Posted: March 01, 2005

Poor debate, poor unemployed

The Melbourne Institute has just released Poverty line data for the September Quarter 2004. It confirms just how tough life has become for Australians whose principal source of income is unemployment benefits, in the absence of jobs for all those willing and able to work.

For example, the Institute calculates the poverty line (inclusive of housing costs) for a single person not in the workforce as $257.53 per week while the maximum rate of Newstart Allowance is $197.30 per week. Even if the person also receives the maximum rate of Rent Assistance they would still receive just $245.70 per week - $12 short of the poverty line. Jobless families in receipt of family payments do a little better as, unlike unemployment benefits, family payments are indexed to the CPI.

In May 2003, CofFEE appeared before the Senate Inquiry into Poverty and Financial Hardship. The Hansard transcript of our evidence is available HERE. In our evidence we detailed the transformation in the composition of poverty in Australia since the early 1970s. In the early 70s poverty was concentrated among the aged (a problem partly addressed by the indexation of the aged pension to 25 per cent of average weekly earnings) but abandoning our commitment to full employment has meant that poverty is now concentrated among the unemployed. Generating permanent minimum wage jobs, via a Job Guarantee for unemployed workers with few skills, is thus critical to any poverty alleviation strategy.

The same point was made by Professor Peter Saunders of the Social Policy Research Centre at the University of New South Wales in his submission to the Inquiry. He showed that the poverty rate for jobless families (i.e. with no employed member) is almost seven times higher (65.1 per cent) than the poverty rate among families with one employed person (8.8 per cent). Having two employed persons in the family causes a further reduction in the poverty rate (from 8.8 per cent to 3.3. per cent). Based on this, and other statistical evidence, Saunders concluded:

“The most striking feature of these results is the very large reduction in poverty associated with having not just someone in employment, but with having someone in full-time employment. In fact, the poverty rate is lower when there is one full-time worker than when there are two workers in paid employment, highlighting the fact that it is not so much access to employment that greatly reduces the risk of poverty (even though it does), but access to full-time employment. Generating high employment growth should thus be a crucial component of any poverty alleviation strategy, but generating a growing number of full-time jobs is even more critical. These findings on to the significance of full-time employment for poverty reduction cast a warning given Australia’s poor record of full-time job creation in recent decades. Although joblessness is clearly a major contributing factor to poverty among working-age families, it does not automatically follow that any form of employment growth will produce substantial in-roads into the poverty population. Job creation is important, but creating full-time jobs is even more so".

While the Inquiry’s final report generated a lot of data on poverty rates, and agreed that there was a strong relationship between poverty and joblessness, CofFEE’s submission was one of the few that offered a concrete, costed proposal (an idea!) about how to return our economy to full employment and tackle poverty at its root cause.

It seems to me that what we need in this country is a battle of ideas rather than presumptions that (1) full employment is equivalent to an official unemployment rate of 5 per cent (the Treasurer’s NAIRU story), and (2) poverty is immutable and the fault of the poor. This requires researchers who dissent from mainstream explanations to keep developing their alternative policy responses and to put these ideas out for debate and consideration. This is one of the goals of the CofFEE blog! It requires journalists to ask sharp and thoughtful questions when they engage with politicians, bureaucrats, and all manner of lobby groups. For example, how will microeconomic reform and a national industrial relations system create secure work for 550,000 unemployed Australians and the other half a million who can’t get enough hours of work? I'm stuffed if I know. And it also requires the welfare organisations that once advocated for the unemployed and poor to show the leadership of old. In the two years I spent working in Parliament House I heard a lot of complaints from religious and other welfare groups about the terms of their Job Network contracts but very little about how the current suite of employment programs weren’t providing jobs for our most disadvantaged citizens. Courtesy of government contracts, these organisations have the resources to put the case for change and to put it loudly.

I'll close with three points:

1. The overwhelming share of unemployed people are living below the poverty line.

2. The level of unemployment is a choice made by the Federal Government.

3. The time to start kicking and screaming – the time to advance new ideas – is now.

To quote from Baumann (1999): “The poor will always be with us, but what it means to be poor depends on the kind of ‘us’ they are ‘with’.”

Blog entry posted by Sally