The challenge of inequality of opportunity in Australia
Keynote address at the South Australian Council of Social Service (SACOSS) Poverty - it's closer than you think campaign conference
Adelaide
Thursday 28 July 2005
I thank SACOSS for the invitation to join with you in this Conference calculated to raise awareness in South Australia about issues of poverty and disadvantage among your fellow-citizens. Having been out of action with some physical problems for the last few weeks I will today make a relatively brief speech which I hope will serve perhaps as a useful backdrop to a panel discussion and audience participation session on these important matters.
I approach this subject with a considerable degree of sadness, for what this Conference is addressing is part of a wider and deeper unravelling of philosophies, practices and assumption that shaped what we have liked to think of as the essential characteristic of the Australian nation still best summed up by the concept of the "fair go." Despite record economic growth over the last fourteen years providing the opportunity to strengthen the social fabric by addressing the needs of the underprivileged the opposite has occurred both revenue and expenditure decisions have been skewed toward the more affluent. Wayne Swan, the Shadow Treasurer, puts the point well in his recently published book "Postcode the splintering of a nation" - "The Australian social fabric has become a patchwork quilt of the forgotten homeless, the hidden unemployed, the working poor and a middle class that is fragmenting, with one part doing well but the other under increasing financial pressure."
Some conservative commentators have sought to diminish concern by suggesting that the work of the National Centre for Social and Economic Modelling (NATSEM) has exaggerated the dimension of the problem. Using the half average wage poverty line NATSEM studies suggest that, in 2000, 2.4 million Australians including 743,000 children were existing on less than half the average wage i.e. for an average family of four, existing on $416 per week.
I dont intend to pursue the statistical dispute but make two other points. First, even if one were to accept for the sake of argument the suggestion from the conservative think-tank the, Centre for Independent Studies, that the figure is around one million, such a figure is an obscenity in a nation of our economic capacity.
Second, and more fundamentally, one needs to take head on the conservative argument that people confuse poverty with inequality. Substantial inequality of incomes is of course relevant to poverty but at least as significant is the matter of inequality of opportunity. It is in this sense that the terms "poverty" and "social exclusion" have become increasingly, and rightly, interchangeable among European organisations like the E.U., the O.E.C.D, and the I.L.O. And, of course, this identity of concept is reflected here in South Australia in the Government's Social Inclusion Board, chaired by Monsignor David Cappo.
Again I think Wayne Swan has put it well: "Its (social exclusion) basic point is that entrenched poverty is generally caused when people are excluded from participating in the mainstream economic and social life of the nation whether through chronic illness, lack of skills, lack of jobs or lack of access to the services necessary to the finding of a job like transport, childcare, and the internet. Social inclusion policies recognise the extremes of the "new economy" characterised by workforce flexibility, new technologies and new skills; their aim is not to wind back economic reform but to allow more people to participate in the new economy It is an attempt to move beyond the narrow definition of poverty as a lack of resources as telling as that definition is to a definition that encompasses all the factors that prevent people from participating in their community."
In this context, nothing is more calculated to entrench poverty and pervert the concept of the "fair go" than the very deliberate policy of the Howard government in the field of education. Dr Craig Emerson (Federal Member for Rankin), in a soon to be published book, has brought together a damming indictment. He points out that more than two-thirds of students were enrolled in government schools in 2003 but virtually all of the growth in a 20 year period from 1984 has been in private schools. Enrolments in Catholic schools increased by 17%, in independent schools by a massive 118% and in government schools by less than 1%.
As parents move their children out of government into private schools the students remaining in many government schools are increasingly from disadvantaged backgrounds. Emerson quotes the Allen Consulting Group (2004): "Left unchecked, this situation is likely to worsen. The increasing concentration of students from disadvantaged families in the same schools and regions is making the job of those schools more difficult. They already have a significantly higher concentration of students from disadvantaged backgrounds and sometimes have more students with behavioural problems. As students move away the school often loses those families better able to contribute to school life and school resources."
In the face of these facts which cry out for an intensification of resourcing towards government schools, a funding shift towards private schools has been driven by the Commonwealth and continues to accelerate. In the five years to 2002 real Commonwealth funding per student increased by 12% in government schools, 32% in Catholic schools and 47% in independent schools.
The grotesque inequity of this prioritisation of funding becomes the more glaring when it is appreciated that 37% of students from low socio-economic backgrounds leave school between Years 9 and 12 compared with only 12% from high socio-economic backgrounds. At present about 50,000 young people drop out of school each year and never reach Year 12 the significant majority of them from less privileged backgrounds. The impact of this upon the individual and our society is really beyond measure but some attempt has been made to gauge the economic cost. Access Economics has estimated that if these young people were encouraged to complete Year 12 Australia's GDP would rise by 1.1% of GDP by 2040, or around $500 a year per Australian in today's dollars, and the extra budgetary costs would be more than recovered by extra taxation revenue.
The same pattern of bolstering the already privileged and restricting opportunities for the lower-income section of the community is also being manifested in the post-secondary education sector. This government has brought $200,000 degrees to Australia, allowing students with marks to buy their way into University ahead of better qualified students. By cutting A$5 billion from Australian universities, massive HECS fee hikes and refusing to index university grants, this government has put the cost of high education beyond the reach of many Australians. What is emerging is the very antithesis of a sane and decent society, a prescription for helping to entrench poverty and social exclusion the totally unacceptable situation where the capacity of a young Australian to undertake tertiary education is dependent more on the size of the parents' wallet than his or her intrinsic talent.
Most thinking Australians are concerned about John Howard's approach to foreign policy in lock-step with the Americans, as reflected most tragically in his total identification of Australia with the disastrous American adventurism in Iraq. Perhaps less well appreciated, but as deeply disturbing, is the Americanisation of social policy in Australia under this government which is inexorably leading to the creation of a significant under-class in this country, as in America.
Two outstanding American economists, some fifty years apart, have highlighted this sad phenomenon. J.K. Galbraith in the 'Affluent Society' wrote in 1958: "People are poverty stricken when their income, even if adequate for survival, falls radically behind that of the community. Then they cannot have what the larger community regards as the minimum necessary for decency; and they cannot wholly escape, therefore, the judgement of the larger community that they are indecent. They are degraded, for, in the literal sense, they live outside the grades or categories which the community regards as acceptable." (P.252)
Writing nearly fifty years later one of America's most respected economists gave a contemporary reflection of Galbraith's concerns. What Paul Krugman had to say in an article in the New York Times on 10th June this year has so much resonance for Australia today that I believe it is appropriate to quote rather fully from it:
"Baby boomers like me grew up in a relatively equal society. In the 1960's America was a place in which very few people were extremely wealthy, many blue-collar workers earned wages that placed them comfortably in the middle-class, and working families could expect steadily rising living standards and a reasonable degree of economic security.
But that was another country. The middle-class society I grew up in no longer exists.
Working families have seen little if any progress over the past 30 years. Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labour force or working longer hours, not rising wages.
Meanwhile, economic security is a thing of the past: year-to-year fluctuations in the incomes of working families are far larger than they were a generation ago. All it takes is a bit of bad luck in employment or health to plunge a family that seems solidly middle-class into poverty.
But the wealthy have done very well indeed. Since 1973 the average income of the top 1 percent of Americans has doubled, and the income of the top 0.1 percent has tripled.
Why is this happening? for now let me just point out that middle-class America didnt emerge by accident. It was created by what has been called the Great Compression of incomes that took place in World War II, and sustained for a generation by social norms that favoured equality, strong labour unions and progressive taxation. Since the 1970's, all of those sustaining forces have lost their power.
Since 1980 in particular, U.S. government policies have consistently favoured the wealthy at the expense of working families and under the current administration, that favouritism has become extreme and relentless. From tax cuts that favour the rich almost every domestic policy seems intended to accelerate our march back to the robber baron era.
It's not a pretty picture which is why right-wing partisans try so hard to discredit anyone who tries to explain to the public what's going on.
These partisans rely in part on obfuscation: shaping, slicing and selectively presenting data in an attempt to mislead. For example, it's a plain fact that the Bush tax cuts heavily favour the rich, especially those who derive most of their income from inherited wealth. Yet this year's Economic Report of the President, in a bravura demonstration of how to lie with statistics, claimed that the cuts ' increased the overall progressivity of the federal tax system.'
The partisans also rely in part on scare tactics, insisting that any attempt to limit inequality would undermine economic incentives and reduce us all to shared misery. That claim ignores the fact of U.S. economic success after World War II. It also ignores the lesson we should have learned from recent corporate scandals: sometimes the prospect of great wealth for those who succeed provides an incentive not for high performance, but for fraud.
Above all, the partisans engage in name-calling. To suggest that sustaining programs like Social Security, which protects working Americans from economic risk, should have priority over tax cuts for the rich is to practice 'class warfare.' To show concern over the growing inequality is to engage in the 'politics of envy.'
But the real reasons to worry about the explosion of inequality since the 1970's have nothing to do with envy. The fact is that working families arent sharing in the economy's growth, and face growing economic insecurity. And there's good reason to believe that a society in which most people can reasonably be considered middle-class is a better society and more likely to be a functioning democracy than one in which there are great extremes of wealth and poverty.
Reversing the rise in inequality and economic insecurity won't be easy: the middle-class society we have lost emerged only after the country was shaken by depression and war. But we can make a start by calling attention to the politicians who systematically make things worse in catering to their contributors. Never mind that straw man, the politics of envy. Let's try to do something about the politics of greed."
As I say Krugman's comments about contemporary America, the Bush Administrations policies and the right-wing critics could be directly translated to Australia today. Nothing better illustrates this unfortunate Americanisation of social policy by this Australian government than its radical proposals in the area of industrial relations. These proposals represent a complete perversion of the Australian tradition dating back to the end of the nineteenth century which saw the creation of legislation, judicial tribunals and practices calculated to protect the weak and offset what Adam Smith himself said was the intrinsic inequality of bargaining power between individual employees and their employers. An essential element of that structure was the right of individual workers to be represented by trade unions in collective bargaining and in proceedings before the industrial tribunals. The other foundational element dating from the Harvester judgement in 1907 was the establishment of a basic living wage later the minimum wage below which no one could be employed.
The government's proposals are calculated to destroy these fundamental principles and restrict the capacity of independent arbitral tribunals to protect the standards of the most vulnerable members, or potential members, of the workforce. What ability does a young man or woman have to protect themselves when confronted by an employer with a take-it-or-leave-it individual workplace agreement? Some idea of what is involved is provided by the first paragraph in last Saturday's Sydney Morning Herald (23rd July): "The government office charged with policing individual workplace contracts has approved a string of agreements that strip workers of paid holidays and sick leave, extend working hours and have no provision for shift or holiday penalty rates."
Make no mistake. What we are witnessing is a calculated initiative on the part of the Howard government to destroy the very ethos of an industrial relations system that has embodied the concept of "the fair go" to protect the most vulnerable in our society. It is the Americanisation of labour relations in this country which will see the emergence of that employed underclass so properly deplored by Krugman in his own nation.
No observation on this general subject of poverty and social exclusion is
complete without reference to the special plight of our Aboriginal
Australians. The latest, independent, assessment of the massive disadvantage
suffered by the Aboriginal people is provided by the report, Overcoming
Indigenous Disadvantage submitted to the Council of Australian Governments
by a Committee headed by Gary Banks, the Chairman of the Productivity
Commission. While pointing to marginal improvement in the areas of
employment and education Banks' report painted this bleak picture:
life expectancy 17 years less than the rest of the population,
infant mortality twice as high,
incidence of diabetes two to three times higher,
indigenous students half as likely as non-indigenous students to continue to
year 12,
suicide rates twice the national rate,
homicide rates six times higher and
imprisonment rate is 11 times greater than for other Australians and is
increasing dramatically for women in particular.
This report went to C.O.A.G. but the recent form of the Prime Minister in
that forum does not give much ground for hope John Howard vetoed a
proposal to discuss collective Commonwealth and State action to address
poverty at the June 2004 meeting of C.O.A.G.
As Krugman said, reversing these trends he identifies in the United States won't be easy and I am afraid that judgement is equally applicable here in Australia. But that is no reason for despair. I urge ACOSS and other organisations who are in daily contact with the realities of poverty and social exclusion to keep up the process of exposing those realities. I believe such pressure not only upon government but on all political parties should aim at the establishment of a Royal Commission with full powers to investigate these issues and to make recommendations for their alleviation. I cannot believe that Australians, when confronted with a detailed exposition of the poverty and lack of opportunity of so many of their fellow citizens, will not be prepared to support positive government action to remove this blight from our society.