Last Monday’s blog – I, Daniel Blake – essential viewing – provided a review of the latest Ken Loach movie and put the institutional details with respect to the inhumane way the unemployment and sickness benefit support system had evolved in Britain in the context of earlier developments in Australia which pioneered this nasty ill-treatment of disadvantaged citizens. In today’s blog, I am updating the situation in Australia and discussing some recent (and shocking) data, which has come to light courtesy of the Senate estimates process within the Australian Parliament. There is one institution within Australia’s Parliamentary system that hasn’t fallen foul of the lying theatrics that define the main legislative process. I refer to the Senate Finance and Public Administration Legislation Committee which forces government bureaucrats to provide detailed data on contentious issues, which the ruling party (the government) prefers not to release or draw attention to. A most recent example demonstrates the total failure of a key aspect of the income support system in Australia and the reason is simple – a neo-liberal Groupthink has crippled the capacity of the Australian government to do anything constructive and obvious. Ideology allows policy makers to enact cruel and distasteful policy machinations on those who have all but nothing. Australia – where victims become criminals. It is disgusting really and makes one ashamed to show one’s passport when travelling.
Unemployed in Australia forced by government to live below the poverty line – and it is getting worse
I have previously considered the state of poverty among the unemployed in these blogs:
Things have deteriorated further since then.
For overseas readers here is some background. Unlike 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).
The current federal government is attempting to make matters worse for the unemployed. It is hard to see how they can succeed given how bad conditions already are.
The unemployment benefit system was originally 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.
Unemployment overall was always below 2 per cent and there was no underemployment.
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 thus designed to be a means of 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.
Fiscal policy settings were adjusted to maintain full employment and there was always a buffer stock of jobs available within various areas of the public sector to absorb workers unable to find work in the private sector.
The system turned in the 1970s as the blight of neo-liberalism started to take hold. On the one hand, the neo-liberals started to obsess about fiscal surpluses, which created rising mass unemployment for the first time since the Great Depression.
On the other hand, they began 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.
In 1994, the OECD consolidated the so-called ‘supply-side’ approach to labour market policy when it released its Jobs Study. The program they outlined accelerated the attacks on the unemployed and began the focus, in earnest, on ‘work tests’ and all the rest of the pernicious suite of administrative practices that we saw in I, Daniel Blake.
At the time, 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 that 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 being unemployed exposed them 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 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”.
Our national government has led the way in this inhumanity. It has deliberately chosen, not only to ensure their fiscal settings create worsening unemployment by suppressing aggregate spending, but then, if that wasn’t bad enough, to suppress the income support payments to worsen the poverty that unemployment brings.
Here is an update to June 2016 (which is when the latest poverty line data is available to).
All the calculations that follow are taken from the following data sources:
- Historical data for – Unemployment Benefits.
- RBA data for – Consumer Price Index – Table G2.
- ABS data for – 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 (unemployment benefit) is adjusted every March and September.
The following graph shows the evolution of the Single Unemployment Benefit and the Single Unemployed Poverty Line from the March-quarter 1970 until the June-quarter 2016.
The trends are clear.
In the September-quarter 2016, the single unemployment benefit was $A37.76 a day which is well below any reasonable estimate of the poverty line in Australia (for singles at $A61.02 per day).
For married couples the unemployment benefit as $A68.20 per day, while the corresponding poverty line is set at $A86.43 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 in mid-2005, while the conservatives were still in office. The Labor government (elected in 2007) then allowed the deterioration to continue and our current conservative government has sat on its hands on this issue.
The poverty gap for the unemployed will, unfortunately continue to widen, as the probability of getting a job continues to decline.
The single unemployment benefit recipient is now 38 per cent below the corresponding poverty line.
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 just 9 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 and further forced them to fall behind other income groups in Australia.
I know that the unemployed receive some housing assistance in addition to the unemployment benefit.
It might be argued that because income support recipients in Australia receive rental assistance, for example, the problem is less severe than I have suggested. That is correct but the scale of assistance for the unemployed is short of pitiful.
The shift to the provision of rental subsidies in Australia was part of the ideological shift away from the government taking responsibility for social policy.
In the past, the Federal government (in liaison with the states) provided public housing to low income earners. While in short supply and of a fairly rudimentary quality, most lost income earners could expect to be given access to a secure, affordable home.
That changed when the neo-liberal ideology became dominant and the Government moved progressively to providing rent subsidies to private market suppliers.
There is a large literature which analyses the consequences of this shift for low income earners, which is tangential to this blog. This report (May 2013) – A home on the range or a home out of range – from the Welfare Rights Centre NSW is a good background.
The major conclusions of the plethora of literature on the topic are as follows:
1. Commonwealth Rental Assistance has failed to match the rise in housing costs so the real value of the subsidy has been progressively undermined.
2. This erosion in value has ment that single unemployed people find it almost impossible to rent in the private markets in the major capital cities such as Melbourne and Sydney which means that the spatial concentration of disadvantage rises and the unemployed are forced to live in areas where there is less job creation (notwithstanding the overall lack of job creation in Australia per se.
3. Commonwealth Rental Assistance relies on an adequate provision of affordable housing being made available by private providers. It is clear that supply has been lagging well behind demand for a number of reasons including the incentives given via the tax system to high income earners to invest in higher valued investment housing as tax dodges under negative gearing. This high income-earner welfare is a major source of inequity in the Australian system.
4. Many unemployed are forced to live in group (shared) housing and the maximum Commonwealth Rental Assistance entitlement is then dramatically reduced.
For further discussion, please read the blog Our pathological meanness to the unemployed is just bad economics – for more discussion.
The reality is this.
The Australian government tells us that (Source):
Rent Assistance is payable at the rate of 75 cents for every dollar of rent payable above the rent threshold until the maximum rate of payment is reached.
Currently, a single person has to be paying a minimum of $A153.30 per fortnight to qualify for the Commonwealth Rental Assistance and they can receive a maximum payment of $A130.60 per fortnight or $75.30 per week.
At the June-quarter 2016, the single unemployment benefit was $A263.80 per week and was $163.34 per week below the applicable poverty line.
In other words, even if the unemployed is receiving the maximum rental assistance (around 75 per cent qualify at that rate such is the cost of housing in Australia), they still remain well below the poverty line.
Punishing the victims as criminals
It is a hallmark of neo-liberalism that the victims of the failure of economies to produce sufficient jobs – the unemployed and their families – were blamed for being without work, despite the fact that nothing these individuals could really do to eliminate the shortage of jobs.
The even more perverse evolution of this blame game is a sort of reversal of criminal procedure – the victims in this case have been increasingly treated as criminals and fined (punished) accordingly.
Yet all along there are not enough jobs for them to go to.
As end-games go this should be sufficient for the citizenry to rise up and overthrow the establishment that sits pretty in their nice homes and offices (and yachts and ski lodges etc).
But the divide-and-conquer strategies that have been endlessly pursued have set citizens up against other citizens to ensure working class solidarity is repressed.
It will blow eventually – our disdain for the poor can only last as long as we, ourselves do not become poor. And increasingly, that will happen unless there is a major shift in policy.
I reported in last Monday’s blog the breaching system in the Australian income support system where the most disadvantaged would be fined for various failures of process in relation to the ridiculous and dehumanising requirements that were put on them to receive the measly income support.
It is an abomination that both sides of politics have created and overseen.
In I, Daniel Blake, we learned about the sanction system, which is the name that the British sociopaths in the Department of Work and Pensions call the same process – taking what little cash the state provides the income support recipient away for various infractions.
Criminals receive fines. But in this neo-liberal era the unemployed and the sick are treated as criminals, as if they have breached the criminal code.
A schizophrenic who missed a meeting with their case manager because they are episodic is fined. A homeless person who doesn’t receive a letter informing them to do something is fined.
In Australia, we have refined this to an art form.
Take the case of the Community Development Program (CDP) or the special work-for-the-dole applied to indigenous Australians.
A large proportion of indigenous Australians live in remote areas of Australia where there are zero alternative income generating alternatives.
There is a systemic failure of these local areas to generate enough jobs. The lack of jobs is endemic and the individuals who are victims of that failure because of their geographic location (reflecting history, culture, social considerations, family etc) are dependent on income support as 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.
The Government also imposes so-called Income Management (IM) on these people which amounts to an autocratic intrusion into the daily lives of those that the Government forces to remain in poverty as a result of the government’s own 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 income support in these areas 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 sufficient work to all Australians.
The problem is worse in remote areas. Previously, they depended on Community Development Employment Projects (CDEP), which was a Federal job creation program that provided necessary work and income where private labour markets were scant.
In effect, the CDEP provided an employment guarantee for indigenous Australians in remote areas.
The first Governor of the Reserve Bank of Australia in 1960, H.C. Coombs, who had previously been a major player in the creation of the White Paper on Full Employment in Australia, was also a major proponent of the CDEP.
Please read my blog – A national disgrace – the abandonment of full employment – for more discussion on this point.
Coombs considered (Source):
… that rather than pay lots of Aboriginal people in remote areas unemployment benefits it would be more constructive for them to be employed … to undertake socially useful tasks.
For those who would like to see a summary of the political machinations surrounding the CDEP this – CDEP: A timeline of destruction – is useful.
I wrote about the Community Development Employment Projects system in this blog – So infested with neo-liberalism that they cannot add up anymore.
When the current conservative government were in office (1996-2007), it progressively cut the program that was crucial to remote communities.
In 2007, towards the end of its tenure, it defunded it.
At the time, the decision to scrap the CDEP scheme by the previous Conservative government was described by researchers as just plain dumb.
Unemployment is now very high in these regions, much higher than the rest of Australia.
I recall a discussion I had with a senior conservative federal politician at the time it was scrapped (July 2007) – he said the 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.
The CDEP was, for many remote indigenous communities the only employment available.
When they regained office in 2013, the current government brought the indigenous communities within the aegis of its ‘Work-for-the-Dole’ program.
On July 1, 2015, it introduced the so-called – Community Development Programme (CDP) – which it claimed would “better serves people in remote Australia, leading to better job opportunities and helping community members to help themselves.”
It operates in 60 regions (1000 communities) around Australia and more than 80 per cent of the approximately 33,000 participants
Whereas under the CDEP, the workers received a wage, under the CDP, a person receives the unemployment benefit but musth work 25 hours per week.
The legal National Minimum Wage in Australia is $672.70 per 38 hour week (before tax) or $A17.70 per hour. Casual employees also have to paid at least a 25 per cent casual loading in recognition they surrender their statutory entitlements such as holiday pay etc (note: this loading is grossly inadequate given what the casual worker forgoes).
No one can be lawfully paid less than that. If an employer is found to be paying workers below that legal minimum they are heavily fined (for example, $228,000 penalty for business operator who thinks minimum pay rates are “just crazy”).
Under the CDP, a worker (yes, they have to work) puts in 25 forced hours in return for the unemployment benefit, which amounts to a payment of $A10.57 per hour.
That is, less than 60 per cent of the legal minimum wage.
But it is much worse than that.
In the last week a – Document – was released under the guise of the Senate Estimates process which reports on the way the government punishes CDP participants for what it deems to be unacceptable behaviour.
Here are the facts that were provided by an officer representing the Prime Minister and Cabinet Portfolio under interrogation during the hearing on Friday, October 21, 2016 by Opposition Labor Senator Patrick Dodson.
The Government was required to return a written answer to the Senate Committee on December 2, 2016. The document records that answer.
1. There were 33,000 CDP participants working for largely private contractors under contract to the Federal government.
2. In the June-quarter 2016, of those 33,000, “12,235 job seekers received financial penalties”
3. For the year 2015-16, there were 146,654 “financial penalty events” (20,409 “unique job seekers), meaning the same persons were fined at least more than once.
4. Of those 20,409 people penalised, 18,325 were Indigenous. So disproportionately over-represented.
5. Where there is no alternative work (such as in the Northern Territory) the fining was more extensive.
The evidence is then clear. I spent nearly 2 years working on regional projects in remote NT areas (between 2012-2014) and the results on loss of income support are devastating.
People go hungry, disease increases, and children are neglected.
Previous data showed that “6,000 people had their work for the dole payments suspended for eight weeks between July and December 2015” (Source).
It is also the case that the CDP participants have to work longer hours than other work-for-dole participants.
The ABC report (October 3, 2016) – Remote work for the dole scheme ‘causing more harm than good’ – indicated that:
Under the program, participants are required to attend work for the dole for five hours per day, on five days a week, all year round.
By comparison, non-remote programs do not include any work for the dole requirements until the second year … people in remote communities were incurring financial penalties at 70 times the rate incurred in the rest of the community.
A key player in the sector (from Jobs Australia) was quoted as saying:
Wherever possible, Indigenous and other Australians should be helped into work, and for Indigenous people who suffer higher rates of unemployment, absolutely … But the reality of the labour markets in remote communities is there are not enough jobs to go around.
Even if every job being performed in those communities was being performed by an Indigenous person, there would still not be enough jobs to go around.
The arrangements for CDP need to take account of that, rather than pretending that by requiring people to turn up for five hours a day for five days a week, it’ll get them ready for work that actually doesn’t exist.
Pretty sound logic.
As food for thought, a major reason the fines were the so-called “No Show No Pay” rule. Many people often ask me whether under the Job Guarantee, workers would be paid if they didn’t show up for work.
The answer, in my version of the Job Guarantee, is that they would not be paid unless there was a sound reason, as in any job.
But there is no inconsistency in my criticism of the CDP in this respect and the requirement that workers have to show up to the Job Guarantee to be paid.
First, there is choice under the Job Guarantee. Under the CDP there is no choice of work or contractor or case manager.
Second, a crucial aspect of making job creation schemes effective is attending to other constraints on participation, such as housing and transport.
If you read my work you will know that I advocate a strong ‘social wage’ supplement to the Job Guarantee wage, which itself would be a socially acceptable minimum wage – not an impoverished unemployment benefit below the federal minimum wage when expressed in hourly terms.
This social wage component would provide first-class and free public transport for Job Guarantee workers and provide adequate housing and skills necessary to maintain the adequacy of that housing.
In remote areas, transport and housing is shocking. Further, it is difficult to adjust from unemployment to working in these areas without additional support in these areas.
Third, first-class and free health care would be provided to all Job Guarantee workers, including assistance to escape drug and alcohol dependencies. A No Show for these reasons would not lead to a loss of wage as long as the worker was participating in the appropriate health care program.
Fourth, mental illness is rife in remote communities, including episodic illness. A Job Guarantee would be tailored to suit the participants and ensure that supplementary clinical support was available and provided at no charge to those who relied on it.
Once you take into account those differences, then there is no inconsistency.
Australia is racing to the bottom of nations in terms of protection of human rights. We lock up those seeking refugee status indefinitely on remote Pacific Islands, oversee murder in these prison camps by contracted security staff, and punish our own citizens who most need state support.
Nice play really!
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.