historical data in different ways can help inform the future refinement of the model, in an iterative process. We have developed the following framework for guiding further analysis to inform policy interventions.

Groups of interest

Appendices

Appendix A Policy changes 118

Appendix B Exploratory analysis 121

Appendix C Model factors 122

Appendix D Glossary 130