If we want to ensure those who can work should work, particularly for the people with disability, rights to work through improved employment opportunities should come first before any punitive regimes that reduce access to income support.
This is the key message from our newly published comparative analysis of Australia and Denmark, two very different welfare states with contrasting approaches to activation measures concerning people with disability.
Disability, income support and employment activation
Since the mid-1990s, most advanced economies have introduced measures to get people off welfare benefits and into work. This is partly because of the growing political pressure on governments to control the level of public transfer on welfare. But, it is also driven by growing policy concerns that welfare benefits would discourage people from working. The message was clear: it’s better to actively participate in the labour market than to live on welfare.
For people with disability, this shift from passive compensation to active integration appears to provide an opportunity to realise their right to employment. For many of them, the struggle is not that they refuse to participate in the labour market, but rather about the right to be part of it. This is not to say that passive measures such as cash benefits are not important. But it is also imperative to ensure that people with disability can be supported to enter and remain in the labour market if they choose to.
Of course, the quality of employment matters. Activation measures such as re-training and work-promotion services do not achieve the goals of fair social policy if they cannot move people with disability into genuine employment opportunities. People with disability tend to have work that is insecure, low paid and relatively unskilled. In this environment, pushing them into paid work does more harm than good. Activation measures must therefore be buttressed by the measures that uphold social rights.
Activation measures in Australia and Denmark
To examine how the transition to activation has altered the tensions between work and welfare for people with disability, we took the cases of two seemingly very different countries with strong labour market traditions for comparison: Australia and Denmark.
Both Australia and Denmark have taken steps to restrict eligibility for disability benefits and sought to promote work for people with disability. The concept of diminished work capacity features prominently. In both countries, people with disability are no longer entitled to unconditional welfare benefits; only those assessed with a significantly reduced work capacity can access disability benefits.
Australia’s disability benefits, known as Disability Support Pension (DSP), are granted to individuals with permanent physical, intellectual or psychiatric impairments that prevent them from engaging in employment of more than 15 hours per week for at least 2 years. Those aged below 35 whose work capacity is at least 8 hours per week are subject to participation requirements for payments.
In Denmark, disability benefits, known as Disability Pension, are restricted to those aged over 40 whose work capacity is reduced at least by two thirds. Those under 40 are subject to specific interventions to enhance employability. Disability Pension can be granted only in exceptional circumstances where the work ability cannot be improved by relevant courses or measures.
Both countries differ in that the Australian approach focusses on punitive measures, while the structure of disability benefits appears to be more flexible in Denmark to support individuals into employment. Disability benefits in Denmark are also more generous, as are the monthly income cut-off points for reduced payments.
In Australia, DSP claimants under the age of 35 are required to undergo activity tests, participation plans and ongoing interviews. Those aged below 35 with an assessed working capacity of more than 8 hours per week are also placed on a 36-month waiting list before they can access DSP. While waiting, they are placed on unemployment benefits with lower payments.
Contrary to this tough stance placed on the people with disability themselves, the regulations are arguably softer on organisations and businesses who employ people with disability through disability employment programs. In fact, the measures to improve employment opportunities are mainly about incentivising disability employment service providers to find work for individuals as quickly as possible, as the payment of contracts is directly tied to placing disabled people into any job within 18 months. At the same time, service providers are also given sanctioning powers to report clients judged to be flouting their benefit obligations.
Disability employment service providers can be either for-profit or not-for-profit organisations. The government spends over $800 million per year on these providers, but the outcome was underwhelming: only 1 out of 10 people get a job and stay in that job for at least 12 months. The spending is not capped as this is demand-driven, and the only enforceable service for the provider is to create a job plan with their client that sets out the services the provider will provide.
This employment services scheme was heavily criticised by the Disability Royal Commission for the lack of support and specialised disability knowledge. The government has made a commitment to replacing it with a new disability employment service from July 2025.
In contrast to Australia’s punitive approach, “flexi-jobs” are the cornerstone of Danish disability policy. Introduced in 1998, flexi-jobs are essentially a form of employment subsidised by the state. Once employed in a flexi-job, the employee is allowed to work part-time, with reduced work hours and adjusted work duties. The Disability Pension can only be granted to people whose work capacity is diminished to such an extent that they will not be able to work in flexi-jobs after activation or rehabilitation programmes.
Since the scheme was introduced, a growing number of people have worked in flexi-jobs with the increasing presence of private sector. The implementation of mini flexi-jobs (flexi-jobs for people with a work capacity reduced to less than 12 hours per week) also introduced a new group of companies to hire people in flexi-jobs, sometimes down to few hours a week.
In 1998, around 40,000 people were eligible for flexi-jobs but only 13,000 had flexi-jobs by 2003. In 2011, there were 70,000 workers in flexi-jobs, half in the public sector and half in the private sector. By January 2023, the number of persons in flexi-jobs reached above 93,600.
Although a direct comparison is difficult due to data limitations, the employment rate of people with disability in Denmark was 60.9 per cent in 2018, about 10.1 point above the European average, whereas the figure for Australia was about 48 per cent.
Discussion and conclusions
Neither Australia nor Denmark satisfies the demand for equal rights to employment without any kind of punitive workfare regime as a solution. But if we assume that most people with disability want to work, what matters most is how to improve employment opportunities, not the severity of measures used to push people with disability into the labour force.
As we found, there can be a disproportionate emphasis on punitive activation measures, with coercion of individuals to compel participation in the labour market a feature of some reform initiatives. Here, there is an opportunity for Australia to draw lessons from Denmark. Between passive support and labour market participation, Denmark seems more genuinely ‘activated’ through a range of support and incentives. In comparison, it appears that stricter eligibility is accompanied by insufficient employment support in Australia.
Through the comparison of Australia and Denmark, we observe that a prima facie similar rhetoric of activation can be translated into rather different forms in different contexts, ranging from a model with more extensive support for labour market integration to the other extreme where resources are only devoted to establishing a punitive welfare regime. These cases also show that if we want to make the case for labour market participation for people with disability, rights to work through improved employment opportunities must precede the concerns about disincentives to work, not the other way around.
This is a summary version of the co-authored article published in Australian Journal of Social Issues, Disability, employment and welfare reform: A comparative analysis of Australia and Denmark.
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