The unemployed cannot save

I have written before about the obscene way the Australian Federal Government is treating the people who have been forced to live for extended periods on unemployment benefits as a result of the Government’s refusal to create enough jobs. The current dole payment is well below the poverty line in Australian and the Government has refused to lift it saying it would undermine the incentive for the recipients to seek work. The problem is, of-course, that there isn’t anywhere nearly enough jobs or hours of work being generated in the economy and at least 12.5 percent of workers are unemployed or underemployed and that proportion will rise in the coming year as a result of the Government obsessive pursuit of a budget surplus. But in Australia, not only does the government deliberately create unemployment but it then forces the victims of that failed policy strategy into humiliating schemes of income management, which the evidence now confirms is nothing more than another layer of managing the unemployed rather than advancing living standards.

On November 12, 1969, the Australian Government ratified the ILO Employment Policy Convention, 1964 (No. 122). Which meant that it intended to operate within that convention on international labour standards.

The Employment Policy Convention, 1964 was intended to make operational the Universal Declaration of Human Rights from the UN, which provides that “everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment”.

Article 1 of the Employment Policy Convention, 1964 says that in relation to the aim to achieve full employment, signatories will introduce policies that ensure that:

…
(a) There is work for all who are available for and seeking work;

(b) Such work is as productive as possible;

(c) There is freedom of choice of employment and the fullest possible opportunity for each worker to qualify for, and to use his skills and endowments in, a job for which he is well suited, irrespective of race, colour, sex, religion, political opinion, national extraction or social origin.

That Convention would appear to require governments who sign on to it to be active in creating jobs where no jobs exist and not introduce policies that deliberately create unemployment and then pay unemployment benefits that force the recipient to live below the poverty line.

The Convention would definitely not see schemes that sequester a portion of those below-poverty line unemployment benefits to be used at the discretion of the government rather than the recipient as being moral nor lawful.

But the Australian government doesn’t seem to have read its agreements recently nor understood what their responsibilities as a result of signing these international accords are.

Late last week we learned just how far out of touch the Federal Government is with reality. Data was made available on its – Matched Savings Scheme Payment – which was a doomed, neo-liberal inspired plan from the start.

Basically, the Matched Savings Scheme is part of the overall framework of Income Management (IM) that a paternalistic government has imposed on disadvantaged communities (particularly the disenfranchised indigenous Australians) and, which assumes the individual is to blame for their poverty and lack of income discretion.

It also is based on the view that welfare dependency is bad even if there is no other income generating alternative.

In 2009, the current Federal Minister for Families, Housing, Community Services and Indigenous Affairs made the following statement when introducing the latest version of the Income Management bill to the Parliament:

Welfare should not be a destination or a way of life. The Government is committed to progressively reforming the welfare system to foster individual responsibility and to provide a platform for people to move up and out of welfare dependence … [need to eliminate] … the entrenched cycle of passive welfare …

[Full Reference: Hon J Macklin MP 2009, Social security and other legislation amendment (Welfare reform and reinstatement of Racial Discrimination Act) Bill 2009, Second Reading Speech]

The focus on the individual as the guilty party – just passively taking welfare and refusing to uplift themselves – is characteristic of the neo-liberal nomenclature. It attempts to steer the focus away from the underlying cause of disadvantage.

A large proportion of those subjected to IM live in remote areas of Northern Australia where there are zero alternative income generating alternatives. That is a systemic failure – a lack of jobs – and the individuals who are victims of that failure because of their geographic location (reflecting history, culture, social considerations, family etc) are no more dependent on income support than they are on the air they breathe.

There is high unemployment and as a result – widespread poverty in these areas. The pitiful amount of income support that is begrudgingly provided by the Government ensures the recipients remain below the poverty line. IM then imposes Big Brother/Sister onto the daily lives of those that the Government insists will remain in poverty as a result of government policy.

Even the “passive welfare” connotation is loaded given the pernicious activity tests that are imposed on income support recipients. These include need to search for a certain number of jobs and attend interviews at Government offices every two weeks and satisfy other intrusions (attend interviews, participate in useless training programs etc).

So the culture of IM also completely ignores the fact that not only has the Federal government undermined job creation in Australia via its fiscal austerity obsession but it also has failed to take responsibility for providing work to all Australians and, in particular, continued with the abandonment of the Community Development Employment Projects (CDEP), which for many remote indigenous communities was the only employment available.

For those who would like to see a summary of the political machinations surrounding the CDEP this – CDEP: A timeline of destruction – is useful.

At the time, the decision to scrap the CDEP scheme by the previous Conservative government was described by researchers as just plain dumb.

I recall a discussion I had with a senior federal politician at the time it was scrapped (July 2007) – he said they Government wanted CDEP participants to be forced to move into the private labour market and not be cossetted by artificial government jobs. He, of-course, had an “artificial” yet high-paid government job but that seemed lost on him.

But the substantive point I made is that while I rejected the real/artificial distinction between private and public employment that was at the heart of his policy framework, the reality was something more stark. THERE WAS NO PRIVATE LABOUR MARKET in many of the regions where CDEP provided work. It is one thing to believe in incentives to get workers into the “market” but there has to be a operating “market” to get into.

So now the unemployed in these regions are subjected to IM. There have been a number of in-house Government reports about the need and effectiveness for IM. None have stood the scrutiny of their methodology.

The Government often-quotes the 2009 study by the Australian Institute of Health and Welfare (AIHW) – The evaluation of income management in the Northern Territory – as the authority for IM policies. The AIHW study used data generated by the government.

A closer reading of the AIHW evaluation study reveals it is very circumspect in its approach. Under limitations, it says:

Evidence hierarchies are used to rank different research methods according to the validity of their findings, based on the risk of error or bias in their results … The research conducted for the income management evaluation (point-in-time descriptive surveys and qualitative research) sit towards the bottom of an evidence hierarchy. A major problem was the absence of a comparison group, or baseline data, to measure what would have happened in the absence of income management.

The approach taken by the AIHW in writing the evaluation report was to triangulate the findings of different studies by looking for common issues and themes, and to draw these together around the key evaluation questions. Even though this approach resulted in evidence that had more strength and validity than the results of a single study, the overall evidence about the effectiveness of income management was still not strong.

In other words, we can largely disregard the results of the evaluation – they were not robust. There is an aside here – the way the Australian government compromises research institutes that rely on gaining contract research to maintain their operations. Increasingly, this relationship with funding agencies is becoming highly compromised. I have always refused to sign commissioned contracts which do not give me 100 per cent control of the research output I produce. So I miss out on a lot of funding opportunities. But that is another blog again.

The only independent, peer-reviewed academic study at the time (from the Menzies School of Health Research and participating partners) – Impact of income management on store sales in the Northern Territory – was published n the Medical Journal of Australia (2010). It collected its own data and used time series methodology to examine spending patterns from remote community stores before and after Government IM intervention.

[Reference: Julie K Brimblecombe, Joseph McDonnell, Adam Barnes, Joanne Garnggulkpuy Dhurrkay, David P Thomas and Ross S Bailie, Impact of income management on store sales in the Northern Territory, Medical Journal of Australia 2010; 192 (10): 549-554.

The study found that:

… income management appeared to have no effect on total store sales, food and drink sales, tobacco sales and fruit and vegetable sales, independent of the government stimulus payment … These findings suggest that, without an actual increase in income as occurred with the government stimulus payment, income management may not affect people’s spending overall. The findings challenge a central tenet of income management – that people’s spending habits will be modified in a positive way with mandatory restrictions on expenditure alone.

These findings do not support official government reports of improved healthy food and drink purchases in association with income management … income management had no effect on fruit and vegetable sales or turnover, contrary to results reported in official reports … our findings indicate that income management has had no effect on the sale of tobacco products.

The current Federal government at the time claimed it was going to be guided by the evidence-base in its policy design and implementation. Yet when significant negative results were provided by researchers there was denial from the Government and they continued to broaden the scope and reach of IM, while refusing to increase the unemployment benefit allowance or introduce widespread job creation programs in areas where there are zero job opportunities.

Last month, the Government released the – Evaluating New Income Management in the Northern Territory: First Evaluation Report. This was done without much fanfare at the end of this year’s political cycle as we all pack up our political concerns and focus on holidays and Xmas.

I say that because the Report was handed to them in July 2012 and it took them more than 4 months to make the findings public.

The Matched Savings Scheme Payment was provided to those on IM as a once-off payment of up to $500 if a person had, in addition to other requirements, saved of their private income (a $-for-$ grant). This payment was, in turn, subjected to IM.

Simple arithmetic tells us that a maximum of 4,667 applicants (seeking the maximum) could be successful given the amount allocated over 4 years for the scheme was $A1.4 million. In fact, at the time, the Government expected many more than that given the scheme allowed people to apply before they had reached $A500 of their own personal savings.

It was always optimistic given the evidence-base we have to work with from the ABS. In the March Quarter release of Australian Social Trends, the ABS focused on low economic resource households in a special feature – Life on Struggle Street.

I will leave it to you to study the feature in full detail (it is very interesting) but the section on Financial Stress indicates that there were 1.7 million “Low Economic Resource Households” in Australia, which are defined by the ABS as being in the “two lowest quintiles for both equivalised adjusted disposable household income (adjusted to include imputed rent) and equivalised net worth”, have no saving (“spend more money than we get”).

24.4 per cent of them “spend more money” they they get; 31 per cent could not pay their utility bills on time; 43.3 per cent cannot “raise $2,000 for something important in a week”; “12.3 per cent cannot “pay registration/insurance on time”; 8.1 per cent have “Pawned or sold something” to raise funds; 6.3 per cent cannot heat their home; 10.1 per cent “had gone without meals in the past 12 months due to cash flow problems”; 20.1 per cent had “sought financial help from friends or family due to cash flow problems”; and 10.3 per cent “were forced to seek assistance from welfare or community organisations”.

Now think about the other numbers. The “Average weekly equivalised adjusted disposable household income” was $A465 per week for “Low economic resource households” compared to $A1,033 for all other 6.7 million households.

43.8 per cent of low economic resource households said that their “Main source of household income” came “from government pensions and allowances”.

Income management applied to those in receipt of government benefits.

You might like to consider this – Newstart Fact Sheet – provided by the Australian Council of Social Services (ACOSS) to see how poorly people on the dole are treated.

You will learn that as at November 2012:

… the Newstart Allowance for a single adult is … $246 a week. An unemployed sole parent with a school age child gets $394, including family payments … People reliant on this payment as their main income live in poverty. In 2010, Newstart Allowance was $112 a week below the 50% of median income poverty line used by the OECD.

So it is clear that the unemployed are at the bottom of the income distribution – within the bottom two quintiles – and probably a certainty that they are in the 24.4 per cent that do not save. The ACOSS Report makes it clear how difficult it is for those on Newstart to live from week-to-week. Saving is out of the question.

Please read my blogs – Fat cat bankster wants to make the unemployed even more desperate and Why are we so mean to the unemployed? and Our pathological meanness to the unemployed is just bad economics – for more discussion on this point.

So we should not be surprised to learn that the IM Evaluation Report for the Northern Territory, that the Government took 4 months to release, presumably while it searched for where its sense of decency had gone too, tells us that:

Very few people have received a Matched Savings Payment (15 in total) and the majority of these are non-Indigenous. Subjecting the Matched Saving Scheme payment to income management was viewed negatively.

15 people in the Northern Territory where the IM scheme is concentrated. Nationally, only 20 people applied for Matched Saving payments.

This reminded me of a statement that the President of the European Parliament made at the Jobs for Europe: The Employment Policy Conference in September – where he said that the EU and EC elite policy makers had not bothered to visit the southern European areas where their policies were creating havoc.

The Federal Government bureaucrats who devise these poisonous policies and then create smokescreens when negative evidence arises which undermine the logic and justification for their policies need to get out a bit.

A person can only really save if they have an income that is above the poverty line and allows some discretion. The vast bulk of evidence is that unemployment benefit recipients have no such discretion.

The evidence forthcoming in the latest evaluation report (cited above) of IM should see it abandoned forever.

Among other negatives, the Report said:

There is little evidence to date that income management is resulting in widespread behaviour change, either with respect to building an ability to effectively manage money or in building ‘socially responsible behaviour’ beyond the direct impact of limiting the amount that can be spent on some items. As such, the early indications are that income management operates more as a control or protective mechanism than as an intervention which increases capabilities … Income management incurs costs to the individuals, who in many cases find it embarrassing and humiliating and in some cases de-motivating … The large-scale survey of those subject to income management reveals that the majority of participants reported little change for the range of outcomes examined.

Further:

Compulsory Income Management has given rise to considerable feelings of disempowerment and unfairness … Many people subject to Compulsory Income Management appear not to demonstrate the behaviour problems or financial difficulties which the measure was intended to remedy.

Conclusion

Neo-liberalism has not only seen our governments abandon their obligations under various international treaties to maintain full employment but has seen the innovation of a pernicious management regime to administer the victims of this abandonment.

The Australian government has led the way in the OECD block (as acknowledged in the OECD’s 2001 Report on Job Study implementation) and has created a number of very nasty and mean-spirited ways to manage the poor and unemployed. The fat cats tell us we should resent “passive welfare” and the “culture of welfare dependency” but in between producing biased reports that seek to justify their viciousness I presume they enjoy nice cafe lunches and wine that their relatively secure, well-paid and superannuated jobs provide.

It is obvious that the unemployed need jobs not weird schemes that deny the obvious fact that they cannot save if they have no discretionary income.

Tomorrow we will consider how far the politicians in Europe and the UK are out of touch.

And now … I have a day of meetings ahead.

That is enough for today!

(c) Copyright 2012 Bill Mitchell. All Rights Reserved.