Labor’s legacy: 2.2 million Australians below the poverty line

Posted: October 15, 2012 by Admin in Australian history, Australian Labor Party, Australian politics, Poverty & Inequality, Workers' rights

In New Zealand, the Labour Party is currently pretending it cares about poverty, although it did little to address the issue in its nine years in power.  This article by John Passant indicates the same is true of the current Labor government across the ditch; it has been very slightly edited from here

More than 2.2 million Australians, including almost 600,000 children, were living below the poverty line in 2010, according to the Australian Council of Social Service.  Here is part of what ACOSS said:

“The key finding is that in 2010, after taking account of housing costs, an estimated 2,265,000 people or 12.8% of all people, including 575,000 children (17.3% of all children), lived in households below the most austere poverty line widely used in international research. This is set at 50% of the median (middle) disposable income for all Australian households. In the case of a single adult, in 2010 this poverty line was $358 per week. In the case of a couple with two children it was $752 (Table 1). This is the main poverty line used in this report.

“A less austere but still low poverty line, that is used to define poverty in Britain, Ireland and the European Union, is 60% of median income. In the case of a single adult, this poverty line in Australia was $430 per week in 2010.

“When this higher poverty line is used, 3,705,000 people, including 869,000 children, were found to be living in poverty. This represented 20.9% of all people and 26.1% of children. A major reason for the large increase in the number of people living below this income (compared with the lower poverty line) is that many households on social security payments have incomes (typically pension payments plus small amounts of private income) that lie in between the two poverty lines.”

Even using the more restrictive figure, 2.2 million Australians living in poverty is 2.2 million too many.

Poverty is a social construction, not something natural. There is more than enough wealth in Australia to abolish poverty almost overnight.

Remember when Bob Hawke said that by 1990 no Australian child would live in poverty? Everyone scoffed because that would have required an assault on the rich and a radical redistribution of wealth to address the issue. We all knew Hawke was a puppet of the profit bludgers, not their nemesis, so it wouldn’t and didn’t happen.

As I have mentioned ad nauseum the share of national income going to labour is at its lowest and that to capital its highest since records began to be kept in 1960.

The OECD’s key country findings for Australia in its Divided We Stand report included the fact that the share of national income of the richest one percent increased from 4.8% in 1980 to 8.8% in 2008.For the richest 0.1% their share trebled, from 1% to 3%.

While the earnings gap between the top 10% and bottom ten% of workers increased by one fifth, the tax system ‘offset’ only about half that increase. This is indicative of deeper tax changes since 1980 in Australia. Tax has become less progressive.

Progressivity and average tax rates have fallen, and the redistributive effect of tax has weakened, in part because of the flattening of tax rates. In other words the rich got richer and the tax system got less progressive.

As to tax, according to the ACTU ‘[households in the top 20% of the income distribution pay an average of 34.5% of their incomes in taxes; households in the bottom 20% pay 26.7%.’  This seems a small difference between the rich and poor for a supposedly progressive tax system.

The trend to flatter taxes – in other words a more regressive tax system – has been a long term one. In looking at the trends since 2000 the ACTU says that personal income tax has become flatter.

The OECD has confirmed what the Occupy people around the world could tell you – the gap between rich and poor is getting worse. Indeed, in Australia, the top 10% saw their income grow 4.5% per year since the mid-80s.  This was the biggest growth of any of the OECD countries.  For the bottom ten percent the figure was 3% per year, also a high rate of growth by comparison.

While the Treasurer in his The Monthly magazine diatribe against the three mining amigos made much of the fact that “poorest 10% in Australia have grown at more than double the average for developed economies in recent decades,’ he conveniently did not mention that those at the top end had seen their income grow even more, 1.5% per annum more. Compounding a 1.5% difference (4.5% versus 3%) over more than 20 years creates a huge disparity. As Peter Martin in the Sydney Morning Herald explained:

“[T]he compounding effect of the different rates has opened up a very wide income gap. A family taking home $30,000 in the mid-1980s would be earning $68,000 today if income had grown 3 per cent per year. A family earning $30,000 enjoying a 4.5 per cent rate of growth would be earning $103,000 today.”

So the rich have got richer and the rest of us haven’t kept pace with them.

As a consequence of the wealth shifting policies of the Labor Party from labour to capital poverty rates have increased over time in Australia.

In part this is also because Labor won’t increase unemployment and other social security benefits. People on the dole are over $100 a week below the poverty line.

Labor’s actions last week in cutting single parents whose youngest child turns 8 off the single parent payment and onto Newstart (unemployment benefit) is forcing  an extra 100,000 recipients and their children to live in poverty. The cut in benefits is between $60 and $100 a week.

There are also the working poor – those people with a family earning the minimum wage for example. On the ACOSS figures they are about $100 a week below what is needed to survive. Indeed over 400,000 Australians in full time employment were living below the 50% poverty line. Almost that many again working part time were.

At a time when gender is much on the agenda of the babbling brook of Parliament, the real issue is that ‘women (including female children) face a significantly higher risk of poverty than men.’

Labor is doing nothing to address that. Indeed it is making it worse by consigning the 100,000 single parents, 90% of whom are women, to poverty or more poverty.

One reason among many for the difference is that women suffer a gender pay gap of about 17%. A concerted attack on this here and now could address that.

Instead Labor’s commitment to fund salary increases over the next 7 years for women in the community sector is a cop out because it is too long a time frame and the pay increases will be chipped away by inflation and enterprise bargaining.

The arrangements also cover only about 150,000 mainly female employees, not the millions of women (teachers and nurses come to mind)  subject to lower pay and recognition.

According to the Australia Institute, and I agree, Australia is a low tax country.  So why doesn’t Labor tax the rich? The simple answer is because it rules for them.

Labor’s Australia is where the top 20% of income earners own over 60% of the wealth, and the bottom 20% own just one percent.

Gina Rinehart, the world’s richest woman, saw her wealth grow from $5 billion to $29 billion under Labor. She receives (‘earns’ is too inappropriate a word here) in one second what a person on the minimum wage receives in a week. Her receipts in a minute are what a minimum wage worker earns in a year.

Over 2.2 million Australians are living below the poverty line. That is Labor’s legacy.


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