Anti-Poverty Week – best solution is job creation

Today marks the beginning of – Anti-Poverty Week – in Australia and elsewhere. The overwhelming reason people are poor is because they are unemployed (or underemployed). There are related reasons associated with poor housing etc, but the fact remains that if we eliminate mass unemployment by providing enough work for all those who desire it and ensure there are jobs for those with multiple disadvantages then we will reduce poverty overnight. While poverty is persistent, it wasn’t always thus. I have been to many meeting where policy makers, usually very well adorned in the latest clothing, plenty of nice watches and rings, and all the latest gadgets (phones, tablets etc), wax lyrical about how complex the poverty problem is. I usually respond at some point (trying my hardest to disguise disdain) by suggesting the problem is relatively simple. The federal government can always create enough work any time it chooses at a decent wage to ensure that no-one needs to live below the poverty line. Read: always! It can also always pay those who cannot work for whatever reason an adequate pension. Read: always. If we run out of real resources which prevent those nominal payments (wage and pensions) translating into an adequate standard of living, then the government can always redistribute the real resources by increasing taxes on those who have “too many” resources at their disposable. Too many is a relative concept in this context. The so-called complexity of the problem is just code for an unwillingness of the policy makers to use the capacity they have as currency issuers. There is nothing complex about announcing that the government will pay a living wage to anyone who wants to work – just turn up tomorrow and the wage begins. If that announcement was made then we would know who wants to work for a wage and those who do not. For Anti-Poverty Week – the best thing the government can do is announce the unconditional job offer.

The Anti-Poverty week organisers state that their main aim is to:

– Strengthen public understanding of the causes and consequences of poverty and hardship around the world and in Australia;

– Encourage research, discussion and action to address these problems, including action by individuals, communities, organisations and governments.

They urge us to organise and activity to “help reduce poverty”.

The big corporate firms in Australia, including the mining companies are all notable by their absence among the “Principal National Sponsors” of Anti-Poverty Week in Australia.

Further, among the sponsors are charities that signed up to the Federal governments various incarnations of the privatised public employment service – formerly the Job Network and now Job Services.

These agencies have largely become co-opted by the Federal governments “employability agenda” and are now part of the “industry” that manages the mass unemployment that the neo-liberal macroeconomic policy stances produces.

Among the other “crimes against humanity” that these agencies have committed is breaching, where the agency reports a person on income support benefits to the federal government department overseeing the whole nasty system for failing to satisfy some aspect of the pernicious work test regime and the result is the person loses their benefits for some period.

Schizophrenics who are episodic when they are meant to be attending an “interview” with their case managers, homeless people who fail to receive the notification of the “interview” dominate the queue of those who are breached by our national government. It is an abomination that both sides of politics have created and overseen.

One of the sponsors of Anti-Poverty Week, Mission Australia is on the record as supporting breaching as a “tool” to manipulate the unemployed.

In evidence to the Standing Committee on Education and Employment (April 18, 2011) which was considering the – Social Security Legislation Amendment (Job Seeker Compliance) Bill 2011, the Mission Australia head told the Committee that:

In terms of the amendments, we think that they will certainly strengthen the Job Services Australia contract and assist employment providers by encouraging job seekers to properly engage with the system. That is the core of what we believe-that these amendments will be a tool that will help us to better engage job seekers.

So even those who claim their mission is to help the poor have been co-opted by this neo-liberal system. Billions of dollars of public money have been pumped into these agencies under the pretence they are helping the unemployed regain jobs. The success record is appalling.

The fact is that the unemployed cannot search for jobs that are not there – no matter how motivated they are, or how scared they are of losing their miserly income support.

We have all been co-opted by neo-liberalism in some way, if only by our reticence and tacit support of the system. Some are more compromised than others. The front-line troops are the welfare support agencies who have taken contracts from the Government as part of the “unemployment industry”.

Anyway – Anti-Poverty Week.

Let’s start with an update of some of the front-line troops – the unemployed.

Please read my blog – The indecent inconsistency of the neo-liberals – for background to the following discussion. For overseas readers, particularly, our system of unemployment benefits is totally different to the unemployment compensation insurance schemes that operate in most countries. The Australian unemployment benefits system is paid by the federal government at set rates for an indefinite period (subject to Work Activity tests). Employers and employees do not contribute to the scheme and everyone gets the same rate (adjusted for marital and parental status).

In the May 2009 Budget, the Federal government increased pensions for all groups except the unemployed and single-parents. For example, single pensioners (other than the excluded categories) received about $50 a week more and married couples around $12 which represents a major realignment with average weekly earnings.

There is no doubt that the 2009 aged pension increases were necessary given how stingy the previous conservative government was to this group.
But given that the economic crisis has impacted mostly on the unemployed and the Government’s own austerity program is now causing unemployment to rise sharply again, how can the government justify not increasing the unemployment benefits as well?

I have previously considered the state of poverty among the unemployed in these blogs – Why are we so mean to the unemployed? and The plight of the unemployed – under growth and decay and Our pathological meanness to the unemployed is just bad economics and Fat cat bankster wants to make the unemployed even more desperate.

The new federal government is already making noises that suggest it will make things even harder for the unemployed and drive more people out of the labour force to suppress the rising underutilisation rates that are accompanying the declining growth in real GDP.

Event the OECD, has lambasted the previous Federal Government for its approach to the unemployed. In the – OECD Economic Survey, Australia 2010 (see an overview of the Survey HERE) the OECD said that:

The transfer system could better tackle poverty, while strengthening incentives to work … additional attention given to disadvantaged groups should not lead to worsening of services provided to less disadvantaged unemployed. Over time, the adequacy of Newstart Allowance should be examined, taking into account both fiscal constraints and community expectations. An option would be to increase the Newstart Allowance for the initial period of unemployment to provide a more adequate safety net, but job search requirements should be maintained and the impact on the incentive to work should be assessed.

[Newstart Allowance is the unemployment benefit].

The Australian Government could increase the unemployment benefit with the stroke of a computer keyboard. It issues the currency after all. Even if the computer keyboard operator fumbled and put an extra zero on the end of the new benefit there would be no financial constraints on the payment being honoured.

The unemployment benefit was designed to provide income support for those who fell into unemployment in an environment where long-term unemployment was rare (and defined as 12 weeks or more rather than 52 weeks or more as it is now) and the nation enjoyed true full employment.

At that time, spells of unemployment were short and most people could quickly find a new job if they were unlucky enough to become unemployed. Unfilled vacancies were usually above the level of unemployment which meant that firms were always looking for workers and provided training slots with job offers to ensure they could fill vacancies.

Unemployment benefits were designed to be short-term income support in an economy where the national government took responsibility for ensuring there were always enough jobs available to match the preferences of the available labour force.

The incentivise narrative – exemplified by the quote above from the Mission Australia CEO – entered much later as the neo-liberals were looking for victims to blame for the mess that their austerity policies were creating – that is, the high unemployment that they created by abandoning active fiscal policy and relying monetary policy to use unemployment as a policy tool to keep inflation low.

It was introduced when unemployment to vacancy ratios rose – sometimes to around 10 to 1 – currently around 4.5 and that is not counting the mass underemployment that is a more recent manifestation of the failure of the economy to produce enough jobs.

It was obvious the economy was not producing enough jobs yet to disguise that a full-blown attack began on the unemployed and the narrative shifted to claims their allowances were too high and were undermining incentives to work.

Quite simply, it was argued that our disadvantaged citizens preferred the pittance that the government provided them by way of unemployment benefits to working despite the fact that the former life opened the person to public humiliation, vilification from the media and civic leaders, and – poverty.

Somehow, successive governments were able to convince us that these characters were lazy and living high on the hog and should be working like us. The argument relied on a sort of collective denial or ignorance of the reality – the data – the UV ratio, the lack of jobs – whatever you want to call it.

When those arguments were raised, relevant Government Ministers would perjure themselves with creative stories such as “there are plenty of jobs it is just that the firms have stopped advertising them because they know the dole bludgers won’t take them anyway”.

With Anti-Poverty Week starting today, the first place any Government which pretends to care about poverty should focus on is unemployment. It is the single most significant reason people find themselves in poverty.

But our national government deliberately chooses not only to ensure their fiscal settings create worsening unemployment by suppressing aggregate demand but then, if that wasn’t bad enough, to then suppress the income support payments to worsen the poverty that unemployment brings.

Here is an update as at September 2013. All the calculations that follow are taken from the following data sources:

• Historical data for benefits at – Single Persons – and Married Persons.
• RBA data for – Consumer Price Index – Table G2.
• RBA data for – Labour Costs – Table G6 – to compute Average Weekly Earnings.
• Poverty line data is available on a quarterly basis from the – Melbourne Institute of Applied Economic and Social Research

The Newstart Allowance is adjusted every March and September.

The following graph shows the evolution of the Single Unemployment Benefit and the Single Unemployed Poverty Line since 1973 until September-quarter 2013. Where data is not yet available for September (such as CPI) I have assumed a constant growth rate.

The single unemployment benefit stands at $A35.80 a day which is well below any reasonable estimate of the poverty line in Australia (for singles at $A57.55 per day). For married couples the unemployment benefit is currently at $6A4.61 per day, while the corresponding poverty line is set at $A81.51 per day.

Whether one is single or in a couple, once accommodation is paid for, there is not very much left of the unemployment benefit income.
The next graph shows the weekly unemployment benefit for married couples and the corresponding poverty line. The interesting feature is that the deterioration in the situation for married couples came when the conservatives were elected in 1996. The Labor government (elected in 2007) then allowed the deterioration to continue.

I do not expect any change from the new conservative federal government. The poverty gap for the unemployed will, unfortunately continue to widen, as the probability of getting a job continues to decline.

The next graph shows real average weekly earnings and the real single and married unemployment benefit indexed to 100 in the December-quarter 2007. This quarter was the peak of the last cycle. The real single and married index have moved together since that time.

I should note that productivity has been rising well above the rate of real average weekly earnings since the early 1980s so there has been a further redistribution of national income away from workers generally over the last 30 years to profits.

But even with that dynamic unfolding, real average weekly earnings have grown modestly since the early 1980s whereas the real standard of living for the unemployed has barely changed.

Since December 2007, real average weekly earnings have grown by 10 per cent, which is pitiful. However, real unemployment benefits have not improved at all. So the Government has deprived the unemployed of enjoying some of the benefits of national productivity gains.

Sure enough the unemployed haven’t done the work. But the Government’s fiscal policy stance has deliberately locked them out of employment.

Anyway, one of the Anti-Poverty Week sponsoring agencies – the Brotherhood of St Laurence in conjunction with the Melbourne Institute (University of Melbourne) has just released its latest – Social Exclusion Monitor Bulletin – for October 2013, to coincide with the beginning of Anti-Poverty Week.

The aim of the “monitor” is to:

… develop a method to measure the extent and evolution of social exclusion in Australia.

The monitor eschews “one-dimensional” approaches (for example, “based on income or consumption”) and instead:

… recognises the importance of multiple and interrelated factors in determining the capacity of individuals to fully participate in society

The “capabilities framework” (Amartya Sen) informs their measure of social exclusion. There are seven life domains recognised and within each there are a set of indicators that capture the extend of the individual’s level of exclusion.

The following table (Table 1 in the publication) summarises the domains and the indicators used.

Their social exclusion index identifies different degrees of severity:

• Marginal social exclusion
• Deep social exclusion
• Very deep social exclusion

The Report concludes that:

… around one-quarter of Australians aged above 15 years experienced some level of exclusion in 2011. These comprised 20 per cent who were classified as marginally excluded and 5 per cent who were deeply excluded. Almost 1 per cent were very deeply excluded in 2011. In absolute terms, this means that more than 900,000 Australians experienced deep exclusion and around 130,000 people were very deeply excluded that year.

The rate of income poverty in Australia (less than 60 per cent of median income) is around 20 per cent and that has been a constant for the last decade or so. The rate of marginal exclusion is rising while the more severe categories have “remained fairly constant to 2011”.

In other words, despite the “mining-boom-of-the-century” that Australia has been “enjoying” over the last 8 years (with some interruption in 2008-09 while China cranked up its budget deficit and the growth in our exports resumed.

The Report finds that social exclusion is persistent. In other words, individuals endure “multiple years” of hardship.

What are the main reasons that lead a person to be socially excluded?

The Report concluded that:

1. “Women are at significantly more risk of social exclusion than men. About half of Australians aged over 65 years experience social exclusion.”

2. “Among Indigenous Australians, 48 per cent experience social exclusion.”

3. “Immigrants and people of Aboriginal and Torres Strait Islander descent are particularly likely to experience social exclusion in Australia.”

4. “More than one in two Australians who have a long-term health condition or disability experience social exclusion each year. Early school leavers experience social exclusion nearly 2.5 times the rate of those who have completed Year 12.”

5. “People with limited education are more likely to experience social exclusion. The prevalence of exclusion among those with less than Year 12 is nearly 2.5 times as high as that of those with Year 12.”

6. “Lone parents and people living in public housing are highly vulnerable to social exclusion in Australia.”

The solutions must start with tailoring job creation policies to be inclusive for those who have low skills, poor education, and other disadvantages. Forget all the talk about training and skills development.

Start with job creation and then work on skill development with a paid-work environment. The Research clearly shows that to be the most effective way to generate meaningful work skills.

The solution also requires a massive change in public housing policy to ensure the current shortfall is eliminated. The neo-liberal period has seen a dramatic under-investment in public housing at a time when homeaffordability has fallen such that many low income recipients are now excluded from the housing market.

The general manager of BSL’s research unit told the press today that (Source):

The labour market is the critical factor. The post-war manufacturing boom provided stability, for the low-skilled and migrants … Where in Australia are we going to find that growth engine to supply the jobs in the way that manufacturing did before and the way that wool, land and agriculture did before that? … If we can’t crack that, then we can’t really talk about social inclusion and an inclusive society because we won’t have a labour market to support that.

Well we can start with the obvious place – large-scale public sector job creation aimed at

We call it – the The Job Guarantee

However, you can see how confused these organisations have become in this neo-liberal era by reading the BSL press release today – Anti-Poverty Week – the best way out of poverty is decent work. That would seem to be straightforward – unemployment is a scourge – create employment.

But the BSL’s executive director is quoted as saying that:

The best thing we can do to lift people out of poverty is to ensure they have the skills and experience that will enable them to get a job and to go on to build a good life for themselves …

That is, an assertion of the supply-side focus, which has categorically failed. It implies the problem is a lack of skills/experience when all that does is shuffle one’s place in the jobless queue when there is a rationed job environment as we have now.

The solution is to ensure there is no queue and allow the competition among employers in that rationed worker environment to ensure the skills upgrading occurs.

With a massive excess supply of labour, the employers have no incentive to offer training and can pick and choose among the millions as they like.

These “welfare” organisations should get their message straight and realise how co-opted they are, notwithstanding that their motivations are often sound (that is, to reduce poverty).

Conclusion

For Anti-Poverty Week, I urge everyone to write to politicians, the co-opted welfare groups and anyone else who might influence public policy about the failure of the current policy regime.

Urge these welfare organisations to drop their support (and active participation) in the government “employability” agenda. Force the government to take responsibility for job creation rather than manipulate these welfare groups into doing their dirty work in the “unemployment industry”.

Demand stacks more public housing.

Demand a Job Guarantee.

That is enough for today!

(c) Copyright 2013 Bill Mitchell. All Rights Reserved.