Chapter in Basic Income Guarantee and Politics Richard K. Caputo (ed), Palgrave Macmillian, New York, 2012 pp.153-176
Australia has had a federal social security system since the inception of the 1908 age and disability pensions legislation in 1910. From then until the late 1980s the system became more comprehensive and generous. It was and still is a categorical and means tested system paid from the Commonwealth government’s general tax revenue. It provides assistance to older Australians, to families with children and to people when they are sick, unemployed, experiencing a disability or illness and to those enrolled in some education programs. The Commonwealth system runs alongside private superannuation, commercial unemployed and sickness insurance and a war veteran’s benefit system.
In 1975, in its First Main Report, the Poverty Inquiry, headed by Professor Ronald Henderson, recommended the introduction of a system of guaranteed minimum income that had the potential to ensure that no Australian permanent resident would be left without some form of financial assistance. Since the late 1980s, in response to economic fundamentalist and neoconservative attacks upon welfare assistance and social security recipients, Australian governments have tightened conditionality and imposed increased obligations upon those needing to rely on social security.
The seesawing between a universal philosophical approach and an individualized categorical means tested charity approach to the provision of social security assistance has been part and parcel of the income maintenance debate in Australia for well over a century. This chapter will describe that debate, particularly some of its most recent manifestations, and attempt to predict the direction in which it is heading.
Australia began as a series of British colonies, which by the end of the nineteenth century had become states, which subsequently federated in 1901. There was never an established poor law system as in England – rather welfare provision was provided by church based charities and state or local governments. Despite the absence of poor law administrators, the attitudes with which much of the delivery of welfare assistance was imbued shared a great similarity with that of the British poor law system. Given that the overwhelming majority of migrants had arrived from Britain, this is hardly surprising.
By the turn of the twentieth century, there were other influences at work, deriving in part from the tradition of Bismarck’s Germany and other continental European traditions and emerging political movements. Indigenous Australians, once subdued, were controlled on government reserves and church missions. Race was a predominant consideration in the young Australian nation. The immigration act was the first piece of legislation passed by the Australian Parliament. Permanent Asian residents were not provided with social security until the 1940s. From 1945, some Indigenous Australians who could establish they had had previously maintained full time work for considerable periods of time were paid unemployment or sickness benefit in the event of unemployment or illness. Although in 1959 Commonwealth social security legislation was amended to place Aborigines on the same footing as other Australians (Kewley 1980, p.122, F/n 7), city dwelling Aboriginal people were not properly incorporated in the social security system until the mid1960s and their rural and remote cousins had a further decade’s wait before they were assisted.
In 1907 the industrial Arbitration Commission in the Harvester Judgment set a minimum wage sufficient for a male worker to support a wife and three children. Women’s wages were subsequently set at between 60 and 75 percent of the male wage until 1967 when an equal pay judgment was handed down. However because of the gender segregation of much of Australian industry, women still do not have full wage equality with men. Aboriginal workers were also accorded formal wage equality with other Australians in the late 1960s but because of continuing discrimination in employment and education and because of the remote localities in which many Indigenous people live there is still a huge gap in wage, health and educational outcomes between them and other Australians.
In 1908, legislation passed both houses of the Federal Parliament introducing pensions for citizens in the event of permanent injury or reaching the age of 60 for women and 65 for men. These pensions began to be paid in 1910 to aged citizens who could establish they were of good moral character and who had previously adequately supported their families. Invalid pensioners needed to establish they had resided in Australia for five years but were not required to pass a character test (Kewley 1973, p. 91). Means and asset tests applied to both pensions and applicants for an invalid pension had to establish their relatives could not maintain them. So, by the end of the first decade of the twentieth century, the full time white male workers (in unionized work) and their families had a minimum wage and social security cover in the event of permanent injury or old age.
In 1912, the social security legislation in relation to applicants who were legally blind was amended to allow for the payment of a blind pension without the requirement that they establish they were permanently incapacitated. All other invalid pensioners had to establish they could not work. In relation to blind pensioners “the desire was to provide them with every inducement to earn (Kewley 1973, p. 93).” This eventually led to subsequent changes, which provided legally blind citizens with a means and asset free pension. Such a provision has particular relevance in relation to Basic Income.
The Commonwealth Treasury Department administered social security until 1927, after which time a new department was set up. In this early period clear eligibility categories were established in order to facilitate accountable bureaucratic decision- making. Yet even then, discretion was widely used to determine who was/not of good moral character. It seems that blind musicians playing in the street caused consternation to the treasury officials who were uncertain as to whether they should be classed as working or begging and usually decided that they were beggars who should not be paid a blind pension (Jordan 1984).
Also in 1912, legislation was enacted which provided for maternity allowance to be paid to non-Asian and non-Aboriginal mothers. When the 1929 Depression hit Australia a third of the workforce was left without a job. There was no Federal unemployment benefit. Various state and local governments provided dole/rations in return for work and often forced men to move on after short periods allegedly to encourage them to find work. Pension payments were reduced and increased effort was put into making relatives support pensioners in the early 1930s. Any pension paid was held as a debt against the estate. This practice was abolished in 1936.
The Depression and the Second World War made a major impact on the Australian mindset and this subsequently led to increased solidarity and support for an expansion of the social security system. In 1941, a universal child endowment was paid for each child after the first, was paid to migrants with children a year after they entered Australia, was paid in respect to adopted children and could be paid to Aboriginal mothers provided they were not nomadic nor wholly dependent upon the Commonwealth or state government. In 1950 child endowment was paid in respect to the first or only child. This child payment was granted without a means test and was disregarded as income for taxation purposes (Kewley1973 Ch. 10).
The early 1940s saw legislation providing widows with a pension provided the child was under the age of 16 or under the age of 18 in full-time education and not employed. A pension was also paid to widows over the age of 50 whose youngest child was over 16 years of age. A woman who had lived in “a bona fide domestic relationship” with a man for a period of 3 years immediately prior to his death could be paid a pension provided she had custody of a child under the age of 16 years. A widow without children in “necessitous circumstances” could be paid a pension for up to 26 weeks following her husband’s death. Widows needed to have lived continuously in Australia immediately prior to her husband’s death. In 1960 a woman whose husband was in jail for longer than six months could if she had a child be paid a widow’s pension.
Unemployment and sickness benefits were provided for in the 1944 legislation that came into effect in July the following year. Aboriginal Australians who worked for award wages in the towns qualified for benefit in times of unemployment or sickness. This 1944 legislation created a “special benefit” that was to be paid those in financial need who did not meet the totality of eligibility requirements for other social security payments. The special benefit was paid at the discretion of the Director-General to a person who “by reason of age, physical or mental disability or domestic circumstances, or any other reason, … is unable to earn sufficient livelihood (Kewley 1973 p.269). This benefit was to be paid at the same rate as the unemployment and sickness benefit. The special benefit was paid to a relative who was required to care for a sick or incapacitated child or parent. It was paid to people who could not meet the residency requirement for other payments. It is clear from the documents at the time that the special benefit was designed as a catchall benefit capable of providing anyone in financial need with sufficient income to sustain them when they were unable to establish eligibility for other benefits or pensions. The requirement that the Director-General use his discretion in granting the benefit meant that the benefit was not conceived of as being the equivalent of the French Minimum Insertion Income. Even so, when I worked in the Department in the mid-1960s the special benefit was a widely used benefit paid to people who were in the process of establishing their eligibility for another benefit or pension. This benefit could have easily been extended to become something similar to the French Minimum Insertion Income.
The Consolidation Act of 1947 brought all the Federal social security legislation together in one place and made the administration of a range of benefits and pensions much easier to manage. From then until the mid-1980s the generosity and range of benefits gradually increased. Some of these extensions to welfare provision will be elaborated upon later in this chapter following a discussion of universal income guarantees.
Throughout the entire period since federation no single ideological force has held total sway over the motivations of politicians controlling the social welfare system. There have been differing ideological positions taken by the public at large when particular pieces of social welfare legislation have been discussed. There have been times when support for universal provision of pensions and benefits has commanded greater approval in the parliament and the public generally. At other times the general mood has turned away from universal provision towards support for more targeting and means testing of social security (Mays forthcoming).
The major political parties have generally tended to have candidates with a wide range of views. The major parties on the right attract conservative, agrarian socialist, neo- liberal (economic fundamentalist) and small “l” liberals. On the left, the Labor Party has combined neo-liberal, small “l” liberals, laborist, social democrat, socialist and the occasional (undeclared) communist as candidates. Currently the Greens candidates are nature conservationists and further to the left on most social issues than the Labor Party. In the first half of the twentieth century the Communist Party attracted a significant following.
In relation to social welfare policies a number of competing ideas are likely to emerge in a parliament with such a range of political positions represented. It is not surprising that conservatives with their beliefs in traditional values, established order, the sanctity of private property and small government should champion the targeting of welfare benefits to those in most “need” and refusing those whom they believe should fend for themselves. This sieving out the “needy” from the “greedy” is a distinction harking back to the days of the poor laws and the concept of “less eligibility.” Conservatives, because of their belief in the imperfection of humans and their desire to enforce traditional values, want governments to impose obligations upon recipients in return for providing assistance.
Neo-liberals join with their conservative colleagues in such targeting of assistance and the imposition of onerous obligations upon recipients of social welfare because they know that such mechanisms decrease the number of people applying and thereby the amount of taxpayer’s funds needed. The conservative attachment to the sanctity of private property leads them to insist that welfare services should encourage thrift. Neo- liberals support such views because they can’t see further than the government’s economic bottom line.
Mainstream liberals are philosophically attached to the idea of individualism, freedom, self-help, property, progress, rule of law, and the free play of market forces. Neo-liberals join them in their belief in self-help and progress which in turn leads them to the old “rising tides lifts all boats” cliché without taking into account the need to ensure that everyone’s hull is in a sound condition prior to the turn of the tide. There seems little understanding that insufficient social security creates for many doubts that they will escape poverty even in prosperous times. Both mainstream and neo-liberals interpret the combination of freedom and the free play of market forces to insist that recipients take any available job, irrespective of how suitable it is for the individual. This leads them to limit the amount of assistance provided so as to ensure recipients are not tempted to stay on welfare indefinitely.
Some small “l” liberals have an attachment to equity whereas social democrats and socialists see themselves as striving for equality, albeit for social democrats attainment of equality is something to strive towards. Socialists and Marxists see equality as a prime and immediate goal. The socialist belief that treating unequals equally is as unfair as treating equals unequally confounds their desire for absolute equality yet leads them in the general direction of universal provision of welfare assistance. In this they are joined by social democrats.
The hallmark of the social democratic position is equality, government intervention, representative government, and the peaceful transition to socialism. The last flowering of this tradition in Australian social welfare was in 1973-5 during the Whitlam Labor government. The widows pension was extended to lone mothers, the necessity to pass a character test before an applicant was “deemed worthy” to receive a pension was abolished, and the government set in train a number of Inquiries designed to recommend ways to improve worker compensation and social welfare services generally. I worked in the Department at the time and the mood changed for many from being there to ensure that nobody got more than they were entitled, to a feeling that it was necessary to ensure that all people obtained the totality of benefits to which they were entitled.
It is not only conservatives and liberals who rely upon “the need for welfare assistance” as the prime justification for the supply of benefits. Marxists also rely on “need”; this is exemplified in their maxim “From each according to ability, to each according to need (Wikipedia 2011)”. In this statement Marxists are attempting to come to terms with their desire for both equity and equality.
Beyond the political ideological struggle described above there are other ideological tussles in the society generally and the welfare arena in particular. Feminists argue that discrimination on the basis of gender is not peripheral to an understanding of power in Australia but is a core feature which structures social interaction. The individual is the main unit utilized in relation to taxation but the social security system insists that the family is the appropriate unit to be used when determining means and assets when assessing benefit applications. Many people who might otherwise qualify for a benefit are refused payment because of the income of their partner. Conservatives see the family as the main vehicle for controlling reproduction and transferring property between generations. Marxists are divided between those who see the nuclear family as a major bulwark against ruling class oppression and those who envisage the family as the way the ruling classes ensure the reproduction of the next generation of exploitable workers.
In addition to gender the main organizing features of Australian society are class, age race and locality. Australia is a huge country but most people live in the capital cities or along the Eastern seaboard. Those living in the major urban conglomerations have better access to health, education and other services and live longer than their rural counterparts. Teenagers and young adults who were unemployed have been singled out for the imposition of the most repressive obligations through programs such as “work for the dole” and compulsory training by Labor and Conservative governments in the last decade and a half. Older unemployed workers frequently encounter employer resistance to employing them. Teenage social security recipients are paid considerably lower rates of benefit than are adult recipients. Class is an accurate determinate of lifespan. Racism is a daily experience for Aboriginal people whether they live in towns, cities or remote communities. As well as these ideological features, people with significant impediments find that they are regularly discriminated against in relation to employment, education and access to buildings. Recent governments have argued that many disability support pensioners do not have disabling conditions sufficient to warrant their being paid a pension and have shifted many to less generous unemployment benefits with onerous work search obligations (Mays forthcoming; Galvin 2004).
Income guarantees in Australia
The conservative Menzies government initiated the child endowment legislation. The widow’s pension legislation was put forward in 1942 by the incoming Labor government but had bipartisan support. Labor enacted unemployment and sickness benefit provisions and spearheaded the improvements in the Consolidated Act in 1947. Labor lost office in 1949 and Menzies returned to the Prime Ministership and stayed there until 1966. The conservatives continued in power for a further 6 years.
By the time conservatives relinquished office, despite Menzeis’s efforts to gradually extend social welfare resources and programs, poverty, particularly poverty amongst the aged, was starting to emerge as an issue. Writers like John Stubbs (1966) and Professor Ronald Henderson with his colleagues Alison Harcourt and John Harper (1970) played important roles in raising the issue of poverty. Church-run charities like the Brotherhood of St Laurence took leading advocacy roles. The McMahon conservative government, which was to lose office in 1972, set up the Henderson Poverty Inquiry. The incoming Whitlam Labor government massively expanded the scope of the Poverty Inquiry.
In 1975, in the first main report of the Poverty Inquiry, Henderson set out (at Chapter 6 of Vol. 1 and Appendix 6 of Vol.2) a detailed suggestion for the introduction of a guaranteed minimum income in Australia. The income guarantee which Henderson proposed was intended to simplify and move towards unifying the social security and taxation systems and to treat those with stable and those with fluctuating income equitably. He wanted to reduce the emphasis on the various categories of pensions and benefits and make the withdrawal rate on earned income more transparent and hence understandable. Under the proposal, the population was divided between those who qualified for a social security benefit or pension whom he called “Categorical” and those who were not able to establish eligibility for an existing payment. He foreshadowed subsequently broadening the eligibility provisions in order that “no person at risk of poverty will henceforth be denied an income” (Henderson 1975 Vol. 1 p. 67, see also pp. 30-32). For those whom he called categorical, Henderson proposed a rate of payment at 106 percent of the poverty line but he suggested paying the non-categorical groups as little as 50 percent of the poverty line. He considered abolishing all categories within the system of income support but decided against it on the grounds that a simple guarantee at the poverty line for all would result in a taxation rate of 50 percent that he considered political unsalable (Henderson 1975 Vol. 1 p. 74).
The Henderson proposals were compatible with the existing social security system in that they were in the form of a demogrant, expressed as a social right, flat rate and non-contributory. He considered the guaranteed minimum income would make the income maintenance system in Australia more humane, less categorical, and more comprehensive. It would have done all this, however, the basic weakness of the proposal was that it failed to dismantle the existing system and restructure it in a way that would facilitate the complete integration of the income maintenance and taxation systems. The Henderson proposal would have reduced but not abolished the advantages accruing to people with fluctuating incomes compared with those in stable employment. His proposal to abolish the existing progressive taxation system and replace it with a proportional tax would on the face of it appear to advantage the more affluent. He did, however, propose a 5 percent tax surcharge for incomes over $240 per week as at August 1973 (Henderson 1975 Vol. 1 p. 78).
The major problem with the Henderson proposal was that dividing the population between the categorical and non-categorical, providing the categorical group with a guaranteed income equal too or better than the poverty line but only guaranteeing others an income of between 50 and 71 per cent of the poverty line would not decrease the desire of the non-categorical group to be considered categorical. Because it does not guarantee the non-categorical group an income above the poverty line it cannot ensure that some Australians would not remain in poverty. Another disappointing aspect of the Poverty Inquiry’s guaranteed minimum income scheme was that it used the family as the basis of calculating the appropriate rate of benefit. It did envisage older children living in the family home being paid in their own right.
Also in 1975 a group of senior public servants predominantly from Treasury and calling themselves the Priorities Review Staff proposed introducing a negative income tax or a tax credit scheme. Like the Henderson proposal, they proposed a two-tiered scheme that treated more favorably those qualifying for pensions and benefits than those who could not establish their eligibility for assistance. The categorical group would receive 100 percent of the Henderson poverty line (non-working) and the non-categorical group would receive 55 percent of the poverty line (working). They suggested a proportional tax rate of 43 per cent for prime earners and a 33 per cent tax rate for a second earner in a family. They recommended a tax surcharge of 5 per cent for those with an income of $17,000 – $20,000, rising to 25 per cent for those over $58,000 (Priorities Review Staff 1975 p. 34). They too adopted the family as the unit of income for assessing their income guarantee.
The Priorities Review Staff had a similar desire to Henderson in wanting to mesh the tax and social security systems, provide assistance to those poor people who were not assisted by existing categorical schemes, and generally simplify the social welfare system. Whereas the Poverty Inquiry wanted to put in place an increased range of services, the Priorities Review Staff wanted to limit or abolish as many supplementary services as possible. The Priorities Review Staff set out a way to mesh their proposal with the recommendations of the Woodhouse National Compensation Scheme (1974).
The Woodhouse injury compensation scheme has continuing relevance because, in 2011, the Productivity Commission has made similar recommendations. The Woodhouse Commission was charged with designing a comprehensive income support system for injured, disabled and sick people. Woodhouse recommended that people who were sick or disabled would be paid a benefit at 85 per cent of their previous wage up to an amount of $425 per week. Non-earners were to receive $42.50 per week. Low income earners would be paid at 100 per cent of the minimum wage. His scheme was designed to replace the expensive worker and road accident legal jungle in which many wait an inordinate time before settlement and then some get windfall settlements whilst others receive nothing. It was intended to fund the scheme via a 2 per cent levy on wages and 10 cent per gallon petrol tax. In addition the government would provide $370 million annually (the amount it was then spending on invalid pensions and sickness benefits [Woodhouse 1974 p.260]).
Another contemporaneous Inquiry was asked to design a national superannuation scheme to replace the means tested age pension. This Hancock Committee failed to come to a unanimous conclusion and brought down a majority and minority report in 1976. The majority report recommended a pension of 25 percent of the average weekly earnings, with a means-tested supplement raising the income to 30 percent of the average weekly earnings for those without other income. The more affluent would receive the base 25 per cent without a means test plus a purchased pension dependent upon contributions. The proposal was to be funded by an extra 5 per cent income tax levy on income over 30 per cent of average weekly earnings. The minority report thought Hancock’s proposal placed too high a burden on low income earners and recommended a pension without a means test for all over 65 years of age and supplementary means tested benefits.
A common feature of all these Inquiries was they were all critical of the existing categorical means-tested social welfare system. Even so none of these proposals could entirely wrench themselves away from the categorical targeting of particular groups of people. Both the majority and minority Hancock proposals would have guaranteed an income to the elderly – but the age pension already provided most poor older people with an income guarantee. The Woodhouse scheme would have rationalized workers and road accident compensation as well as unifying sickness benefit and invalid pension provisions but would have still left many who did not fit into the existing categorical welfare system without assistance. The Woodhouse and Hancock majority reports both extended the inequalities of the employment situation into the post-work phase of peoples’ lives.
Henderson (1977 p.103 and p.108) rejects the recommendations of both the Woodhouse Inquiry and the Hancock majority report on equity grounds. He quotes the words of the minority report of the Hancock Inquiry to help establish his case: “Benefits payable under the scheme (Hancock) in 1977 would require an estimated 5.1 percent of Gross Domestic Product. This may be contrasted with the 2 percent required to finance the age pension system.”
Only the Henderson and Priorities Review Staff suggestions had the potential to ensure every Australian received an income. Neither would have resulted in equal or equitable distribution but either of them would have rationalized and modernized the social security system simplified the tax and social security combined withdrawal rates and watered down the excessive targeting that is the hallmark of the Australian welfare system.
As mentioned earlier, the period of the Whitlam Labor government saw the last flowering of the social democratic philosophical position in Australia. There was a real concern that poverty should be addressed, that the social security system should be equitable, that people should obtain the totality of benefits to which they were entitled, and that Aboriginal people should be granted land rights to traditional lands, which had not, by then, been alienated to white interests.
The abolition of the character test and the expansion of the widows pension scheme by the addition of a separate but reasonably similar payment to single mothers with a child in their care exemplified the difference between the Labor government and the 23 years of unbroken conservative rule that had proceeded Whitlam’s 1972 electoral victory. Bill Hayden, the Minister for Social Security, described himself as a socialist and worked hard to promote equal treatment of recipients. A prime example of this was the considerable increases in the benefit rate that occurred on his watch.
Pensions, which had both income and asset means tests, were paid a substantially higher amounts than were unemployment, sickness and special benefits which had only an income means test applying to them. Traditionally there were three benefit rates for those aged 16-18 years of age, those aged between 18 and 21 and an adult rate. In February 1973, the Whitlam government introduced legislation providing “for a common rate of benefit, irrespective of the age of the beneficiary, and brought the rates to parity with those for pensions” (Kewley 1978 p. 125). This action was repeated four more times by the Whitlam government although on the last occasion in November 1975 and just before being dismissed from office the benefit rate for unmarried unemployed recipients under the age of 18 years was not raised in line with the other increases.
Perhaps the litmus test of generosity in Australian social welfare is the degree of robust enforcement of the “work test provisions” applying to applicants for unemployment benefit. In May 1973, Hayden believed the overwhelming majority of unemployment beneficiaries wanted work and instructed that there should be a less strict enforcement of the work test saying it was preferable that a few people took advantage of the system “than that people genuinely seeking work should be unfairly penalized” (Kewley 1980 p. 134)..Hayden and other Ministers declared themselves in support of generalized income guarantees as a way of rationalizing the hodgepodge of benefits, pensions and allowances (ACOSS 1975).
Whether the Whitlam government would have accepted the recommendations of the Poverty Inquiry in relation to the introduction of a guaranteed minimum income or the negative income tax proposals of the Priorities Review Staff, or adopted some of the suggestions of the Woodhouse or Hancock Inquiries cannot be known. Wider political events overtook the Whitlam government, in particular ill discipline amongst several members of the cabinet, the Khemlani overseas loans affair (Whitlam dismissal 2011), and losing its majority in the Senate led to the Governor General dismissing Gough Whitlam and installing the conservative Malcolm Fraser as leader of a caretaker government. The Fraser government won the subsequent general election. What can be asserted with confidence is that the Australian Council of Social Service produced two monographs supporting the introduction of a guaranteed minimum income.
Many social welfare academics and practitioners supported such a change in income maintenance policy whilst others were critical of such a change. Many of the papers written about Basic Income at the time and since then have been placed on the Basic Income Guarantee Australia web site. It is my belief that had the Whitlam government been able to retain office; some form of generalized income guarantee would have eventuated. The general thrust of the rationalization of rates of benefit aimed at developing equity between beneficiaries and pensioners signals the direction in which the Labor Party was heading.
The unemployed, and the young unemployed in particular, were to experience far stricter work and other eligibility tests under the Fraser government. In March 1976, The Fraser government announced that as of the end of that school year, school leavers would not be paid unemployment benefit until the start of the new school year. The agrarian socialist philosophical position of the conservative side of the parliament was revealed later that year when it was announced that farmers who had previously been denied unemployment would henceforth be assisted when experiencing financial hardship.
The Fraser Government did not raise the benefit rates for teenage beneficiaries in its entire three terms of office. By the time Labor regained office a considerable gap between pension and benefit levels had again emerged and the young were most severely affected by this change in thinking. In 1977, the conservative government did extend the supporting mothers payment to include lone fathers who had custody of one or more children. Fraser slightly amended the Northern Territory Land Rights draft prepared by the Whitlam government and pushed it through the parliament. Apart from these changes the period of the Fraser government was one of general continuity on the social welfare front.
Whitlam had abolished the means test for age pensioners over 75 years of age in 1973 and for those between 70 and 74 years in 1975. In 1976, Fraser removed the asset test for those over 70 years of age but retained an income test. In 1983, the Hawke Labor government was elected. In November of that year, Hawke reintroduced a slightly more generous income test for those over 70 years of age, compared with younger pensioners. In 1985 he reintroduced an asset test.
The mid-1980s to the early 1990s was a period of fiscal restraint in social welfare spending. Hawke had come to an accord with the trade unions to limit wage demands in return for tax, Medicare, and superannuation benefits. The Labor Party had traditionally opposed privatized superannuation because they feared it would undermine support for the age and invalid pension but times had changed as will be seen when superannuation is discussed in detail below.
The Fraser government changed the child allowance system to a family allowance system. Like the child endowment it was not subject to any income or assets test, nor was it taxable. Subsequent Labor governments basically retained the family allowance system but gradually applied mechanisms to limit payment when families had other income. In 2000, the conservative Howard government replaced the existing family allowance system with a family tax benefit that assists families, with incomes of up to $150,000 per annum, raise their children. This benefit is paid though the tax system and the amount received is in inverse proportion to other income.
The recession, in late 1980s and the early 1990s lead to a substantial rise in unemployment as well as a rise in interest rates. Brian Howe, who had been Minister for Social Security since 1984 was deputy Leader of the Keating Labor government from 1991-1995. Prior to entering parliament he had studied theology in Chicago 1967–69 before returning to Australia and serving as a Methodist minister in various parts of Victoria. He had been preoccupied by the idea of intergenerational welfare dependency at least since 1987. He took every opportunity to save funds in his portfolio. In the 1988 mini-budget, the most miserly reduction was the imposition of a stricter income test on (short-term) special beneficiaries who received payment for less than 13 weeks. The majority of those who received the payment were single women immediately prior to and just following the birth of their baby. In order to receive the payment, mothers had to establish they were not working, not living in a bona fide domestic relationship and had no other substantial income. This income test imposed a 100 percent withdrawal rate on all earned income in excess of $20 per week. At the time of this action I suggested that Howe was behaving like a Victorian parson doling monies out of the parish poor box.
Economic fundamentalists had a considerable influence in the Hawke and Keating governments. The social welfare emphasis had shifted from assisting applicants in need to delivering occupational benefit and generalized assistance to families. Following the Mabo High Court Judgment, Keating pushed through the Native Title Act that provided an opportunity for Indigenous traditional owners to lay claim to unalienated land.
Unemployment became a considerable problem for the Keating government and, in 1994; the Prime Minister issued a White Paper entitled Working Nation in which he set out his prescription to solve it. The plan included guaranteeing employment to every unemployed person out of work for 18 months. But in return for this employment guarantee plus other assistance the unemployed were required to accept their “reciprocal obligation” to do all that was possible to find work or make themselves “job ready.”
Contributory superannuation schemes had been promoted by the conservative side of politics in Australia and several attempts had been made to introduce them. The Labor Party had opposed them on the grounds that they would undermine support for social security programs. During the Hawke/Keating period in office, Labor changed its approach and introduced a compulsory privatized contributory form of superannuation, quite unlike the social insurance model of superannuation prevalent in Europe.
The change came about in part as a result of the Accord and the amalgamation of craft unions into super unions whose leaders saw an opportunity to bolster their power by setting up industry superannuation funds to safeguard their members’ contributions and tie the workers more intimately to the union. The banking and insurance industries offered private superannuation schemes and welcomed the opportunity for a massive expansion. Prior to compulsory superannuation, some firms had set up superannuation schemes for their workers and permanent government employees were provided with defined benefit superannuation as part of their salary package. Most defined benefit schemes have now closed their books to new members and the system of superannuation that has evolved in Australia means that the superannuation that people receive is roughly proportional to what they paid in, the wisdom of fund investors, the choice that individuals make about investment strategies and just plain luck. Those in seasonal, part time or casual employment find that many employers either don’t deduct superannuation contributions or if they do then don’t pass on the contributions to superannuation funds.
The Banking and Insurance industry controlled funds usually charge larger fees than Industry Superannuation funds so this too affects the amount of money people receive when they retire. Social Insurance superannuation generally results in superannuation payouts roughly in line with contributions and a country’s capacity to pay. Privatized superannuation is often less equitable and tends to advantage those with greater financial resources (Hughes 2008).
John Howard swept Paul Keating from office in March 1996. Howard (1999) described himself as a social conservative but an economic liberal. Many of the policies he pursued certainly placed him in the camp of the neo-liberal economic fundamentalists. His deputy, Peter Costello, had made his name as a relentless employers’ advocate. Their first target focused on young employed people whom Costello described as “job snobs”. The solution was the imposition compulsory literacy training, compulsory “work for the dole” and other “mutual obligations.”
Howard’s next target was the Native Title Act. He set out to win what became known as the “culture wars.” He described the position taken by many pro-Aboriginal historians and anthropologists as representing a “black arm band” view of the early days of white expansion of the continent. In turn, Howard was regarded as having a “white blind folded” view of the early Aboriginal/white interaction. Howard amended the Native Title Act to increase the difficulty that Aborigines had establishing their claim. The amendments included a clause insisting that Aboriginal applicants had to establish a continuous and unbroken connection with any land claimed. This made it impossible for many traditional owners, who had been forcibly removed from their traditional land and herded onto missions or settlements, often at gunpoint, to launch a successful claim.
The main weapon in the Howard government’s industrial arsenal was the Work Choices legislation that created extensive penalties for both workers and unions taking unauthorized industrial action. In the early years, this legislation was not as strongly pro-
employer as the government wanted because their zeal was held in check by the fact they did not have an absolute majority in the senate. In their last term, they obtained control of the senate and were able to pass more repressive industrial provisions. This eventually led to a backlash. The trade unions successfully mobilized substantial opposition.
The Howard government persevered with the policy of mandatory detention begun by Labor and imposed harsher internment conditions upon asylum seekers, who arrived by boat. The government set up detention centers on Nauru and on Manus Island in New Guinea. This off shore processing of asylum seekers was termed the “Pacific Solution.” Refugee advocates waged a determined and prolonged campaign and towards the end of Howard’s term five of his senior backbenches forced the government to release children from detention.
Howard expanded family benefits, boosted careers benefits, significantly increased the pharmaceutical benefits for pensioners and self-funded retirees and allowed people to make huge contributions to private superannuation schemes. This conservative government became alarmed by large increases in the number of people receiving the disability support pension and set out to reduce that number by one third (Galvin 2004; Mays forthcoming).
In June 2007, The Howard government announced the Northern Territory Intervention into 73 Aboriginal communities. This Intervention was supposedly instigated in response to The little children are sacred report co-authored by Rex Wild and Pat Anderson. The Intervention was justified on the grounds that it would protect Indigenous children from neglect and pedophilia and would protect women and vulnerable people from being assaulted or stood over for money. In order to facilitate the Intervention the Howard government suspended the Racial Discrimination Act, quarantined half of people’s social security and placed this money on a Basics card that could only be used for approved purposes (Altman and Hinkson 2007). It imposed compulsory town leases and health checks.
Kevin Rudd led the Labor party to victory in 2007. The unions massive mobilization around the excesses of Howard’s Work Choices legislation played no small part in that victory but the Labor Party needed a leader who would not frighten the horses. Rudd declared he was a fiscal conservative, a church going Christian, someone who would continue the Northern Territory Intervention for at least another year and his wife was a wealthy businesswoman who had built a large business. He looked and sounded like a safe pair of hands. Rudd promised to end the offshore processing of refugees, to restore a balance in industrial relations, and bring a new humanity to the administration. Howard on the other hand looked old, tired, and mean.
The Rudd government removed the most draconian aspects of the Work Choices legislation, through Keynesian countercyclical pump priming managed to avoid the recession that enveloped other developed countries, abolished the Pacific Solution and tried to cope with the increased boat arrivals. An inquiry was held into the effects of the Northern Territory Intervention. This Inquiry recommended ending the suspension of the Racial Discrimination Act, restricting the compulsory quarantining of half of peoples’ welfare payments to those people who wanted it or who were actually neglecting their children, and ending other repressive aspects of the Intervention. Rudd insisted the Intervention continue. Rudd championed significant increases in taxes to be paid by multinational mining conglomerates and the imposition of a carbon emission reduction scheme. The multinational companies launched a massive media campaign opposing the tax increases and caught Rudd on the hop. He decided after two failed attempts to get his carbon emission through the hostile senate to shelve it at least until 2013.
Rudd’s deputy, Julia Gillard, in June 2010 with overwhelming cross-factional support (within the parliamentary Labor Party) toppled her leader and became Australia’s first female Prime Minister. She quickly struck a deal with the mining companies. When the Gillard government faced the electors, in August 2010, Labor failed to get a majority of seats in the lower house and has been forced to rely upon cross bench support in order to govern.
The Gillard government continued the crackdown on disability support pensioners and the unemployed that Howard had started and Rudd had continued. In February 2011, Gillard appeared on the ABC Four Corners program arguing that it was her ambition to get many people off welfare as possible by getting them a job “for the simple dignity that work brings.”
The Gillard government took a harsher attitude to asylum seekers, arriving by boat. By the middle of 2011, the Gillard government claimed to have struck a deal to return asylum seekers, arriving by boat, to Malaysia for processing. Malaysia is not a signatory to the Refugee Convention and regularly canes asylum seekers entering its territory. The government claimed it intended returning unaccompanied minors and pregnant women to Malaysia (ABC News June 4).
In 2007 most progressives assumed that, after a year, the Northern Territory Intervention would be replaced by a community development approach that would include consulting appropriately with Indigenous communities, ensuring the Racial Discrimination Act was re-instated, an end to quarantining of social security and expanding health, housing and education programs (Tomlinson 2011). What progressives had not understood was that Howard had won the “culture wars” that Rudd and Gillard either weren’t interested in the ideological battle, shared many of the same values as Howard or were just incapable of mounting a sufficiently sustained ideological defense of social democratic values.
A universal Basic Income
In Australia, a full universal Basic Income, if it were to abolish poverty, would need to be paid to every permanent resident at or above the existing single rate of age pension (that is pegged at 25 percent of the average wage and is slightly above the Henderson poverty line). It would be paid to individuals irrespective of their marital status, whether they lived alone or with others, irrespective of their race, age, gender or other social status. In the short term, partly because of attitudes surrounding the nuclear family and partly because of the history of family payments, it would probably be necessary to pay parents of children, under the age of 16 years, living in the family home at a rate of half the adult rate. It would be paid to rich and poor, whether or not they were employed or in education. No work or other obligations could be attached to the receipt of the Basic Income and governments or other bodies could not garnishee it (see Tomlinson 2003).
Basic Income: Obstacles and what is going for it?
The major obstacles to the introduction of a Basic Income in Australia are questions surrounding affordability, the presence of a privatized superannuation system, and the ideological maelstrom that envelops discussions of social welfare, migration, the work ethic, race, age, gender and disability. Several of these issues have been discussed above and there will be further discussion of some of them here.
Governments and oppositions in Australia have demonstrated a capacity to bamboozle the public about the capacity of the nation to afford to introduce improvements in the social wage, protect the environment, lift wages, and increase or decrease other expenditures. Political parties talk about lowering carbon dioxide levels yet allow the Defense Department unlimited access to petro carbon guzzling planes, tanks, trucks, and ships.
Every Australian Broadcasting Commission’s news and current affairs program has several items dealing with the economic implications of this or that aspect of our economy. Yet, the public is not sufficiently economically literate to understand the implications of a lot of the discussion. They tend to get swayed by the cleverest 10 second grab. To be fair to them, the old adage “Give me 10 economists and I’ll supply you with 15 different answers” applies in this country.
There is obviously sufficient money available to pay every individual an income at 25 percent of the average wage. It is not a question of affordability – it is a question of whether the public is prepared for such an egalitarian redistribution. In 1975, Australia went within a stone’s throw of introducing an income guarantee for all residents. The economists of the Poverty Inquiry and the Priorities Review Staff believed it was affordable then. Australia is a far more wealthy country today than then –we could more easily afford to introduce a Basic Income now. The question is whether as a nation do we desire a universal Basic Income.
The privatized compulsory superannuation scheme delivers considerable benefits to the better off sections of Australian society. The one third of Australians who earn more than the average wage are the prime beneficiaries. Many of the two thirds who earn less than the average wage see what ever superannuation they receive as their entitlement: unlike social security or the family tax benefit which they view as complicated, hedged around with conditionality, and given grudgingly. Most of the two thirds aspire to climb the income ladder and are prepared to allow the perks of the rich to remain whilst they still dream of joining them. Most of the two thirds have little idea of just how inequitable the privatized superannuation system is – few understand that thousands of the very rich get more government assistance (in the form of foregone tax on their superannuation) than age pensioners get from the government.
Superannuation contributions are taxed at a rate of 15 percent. As Ben Eltham (2011 p. 4) notes those earning less than $37,000 get no concessions (because they pay a tax rate of 15 percent on their salary. People paid a salary of million dollars a year pay 45 percent on their salary but only 15 percent on any contributions they make to superannuation. He also points out that the forgone capital gains tax exemption on the sale of the family house will cost $23.5 billion in 2011-12 the same amount as the total outlay for unemployment benefits and the disability support pension combined.
The Howard government managed, in 1996, to poach many blue-collar workers from the Labor Party by suggesting that Keating was wasting government monies pandering to Aborigines, asylum seekers, single mothers, and dole bludgers. This group, mainly from the outer suburbs of cities, became known as “Howard’s battlers.” Downward envy drove them to criticize social security payments to low income single parents, disability support pensioners, the unemployed, refugees, and Aborigines on the grounds that they did not receive such payments. They seemed oblivious to the fact that a single parent living below the poverty line, did not have disabilities, and were not unemployed or sick. This fracturing of working class solidarity allowed the rich to continue to enjoy their benefits and the government to tighten conditionality and targeting of social security benefits.
The current situation is one where such downward envy is still bubbling below the surface but has an additional component namely the suggestion that middle income earners do not need help to raise their children. That is that a lot of the family tax benefit is being wasted on “middle class welfare.” Eltham (2011 p.3) suggests that the expression middle class welfare is misleading because the Australian welfare state is “among the most targeted in the western world, with steep cut-offs for many entitlements. It’s a measure of the ‘downward envy of voters that the issue is even a live one.” Whilst the two thirds of the population, who earn less than the average wage, can be distracted from the real income distributional debate and kept struggling amongst themselves the perquisites of the rich and very rich are safe from scrutiny.
The government wants to reduce the number of disability support pensioners because it has observed a rise in the number of such pensioners caused by a crackdown on recipients of other benefits such as unemployment and raising women’s qualifying age for the age pension. People under 35 years of age will be required to develop a contract setting out their work participation plan with the disability support pension paying agency. Howard and Rudd tried to cut the numbers by threats; now the Gillard government is trying to ease people into work by allowing them to work up to 30 hours a week for up to two years and still remain eligible for a part pension (Karvelas 2011). This returns disability support pensioners to roughly the same position they were in before Howard tightened the eligibility requirements in 2005.
The public is of two minds when it comes to the question of disability. Some are positively disposed towards disability support pensioners but others see them as bludgers as the headline in the populist Sydney Daily Telegraph reflects when it proclaims “We’re an army of shirkers in NSW – disability pensions are a losing battle (Jones 2011).”
Despite the fact that Australia is now wealthier than ever it is unlikely that a universal Basic Income paid to all permanent residents at a rate above the Henderson poverty line will be enacted in the foreseeable future. It would appear that if there were going to be any substantial social welfare advance, it is most probably going to be to specific categories of people considered to be “worthy of extra assistance.”
One such indication of this is that in February 2011, the Productivity Commission recommended the establishment of a no-fault National Injury Insurance scheme and a separate dedicated agency with the task of ensuring that all permanent residents with significant disabilities receive appropriate services. Were such a proposal accepted then, all permanent residents who can establish they have a significant disability will be guaranteed an above the poverty line income. This would be brought about either by the National Injury Insurance scheme or via the blind or disability support pension or some combination of all of these. The non-affluent aged all ready have such a guarantee, as do families with children.
Other permanent residents, provided they meet categorical eligibility requirements and fulfill the associated “obligations”, are provided with some income. However the levels of benefits paid to full time students, unemployed, and temporarily sick people is not sufficient to lift them out of poverty. Young beneficiaries can receive as little as 40 percent of the poverty line.
On the other hand both the Howard and Rudd governments looked seriously at introducing a single rate of benefit for all working age people, one that would have simplified the current system immensely. Ken Henry the recently retired Head of the Treasury, in 2010, recommended introducing a far more egalitarian superannuation system through increasing the amounts low income earners would receive.
Still, there are no apparent signs on the horizon that a universal Basic Income is about to be introduced. Despite the Rudd government using Keynesian counter cyclical pump priming to escape the recession – neo-fundamentalist economists maintain a strong hold in government and business in Australia. It took 23 years of conservative rule before the last truly social democratic Labor Party came to power with a progressive social welfare agenda.
Neo fundamentalists have held sway for 25 years; the mining boom looks like continuing for at least another 20 years and hopefully some time soon the “Big wheel will turn” and Australians will again realize that we can afford an income guarantee for all permanent residents (paid above the poverty line) without compromising the economic prosperity of the nation.
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