National Competition Policy Review of the Disability Discrimination Act 1992

Submission to the Productivity Commission 

Submission prepared by Rita Struthers
26 May 2003

National Competition Policy Review of the Disability Discrimination Act 1992
Submission to the Productivity Commission 

Introduction

Term of Reference

This submission is based on the term of reference to look at the “… social impacts in terms of costs and benefits that the legislation (the Disability Discrimination Act (Cth) 1992) has had upon the community as a whole and people with disabilities…”

The submission will modify the term of reference in that it will examine the costs and benefits the Disability Discrimination Act (the “DDA”) may have upon the community as a whole and people with disabilities.

The Premise

This submission argues that the DDA and its Standards would benefit not only people with disabilities but also an ageing Australian population.  

The Standards would assist an older but healthier population to remain active and included in their communities through: employment, voluntary work, support to families and others, and participation in recreational and social activities, thereby lessening any fiscal burden.

This submission is divided into Parts A and B.

Part A

Part A identifies the demographics of an ageing Australia and its potential impact on the economy.  This part also examines the contribution that an older population can and does make to society. 

Part A also examines the estimate of the cost to the community of an inaccessible environment for people with disabilities.  It then highlights the greater costs incurred when older persons are included in the calculations.

Part B

Part B examines people with disabilities and older persons as an untapped labour market and the ways the DDA and its Standards could potentially increase the numbers in the labour force, thereby increasing the taxation base and subsequently decreasing the age dependency ratio.

This part looks at a calculation of the loss to the national income by potential workers with disabilities being excluded from the workforce due to access issues. 

Part B highlights the greater loss sustained when older persons are included in any calculation.

Part A - An Ageing Australia – Potential Contribution and Costs to the Community

Demographics

The projections of an ageing Australian population are based on the following assumptions:

•	declining total fertility rate
•	changing age-specific death rates - increasing life expectancy
•	declining net overseas migration.  

In 1901, there were 151,000 people aged 65 years and over living in Australia.  This group made up 4% of the total population.  By 1998, this group increased to 2.3 million or 12% of the total population.  By 2051, the older population is estimated to reach to between 6 million and 6.3 million or 24% to 26% of the total population.

Baby Boomer Cohort

A significant factor in the projected older population is the "baby boomer" cohort, those people who were born in Australian and overseas between 1946 and 1965.

In 1961, the baby boomers contributed to an increase at the younger end of the age distribution.  However, between 2031 and 2510 the baby boomers are predicted to swell the population aged 85 years and over from 612,000 to 1.1 million. 

Concurrent with the ageing of the Australian population the potential labour force (those people between 15 and 64 years) is likely to decline, after 2011.

The most significant change in the potential labour force and the population aged over 65 is projected to occur between 2011 and 2031, when the baby boomers move out of the workforce into retirement.

The Fiscal Burden

In 2001, Sheen noted that Australia will move from the present situation of one person aged 65 years and over to every four people of working age (people aged between 15 and 64 years) to a ratio of one person over 65 years to two people of working age, in 30 years time. 

This ratio of the number of persons over 65 years to every person of working age is known as the "age dependency ratio".  

An ageing population has the following implications for the economy:

•	a reduction in a national savings (public and private savings)
•	a reduction in business investment due to attrition of savings
•	reduced taxation through wages and salaries and subsequent pressure on federal budgets
•	a slowing of productivity growth with the contraction of labour supply
•	loss of human capital through retirement without replacement by younger people

To manage the concerns of an ageing Australian population there have been various government policies introduced such as the Superannuation Guarantee Charge, shift away from institutional care to support in the home, cost shifting from public sector to the community, along with a focus on employment assistance for older workers.

The 'Intergenerational Report' produced by the Federal Government assessed the "long term sustainability" of Government policies over the next 40 years, taking into account demographic change and its financial implications.

The Report identified that a "steadily ageing population" is likely to place significant pressure on government finances.  However, the Report claimed that Australia is well placed to meet the challenges through its superannuation system, age pensions, health system and social welfare system.

Despite this Dowrick and McDonald believe that the Intergenerational Report was pessimistic in its outlook.  The authors argue that the Report understates the effect of a fall in unemployment; greatly underestimates the potential for future increases in labour force participation rates and presents an unduly certain picture of the levels of future costs of health and aged care.
  
Based on this evidence it is important to consider whether Australia can afford to be so complacent.

Contribution of Older People and the Baby Boomers 

Baby boomers are expected to live longer and stay healthier than the current older generation.  Because of better health, higher incomes and government policies designed to reduce costs associated with institutional care of the aged it is predicted that baby boomers will remain in their own homes living reasonably independent lives with the support of family, paid help and community support programmes. 

It is predicted that a largely healthy and active older population could make a valuable contribution to the care and support of the elderly or infirmed and to the welfare sector in general.  Currently, about 17% of people aged 65 years and over donate time to voluntary organisations.

In addition to formal volunteer work, older people provide a range of unpaid services to family, friends and neighbours.  

Older persons also play an important role in providing support to a person with some form of restriction. The 1998 Survey of Disability, Ageing and Carers estimated that people aged 65 and over made up 21% of all primary providers of informal care to people needing help with self-care, mobility or verbal communication.

Economic Methodology

In his paper 'Some Notes on the Economics of Disability' Frisch  looked at measuring the benefits of accommodative disability policies.

Frisch identified the mixed economy ideology that dominated economics between the 1950s and the 1980s.  He stated that even mixed economies economists have seen disability issues from a welfare perspective ie that disability was a redistributive cost.

Frisch reported that the redistributive cost’s only benefit is the moral or spiritual gain by donors “doing good”. He went on to say that the redistributive approach ignores the investment perspective which would place value in making buildings or transport accessible or place value in providing quality personal care or educational opportunities.

Cost to the Community

Frisch identifies two methodologies for measuring the benefits of an accessible community, the opportunity cost and the insurance methodologies. The opportunity cost methodology states that people who are unemployed or underemployed are a wasted resource.

Part B of this submission will examine how people with disabilities and older people are an untapped resource when looking at maximising Australia’s labour force and increasing its taxation base.
 
Frisch poses the question, "how much would people in the community be willing to pay to avoid inaccessible buildings and transport if they knew the probability of their requiring an accessible environment, and if they were aware of the costs of an inaccessible environment?"

Frisch applies an initial "back-of-the-envelope” calculation to those costs.  Given that approximately 0.5% of the population uses wheelchairs he argues that it would not be unreasonable to calculate that 0.5% of the population will need an accessible environment at some stage of their life. 

He estimates that the average loss due an inaccessible environment when an average person acquires or develops a disability could be 20% of their income.

Frisch calculates the cost of an inaccessible environment by using an income of $30,000 and a subsequent $6,000 loss and then applying an "actuarially fair shadow price” of 0.1% of income.  He goes on to calculate that by multiplying $30 per year by 17,000,000 people will result in a cost to the community of $510 million per year cost or $10.2 billion over 20 years.  Frisch believed that this is a cost that the community would be willing to pay. 
 
Frisch argues that his calculations are on the conservative side given 4% of the population cannot access transport because of their disability and 14% of the population has a handicap.

Disability and Ageing

If we were to look at the percentage of older persons with disabilities the rate of disability increases with age from 4% for children aged 0-4 years to 84% for those aged 85 and over. 

In 1998, there were 2.3 million older Australians (aged 65 years and over) of whom 54% had a disability.  

Additionally, older people's need for assistance with everyday activities increases with age regardless of whether or not they have a disability.  Less than half (46%) of this group needed assistance. Older people, 85 years or more, had a markedly higher need for assistance than those aged 65-74 (92% compared with 32%). 

Older people are more likely to develop certain types of restricting impairments because of the degenerative nature of some of health conditions.  For example, physically restricting impairments are a common and sometimes debilitating factor among the older population with arthritis and circulatory disorders being a frequently reported health condition. Of people aged 65 years and older with disabilities, 75% were restricted by a physical impairment.

If we apply Frisch's calculations to include older people with mobility restrictions and the potential of extended working lives, the final calculation would no doubt add to the cost to the community.  

Conversely, the potential of enabling older people with disabilities to remain employed and active in their communities would add significant weight to any cost-benefit analysis when providing an accessible environment. 

Social Connectedness and Health Expenditure

Of particular concern to government is an ageing population and increased health expenditure.

A report by the Australian Institute of Health and Welfare published in 2000, predicts that health expenditure will rise from 8.4% of GDP in 1990 to 11% of projected GDP in 2051.  This translates to a health care expenditure on older people potentially increasing from approximately 33% of total health care expenditure in 1990, to 50% by 2051. 

The report notes the debates the extent of the impact an ageing population has on health expenditure.  The report cites Howe who suggests that rather than speculating about the potentially increasing proportion of GDP that might be spent on health care for older persons, an alternative approach might be to model the kinds of options that could "optimise" health status across the population within a given level of expenditure.

Research findings from the Harvard School of Public Health and from around the world challenges our views about "normal ageing". Ichiro Kawachi, Associate Professor of Harvard's School of Department Health and Social Behaviour stated "… social connectedness is among the most important predictors of health and independence as we age - almost a strong as not smoking or being overweight."

The findings examined a range of studies that looked at participants’ social interactions, the number of friends and relatives they had, the strength of their relationships and participation in community networks.
 
The findings also noted that participants in the second Nurses’ Health Study who had strong relationships were found to have less medical decline and lived more active and pain free lives, without physical limitation.

John W. Rowe, founding director of the Division of Ageing at Harvard Medical School and co-author of Successful Ageing,  indicated that to make longevity meaningful in our culture we must develop a society that provides people with opportunities for continuing engagement in life.

The DDA and its Standards could be an important foundation for the facilitation of an active older Australian population.  The legislation could subsequently enable older people to remain involved in their communities and maintain their health and independence for longer periods of time. Thus allowing older people to maintain a high quality of life and continue to make a contribution to the Australian economy and subsequently lessen the burden on health services.

Part B - Maximising the labour force and taxation base

Issues

As noted earlier in this submission, an ageing population raises issues of concern such as its impact on taxation levels, national savings, business investment and productivity growth due to contraction of labour supply. 

One way to address these concerns is to look at methods of increasing Australia's taxation base.

Economic Methodology

Frisch's economic methodology identifies one of the disadvantages of an inaccessible environment as lost productivity due to people with disabilities being unemployed because of poor access in the community. 

Frisch states that the participation in the workforce of an estimated 80,000 people who use wheelchairs in the community (between the ages of 15-64 years) has been reported to be at 38% as compared to 76.9% participation rate for people without disabilities.

He went on to calculate that if 12,000 currently unemployed people who use wheelchairs were made employable by an accessible built environment and transport, the participation rate would increase to 53% which would still be 23% below the national average.

Frisch argues that if these workers had an average productivity of $25,000 per annum then National Income would increase by $300 million per year or $6 billion over 20 years.

People with Disabilities

If we were to look at the overall numbers of people with disabilities, we see that in 1998, 3.6 million people in Australia had a disability (19% of the total population).

Of those with a disability, 87% (3.2 million) experienced specific restrictions in core activities, schooling, or employment.

When looking at persons aged between 15 and 64 years, the likelihood of being employed is less for people with disabilities.  Approximately three-quarters (74%) of working age people without a disability were employed compared to less than half (47%) of those with a disability and just under one-third (32%) with profound or severe restriction.

For people of working age, with a disability, approximately one quarter of the main impairments were caused through accident or injury (23%) or were due to working conditions or overwork (15%).

Statistics about acquired impairments are more useful when using Frisch's methodology because a person who has acquired an impairment is more likely to have been employed, making calculations as to loss of income due to an inaccessible environment more demonstrable.

There is the potential for more than the 12,000 people used by Frisch in his calculations to become employable if their environment was accessible.

Older Persons

Labour force participation among the population aged 45-64 years is lower than other age groups. Retirement was a key factor in the group 55-64 years.

Unemployed people in this age group had less success in obtaining work than their younger counterparts.  This was often due to a lack of transferable job skills as a result of changes in industry and technology, relatively low levels of education and less flexibility in changing location.
 
Older jobseekers (people over 45 years) were more likely to drop out of the labour market.  They were also less likely to find a job as a result of participation in a training course. Jobs they did find were more likely to be part-time or casual, and low paid.

Against a backdrop of an ageing population it is understandable that the unemployment and under-utilisation of older workers has emerged as a high priority public policy issue.

If we were to apply Frisch's calculations to include the potential for older persons to remain employed (because of an accessible environment) the contribution to the national income would be significantly increased.

The Matrix for Change

It would be unwise to suggest that the Disability Discrimination Act and the continued development of a range of Standards alone, will lead to more people with disabilities and older persons obtaining increasing levels of employment. The essentials of a valued life, such respect and dignity as well as the need to access quality housing, education, training and retraining, transport and employment are also required.

Education, training, retraining and employment support for people with disabilities and older persons should be developed with a view to the needs of a future labour market that has moved from production and manufacturing industries to technological and service based industries.

Of particular importance would be the timing of the impact of the Standards given it is estimated that the baby boomers move out the workforce and into retirement between 2011 and 2031. 

Legislation such as the range of various State, Territory and Commonwealth anti-discrimination laws must have effective powers and the ability to bring about outcomes that can enforce the elimination of discrimination.

For example, we can see how the complaints-based system under the Disability Discrimination Act will be of little use with its attendant costs, if the complainant's only option is to pursue the issue through the Federal Court. 

Effective legislation coupled with community education is essential for policy and attitudinal change that brings about real change at the community level.

Conclusion

This submission concludes that:

•	There are substantial economic benefits to an accessible community - this is significantly strengthened when considering an ageing Australia

•	The facilitation of inclusion and participation assists communities in developing social capital 

•	International research indicates that the development of social connectedness reduces expenditure in the area of health

In addition, the submission argues:

•	the Disability Discrimination Act Standards can provide the foundation of an accessible and inclusive society by providing accessible built facilities and open space, access to public transport, access to quality education and employment

•	this would benefit not only people with disabilities but also an ageing Australian population where an older but healthier population are able to remain active and included in the community through: employment, voluntary work, support to families and others, and participation in recreational and social activities, thereby lessening the fiscal burden

•	Disability Discrimination Act Standards that provides benefits to an ageing Australia as well as people with disabilities would add a significant new dimension to Regulatory Impact Statements and substantially strengthen cost benefit arguments

These are powerful arguments as to the benefits of the DDA and its Standards to the community as a whole, as well as people with disabilities.

Government reports and economic projections suggest that the negative forecasting of the impact of an ageing population on the Australian economy, sits on the pessimistic side.

In times of global change and uncertainty - economic, political and social forecasting is a haphazard and somewhat dangerous activity.  We only need to see the impact of September 11, international terrorism, war on Iraq and Severe Acute Respiratory System (SARS) on economies around the world.

The following questions need to be addressed:

•	Can Australia confidently predict the impact of world events on the global and Australian economy in the next five years, yet alone forecast for the next ten to forty years?

•	Should Australia consider utilising an investment model of economics which would maximise the potential labour force to be found in people with disabilities and older persons?

•	What can Australia do to assist people with disabilities and older Australians in becoming and remaining active and participating in their communities?

In conclusion, what is a certainty is that people with disabilities and older persons can and do make a significant contribution to society.  Welcoming diversity and promoting inclusion makes good economic sense and is the foundation of a moral, spiritual and economically prosperous society.

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