I read an interesting report this morning, which resonated with some other work I had…
It’s Wednesday and apart from music I am talking mostly about poverty – opposites indeed. The beauty of the beat against the ugliness of enforced poverty. Enforced by government policy, which if there is political will can always eliminate systemic poverty. Yesterday (April 18, 2023), a major report was released in Australia by the grand-titled Economic Inclusion Advisory Committee – 2023–24 Report to the Australian Government. It provided a series of recommendations to the new Labor government about how it should deal with poverty, disadvantage and the appalling state of income support in this country. Among its recommendations it found that “current rates of these payments are seriously inadequate, whether measured relative to the National Minimum Wage, in comparison with pensions, or against a range of income poverty measures. People on these payments face the highest levels of financial stress in Australia”. Accordingly, they recommended a “substantial increase in the base rates” for unemployment benefits and other payments. The new Labour government has already indicated it will not increase the rates in any significant way. The problem, though, is that the recommendation of the ‘Inclusion Committee’, is such that if introduced would still leave the unemployed being forced to live below the poverty line. Yet, its recommendation is now framing the ‘limit’ parameters of the debate. All sorts of so-called progressives are using the recommendation as the aspiration, which really becomes self-defeating. The ‘Inclusion Committee’ might better have been called the ‘Exclusion Committee’.
Previous relevant blog posts
I have consistently written out the state of poverty that the government deliberately forces onto the unemployed – see these blog posts among others:
1. Why are we so mean to the unemployed? (September 23, 2009).
2. The plight of the unemployed – under growth and decay (November 16, 2010).
3. Our pathological meanness to the unemployed is just bad economics (February 15, 2012).
4. Fat cat bankster wants to make the unemployed even more desperate (August 23, 2012).
5. The indecent inconsistency of the neo-liberals (April 30, 2013).
6. Framing matters – the unemployed and the farmers (August 7, 2018).
7. ‘Progressive’ groups in Australia captured by neoliberal ideology (September 18, 2018).
8. The Australian Labor Party is still stuck in its neoliberal denial stage (December 18, 2018).
The failure to do justice by the unemployed has been a cancer on Australian society for years.
I should also say that I would rather the government introduce a Job Guarantee which would eliminate involuntary unemployment and eliminate the need for unemployment benefits.
When a government in one of the richest countries deliberately forces a cohort to live in poverty
In the lead up to last May’s federal election, there was call from many voices (including segments of the corporate sector) for the then conservative government (which was really not conservative at all but, rather corrupt and incompetent) to increase the unemployment benefit, given that those in receipt of this income support were being forced to live well below the accepted poverty line.
During the pandemic, that government did almost double the unemployment benefit for around 12 months (see below).
The Labor Opposition at the time refused to agree to increasing the unemployment benefit, and, instead, claimed they would hold an inquiry before they made a decision.
This is the party of workers who were refusing to help those workers without work.
But the ‘let’s have an inquiry’ strategy is the classic do nothing and delay facing up to doing nothing ploy that political parties who don’t want to do anything about the issue use.
Anyway, the Labor government was elected last May after 10 shocking years of the conservatives.
And they were forced by an independent senator who holds with other independents the balance of power in the upper house to actually commission an enquiry.
And yesterday (April 18, 2023), the Final Report of the grand-titled Economic Inclusion Advisory Committee – 2023–24 Report to the Australian Government – was released.
What did it say?
Well a lot that the Government wants to ignore it seems.
One of their briefs was to seek to “Improve the adequacy of income support and rent assistance” while other areas of enquiry related to disadvantage, economic inclusion, poverty reduction, and sustaining a “commitment to full employment”.
On the income support issue, the Committee was emphatic:
All indicators available to the Committee show current rates of these payments are seriously inadequate, whether measured relative to the National Minimum Wage, in comparison with pensions, or against a range of income poverty measures. People on these payments face the highest levels of financial stress in Australia. Committee members heard from people who live on income support having to choose between paying for their medicine or electricity bills.
And the Committee recommended that:
… the Government, as a first priority, commit to a substantial increase in the base rates … [of the unemployment benefit and other payments]
Not much room for nuance in other words.
What would a substantial increase look like?
Well, the current single unemployment benefit is $A693.10 per fortnight (or $A49.50 per day).
The Committee wants the benefit increased to a level of “90 per cent of the Age Pension”.
How much would that be?
The basic single age pension (without the energy and other supplements) is currently $A$971.50 per fortnight so that would require the unemployment benefit to increase to $A874.35 per fortnight.
That is, an increase of $181.25 per fortnight or 26.2 per cent on the current level.
In Australia, the Federal government pays a flat rate (with sliding payments for family structure) unemployment benefit to anyone who satisfies the criteria.
It is not a contributory insurance scheme as in other nations and the income support is not tied to one’s wage or salary.
In relation to poverty estimates, you can find rather detailed analysis of the Australian poverty line from the Melbourne Institute.
Their work on this issue dates back to the early 1970s when the Institute was known as the Institute of Applied Economic and Social Research (University of Melbourne) under the direction of the great economist Ronald Henderson who pioneered the development of poverty line estimate and conducted the famous Poverty Inquiry which released the first estimate for the December quarter 1973.
The following graph shows the evolution of the Single Unemployment Benefit and the Single Unemployed Poverty Line since 1973 until March-quarter 2023 (the last two quarters for the poverty line are extrapolated based on CPI movements).
The facts are:
1. The single unemployment benefit stands at $49.71 per day which is well below any reasonable estimate of the poverty line in Australia (for singles at $A72.40 per day).
2. The single unemployment benefit is now $A167.24 per week below the poverty line.
3. Whether one is single or in a couple, once accommodation is paid for, there is not very much left of the unemployment benefit income.
4. The Committee’s recommendation to increase the rate to $A874.25 per fortnight or $62.45 per day is thus inadequate because the unemployment benefit recipient would still be living below the poverty line. Workers would be $A77.81 per week short of the poverty line.
You might be curious about that spike in the unemployment benefit during the first part of the pandemic.
The spike was an interesting demonstration of how governments can eliminate poverty in the stroke of pen if it really wants to.
On March 23, 2020, the Government announced a $A550 per fortnight supplement, which they cut to $A250 per fortnight on September 25, 2020. That was further cut under point 2 on January 1, 2021.
But, immediately, on the stroke of that proverbial pen, the Government lifted all unemployment benefit recipients out of poverty and suddenly they could eat better, care for their children better, pay their rent and utility bills and reduce the risk or precarity in their lives.
As soon the supplement was withdrawn, the unemployed were plunged back into abject poverty.
Why the Inclusion Committee’s 90 per cent rule is grossly inadequate
Conside the following graph, which superimposes a 90 per cent of the single aged pension rule onto the data shown in the previous graph (this time starting at the March-quarter 2015).
So for all the talk about ‘inclusion’ and dealing with ‘poverty’, the recommendation from the Committee still enforces an impoverished existence for those on the unemployment benefit.
Which is no surprise, given that the chair of the Committee was a former Minister in the previous Labor government and failed to support significant increases in the unemployment benefit.
Why won’t the Labor government increase the benefit?
Note the divergence between the unemployment benefit and the poverty line began in the early 1980s, when the neoliberal mantra about fiscal surpluses really took hold in Australia.
The deviation started around 1981-82 when the Australian economy experienced a major recession (at that time, the worst since the Great Depression).
The then conservative government was under massive political pressure as the fiscal deficit rose via the automatic stabilisers and instead of meeting the challenge of recession by actively attempting to stimulate aggregate demand and engaging in job creation programs, they tried to claim that fiscal austerity was the way forward.
Undermining the generosity of the unemployment benefits was one manifestation of this mania. They lost office in 1983 and the newly installed Labor government set about providing some relief for unemployment benefit recipients. It still remained a fact that the single unemployment benefit was close to (just below) the poverty line.
The next major recession, worse than the 1982 downturn, occurred in 1991-92 under that same Labor government and their response to the cyclical downturn was poor.
By then they were completely obsessed with achieving fiscal surpluses and failed to stimulate the economy quickly and sufficiently enough to prevent a major deterioration in the labour market.
But their response to the recession from the perspective of the unemployment benefit recipient was appalling. You can see from the graph and a major divergence between the single adult unemployment benefit and the estimated poverty line began during this recession and there’s been no resolution to that since.
Both sides of politics share the narrative that increasing the benefit payment would ‘cost billions’ and jeopardise fiscal surplus targets.
They also increasingly ran the line that they were ‘creating’ jobs and that they were thus about moving the unemployed out of the dole queue into paid unemployment – with the implication that we no longer had to worry about the levels of the unemployment benefits.
The current Labor government has continued to spruik the mainstream macroeconomic line about fiscal deficits.
They were out in force claiming that the public debt levels were too high, even though the RBA (a division of government) had bought up almost all of the federal debt issued since the pandemic.
Even if the RBA hadn’t and the debt remained in the private sector hands there would be no issue.
But trying to claim that the upcoming fiscal statement (aka ‘the Budget’) will require hard decisions, which preclude increasing the unemployment benefit, is just mainstream neoliberal and unacceptable.
The other problem now is that its ‘Inclusion Committee’ has set a limit of any debate about the scale of the increase – and that level is still unacceptable – given that if it the income support payments were raised to that level the unemployed would still be impoverished.
The only bright spot in the discussion today about all this has been the input from the new independent senator from the ACT – David Pocock – who is a former Australian national rugby team player.
He holds a crucial balance seat in the Senate and forced the government to set up this Committee in the first place – having stipulated that he wouldn’t support key industrial relations reform if they did not.
He told the press today that:
It is unacceptable that — as one of the wealthiest countries in the world — so many people in our community, especially children, are being forced to live in poverty in this worsening cost-of-living crisis …
It appears that this Labor government can find extra money for just about anything — from inland rail cost blowouts to submarines — but it won’t do more to protect the most vulnerable.
That puts the ‘we cannot afford it’ claims from the government into perspective.
A good voice in the debate even though I doubt he has done the sums that I have today, which show the Committee’s own recommendations are pitiful.
Better than what we have, but still a long way short.
Music – Inner Circle
This is what I have been listening to while working this morning.
It is from the Jamaican band – Inner Circle – who formed in 1968 in Kingston.
This song – Roots Rock Symphony – was on their album – Everything is Great – which was released in 1979 and recorded at the – Dynamic Sounds Studio.
The lead vocalist was – Jacob Miller – who was killed in a car accident in 1980, not long after this album was released.
This was a classic sound of that era and I often revisit the album because it is so good.
That is enough for today!
(c) Copyright 2023 William Mitchell. All Rights Reserved.