Inequality And Poverty In Australia

Why did Australia not manage to make any progress in the fight
against poverty over the decade despite falls in unemployment and
steady economic growth in that period? (Harding, Lloyd and Greenwell
2001)
The International Day for the Eradication of Poverty was held on
October 17 2002 as part of the Uniting Nations Decade for the
Eradication of Poverty 1997-2006. This article will review some
current research on the state of the Australian labour market, income
inequality and poverty in Australia. Government reforms proposed by
the Brotherhood of St Lawrence will also be considered.

Unemployment and Under-employment

Labour market trends have a pervasive role in shaping the patterns
of income, inequality and poverty (see discussion in March edition
(2002) of Pointers). The fact that there was only one job for
every six people seeking work (in Saunders ed. 2000), decreasing job
security through the increasingly part time and casualised nature of
work were some of the issues explored. Recent statistics confirm this
rather grim picture.

In September 2001 there were

  • 672,500 officially unemployed
  • 563,500 “underemployed”
  • 800,000 wanting more work but not currently looking
    (Frances, 2002 quoting Australian Bureau of Statistics, September
    2001)

Underemployment rose by 20 per cent in the past year with 355,000
part time workers indicating their desire for full time work at the
same time as the number of full time positions decreased by 13,000.
All job growth in the 1990s was in the part time or casual sectors.
There was a drop of 51,000 in the number of full time positions. At
the same time, the wage gap between permanent and casual workers
increased (Frances 2002).

Other research indicates that one million children live in
households where there is no parent in the workforce (Howe, 2002. BSL
website). Moreoever, of those Australians living in poverty, it has
been found that one in five are actually in paid work, this group
often referred to as the “working poor” (Harding and
Szukalska 2000).

Trends in Income Distribution: 1996 – 2001

Comparisons of individual weekly incomes as gathered by the 2001
Census are shown in the figure on page 1.

Lowest Income Earners: At the time of the 2001 Census just over
one quarter of the population 15 years of age and over received an income
of less that $200 per week. Six per cent reported nil / negative incomes.
Around one fifth received between $1 and $199, which is around 9 per cent less
than in 1996 (30%), this category having experienced the greatest shift. For
reference, Newstart payments for single people aged over 21 without children are
$187 per week or $233 if eligible for the maximum rent allowance. Note that
those under 21 years receive lower Newstart payments and rent assistance has
several gradations depending on whether the person lives alone, shares accommodation or
pays a low rent. This means that not all welfare recipients fall into this
category (rates as of 20 September 2002
http://www.centrelink.gov.au).

2nd Lowest Income Earners: Around 21 per cent of the population received an
income of between $200 and $399 per week with almost no change in the
proportions of the population in this group since 1996. The median
Australian individual weekly income was situated in the $300 to $399
range in 2001.

2nd Highest Income Earners: Just under 22 per cent of the population recieved
incomes of between $400 and $699 per week, a slightly smaller
proportion than in the 1996 figures.

Highest Income Earners: Around 22 per cent of the
population received incomes of more than $700 per week compared with
only 14 per cent in 1996. This represents an increase of 8 per cent
and is second in size only to the change that occurred in the
$1 – $199 income group, which decreased by 9 per cent.

  • Around 12 per cent received incomes of between $700 and $999
    (compared with 9% in 1996)
  • Approximately 7 per cent received between $1000 and $1499
    (approximately double the 1996 percentage).
  • Almost 4 per cent received incomes of more than $1500 per week
    (also double the 1996 percentage).

This data needs to be interpreted with caution. In looking only at
gross individual weekly income, no distinctions are made between the
unemployed, those working part time or full time, those studying and
those engaged in home duties or child care. A person stating a nil
weekly income could be homeless, supported by a partner or operating
a business.

It is accurate to observe, however, that the greatest changes in
weekly income were a decrease among those in the lowest income group
and an increase in the highest. Thus, while the proportion of low
income earners decreased and middle income earners remained
relatively constant, the proportion of high income earners increased
quite strongly.

In the context of this finding it is interesting to note that 80
per cent of the jobs created between 1980 and 2000 paid less than
$600 per week. While the number of middle and upper middle jobs
decreased in that period there was an increase in jobs paying very
high wages (in Frances 2002).

Income Expenditure in Australia

The Australian Bureau of Statistics (ABS) analysis of Australian
income and expenditure adds detail to the picture particularly in
terms of the relative lifestyles of the very low and higher income
earners. They compared Australian expenditure on three categories,
comparing the expenditure of those households with the highest 20 per
cent of incomes, and those household in the lowest 20 per cent.

1. Basic goods and services i.e. housing and amenities,
food, transport, health.

On the whole, for every dollar spent by a low income household, a
high income household spent $2.10 on basic goods and services. Those
with high incomes were able to devote considerably more income to
mortgage repayments, the purchase of vehicles and to dining out.

2. Additional goods and services i.e. post secondary
education, recreation, household furniture.

On average, households with high incomes spent 2.5 times
more on additional goods and services than did households with low
incomes, spending significantly more on wine, holidays, computer
equipment and education fees.

3. Expenditure on selected assets and liabilities i.e.
home ownership and associated costs, superannuation.

Overall, high income earners spent on average 6.1 times the
amount of low income earners on repaying their mortgages, other
capital housing costs, and superannuation and life insurance (ABS
2001).

It is important to note the discretionary element in income
expenditure according to the ABS. Just because a person spends less
does not imply a poorer lifestyle. On the other hand, it could be
argued that whether a person “chooses” to purchase
medical insurance or to send their child to a private school is
pre-empted, if not determined, by their income. Nonetheless the
benefits of such purchases may be evident when elective surgery is
required or when the child receives his or her tertiary entrance
ranking (TER).

Implications of Inequality

Unemployment, income and expenditure are useful in gaining an
informed view of the extent of inequality and poverty in Australia.
It is important to look beyond the data however, to see the some of
the implications they have for individuals, families, communities and
Australia as a whole.

Among the implications of unemployment and poverty for individuals and
families is the fact that these families have less purchasing power and thus
decreased choices in their lifestyles in a consumer oriented society. Low
incomes directly impact leisure pursuits, holidays, children’s education and health
care.

Another set of implications revolve around the fact that
unemployed adults are often home during the day, with little to give
them motivation and affecting levels of health and well-being.
Unemployment contributes to lack of self-esteem, to boredom and to
depression (Frances 2002).

There are also implications for the life of local communities and
for the wider society. Unemployment and poverty leads to the
emergence of distinctive “work rich” and “work
poor” communities (Saunders 2000). “Work poor
communities” often have lower levels of social capital in as
far as unemployed people do not have the widespread networks of
contacts that people who are in the workforce often have. There is
often a social stigma attached to living in a “work poor”
community.

Low self-esteem, the stigma of unemployment and lack of control
over one’s life can lead to substance abuse. Drugs and alcohol can
help by numbing these negative experiences. Domestic violence can
sometimes factor in such situations. Crime may increase as the
divisions between rich and poor are exacerbated.

Division between “work rich” and “work poor”
communities can often become cultural in nature. As differences
between such communities grow, mutual understanding becomes more
difficult and compassion is less readily expressed.

The Extent of Poverty and Who is Affected

The Smith Family’s report Financial Disadvantage in Australia 1990 –
2000: The persistence of poverty in a decade of growth
(Harding, Lloyd
and Greenwell 2001) indicates that in 2000, about one in eight Australians or 13
per cent lived in income poverty and that the severity of poverty had increased
in the later part of the 1990s.

  • Children (15%) were at greater risk than adults (12%).
  • Sole parents and young people were at greater risk
  • By 2000, males were more at risk than females owing to a decline in
    the rate among female sole parents. Recent changes in the industrial
    and labour market conditions have had a greater impact on males than
    females.
  • Poverty among the aged increased in the decade between 1990 and 2000,
    but remained constant among aged people who owned their own homes.
  • Home owners were generally at less risk of poverty than mortgagees
    and renters. Of those aged 25 – 44 in this situation, one fifth lived
    in poverty on an after-housing basis.
  • Geographically, New South Wales had the highest poverty rate in 2000
    (14%). Significant increases had occurred in all states except
    Queensland and Tasmania.

There are many ways of calculating poverty and much disagreement
about where lines should be drawn to indicate poverty. However, The
Smith Family’s research unit used twelve different measures of
poverty and found that all but one of them indicated that poverty had
increased over the last decade. The twelfth way of calculating it
suggested that poverty had remained stable. Their conclusion was that

Australia did not manage to make any progress in the fight against
poverty, despite falls in unemployment during the period (Harding,
Lloyd and Greenwell 2001).

Economic Growth and Income Inequality: Australia and
Overseas

Could the research findings be symptomatic of global economic
shifts, market de-regulation and the rise of neoliberalism?
International research also links economic growth with inequality.

The rise of inequality in Australia surpasses many OECD countries,
including the USA and UK. Frances (2002) compares countries using the
increase in inequality as shown in changes in the “Gini
co-efficient” which measures inequality in disposable income.
In Australia, the average annual increase in inequality since 1989
has been around 0.5 per cent: higher than any other country in the
comparison (UK, USA, Japan, Germany, Italy and Canada). In the USA,
the average annual increase in the Gini coefficient was 0.4 per cent.

One view is that economic growth benefits everyone even if the
rewards are unequal. However, research by the Luxembourg Income
School indicates that countries in Europe have experienced less
economic growth. Yet their policies have increased the standard of
living among children living in families experiencing poverty to the
extent that it exceeds that of comparable groups of children in
countries that have had strong economic growth. In the study,
standard of living was calculated by examining the purchasing power
of a particular income in that country. For example, rich children in
the USA are better off than rich children in any other country.
However, the poor children in the USA were worse off than poor
children in any of the other countries in the study except the UK
(Frances 2002).

Attitudes Toward Poverty and Government Reform

We can’t abolish poverty because it is a function of
individual behaviour
(Tony Abbott in Gordon M & Gray D 2001).

The public is increasingly rejecting the notion that the poor are
to blame for their condition due to laziness or poor management
according to Nic Frances, the executive director of the Brotherhood
of St Lawrence and Peter Saunders, former research manager of the
Australian Institute of Family Studies. They hold that people are
much more aware of the structural explanations of poverty (eg. labour
market performance and job insecurity), that support for services for
the poor, and policies for addressing unemployment are greater than
believed and that

Those in government who persist in blaming the victim seem
isolated from mainstream community, whose views on the causes of
poverty suggest that they deserve better treatment than they
currently get (Saunders 2002).

In light of this, the Brotherhood of St Lawrence has proposed a
number of government reforms to raise the money needed to create work
and fund services. Their proposed reforms target rebates and
incentives that largely benefit the upper middle to upper income
groups at the expense of lower income earners.

They propose that the health insurance rebate be abolished as it
drains money from public hospital system to subsidise the private
sector. The rebate currently provides more government assistance than
is allocated to mining, manufacturing and primary agricultural
industries combined (Frances 2002). Research indicates that half the
rebate goes to the 20 per cent richest households and around three
quarters to the wealthiest 40 per cent. At the same time, they note
that while $360 million per year indirectly goes to private dental
care, a $100 million per year program for low income families has
been abolished.

Other proposals were for the abolition of the four wheel drive
tariff which is mainly benefiting urban, private users. The higher
fuel consumption of these vehicles was noted as being in conflict
with the governments own policy of reduced fuel consumption by 2010.
Additional proposals were reform to the Superannuation Subsidy for
high income earners, the current fringe benefits system, employee
shares and options, work related deductions, artificial income
splitting and exemptions from the Medicare levy. The underlying
rationale was that the benefits of such schemes go entirely to high
income earners at the expense of much needed job creation programs
and social services to low income earners. The combined revenue
raised through the proposed reforms was 6.6 billion. (For more
information see the Background Paper for National Job Creation,
2002.)

Sharon Bond
References
Australian Social Trends 2001. Australian Bureau of Statistics,
Canberra.
Centrelink Website:http://www.centrelink.gov.au

Frances, N (2002) Background Paper for National Job Creation,
http://www.bsl.org.au.

Gordon, M and Gray, D (2001) “Abbott view stirs debate on poverty”;
The Age,
Wednesday 11/07/01

Harding, A Lloyd, R and Greenwell, H (2001) Financial Disadvantage
in Australia 1990 – 2000: The persistence of poverty in a decade of growth
,
The Smith Family, http://www.smithfamily.com.au.

Saunders, P ed. (2000) Reforming the Australian Welfare State,
Australian Institute of Family Studies, Melbourne. 2000

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