ECON111 Microeconomic Principles Assignment
N.B This is economics – diagrams are always your friend
The cashless debit card
In 2007 the Australian government first embarked on so-called income management policies with regard to certain forms of welfare payments in certain communities. The basic idea of income management is that control over spending by recipients of payments is limited in a number of ways – some part of the payment may be withheld by Centrelink in order to pay for essentials such as rent on the individual’s behalf; the component of the payment available as cash is strictly limited; payments might be restricted to particular electronic means (the BasicsCard); particular classes of goods (pornography, alcohol, gambling) could not be purchased using the specified electronic means.
In 2016 this approach evolved into the cashless debit card program. This involves an 80:20 split of welfare payments with 20% going into the recipient’s bank account and 80% going onto a debit card that can be used for purchases as usual wherever point-of-sale facilities are available. The card cannot be used to withdraw cash, or used at businesses that primarily supply gaming or alcohol products. Recently the Federal Government announced that all people under income management in the Northern Territory would be moved to the cashless debit card
We have prepared a list below, which contain some of the significant assignment topics that we cover:
The stated intent of the scheme is to reduce socially harmful outcomes in communities with high welfare dependence, by essentially forcing expenditure towards basic health and education maintenance and other supporters of child welfare in particular, and away from expenditures regarded as harmful and injurious. A recent discussion of the scheme from someone with involvement in its implementation can be found here and another perspective on evaluation here. An account critical of the approach can be read here.
1. (a) What are the economic justifications for distributing welfare payments via the cashless debit card? [5 marks]
(b) Are they consistent with the standard economic argument that payment in kind is inferior in welfare terms to payment in cash? [see Unit 3 lectures, Week 4]? [5 marks]
2. (a) What ethical framework underlies the case for the cashless debit card you described above? [See Unit 5 lectures, Week 5] Explain. [5 marks]
(b) Would it matter for this case if people using the cashless debit card were worse off compared to being able to allocate their own expenditure? Why or why not? [5 marks]
3. What arguments are there against the program based on the ethical framework you identified in Question 2? [5 marks]
4. What arguments can be made for and against the program based on an opposing ethical framework? [See Unit 5 lectures, Week 5] [10 marks]
5. (a) Taking into account both the economic and ethical argument, is income management via the cashless debit card justifiable on balance or not? [10 marks]
(b) If so, should it be applied to all recipients of government payments (e.g. pensioners, students)? If not, why not? [5 marks]
• You must submit your assignment in pdf form via the Turnitin link that will be available on iLearn. Assignments must be typed. Make sure all diagrams are electronically drawn or are clear and legible photos. Markers can only mark what they can see and interpret clearly.
• The overall word limit for the assignment is 1500 words. A rational way to approach the allocation of words is 30 words/mark allocated i.e. a section worth 5 marks should be answered with up to 150 words and so on.
• An additional reading (a chapter from J. Wright (2015) Ethics in economics: an introduction to moral frameworks) has been provided to assist in your understanding of the ethical frameworks covered in Unit 5, Week 5).
• Economic arguments mean just that - arguments about efficiency of resource allocation, and about economic welfare. This what is required, not re-treads of talking points from either side of politics. This is not the place for lazy thinking or empty rhetoric.
• Ditto when it comes to the philosophical issues. Mature discussions of ideas is expected, not talkback radio redux.
• The income management approach was first employed and is still mostly employed in Indigenous communities. This assignment is not about Indigenous issues per se; it is about the concept of giving transfer payments in non-cash forms and limiting expenditure autonomy. The rhetoric has consistently been about widening the application of income management, so these should be seen as general issues and not distorted by forcing them through an Indigenous-only lens. Conflation of unexamined and prejudicial views about Indigenous people with reasoned analysis of policies and outcomes is unwelcome, and will not be entertained.
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