Backroom Girl was nice enough to tell me of a paper being given by one of the world’s experts on the tax and welfare systems of the world in Melbourne yesterday. Australian Peter Whiteford was out from his current headquarters at OECD Paris and was giving a talk to the Brotherhood of St Laurence on child poverty and in particular the success or otherwise of tax and transfer systems in helping to alleviate it.
Front rowers in the audience were Peter Hollingworth and Brian Howe both of whom go back a long way on the issue. The paper was very interesting and some of the most interesting points are summarised in graphs below.
When Peter Whiteford put up the slide reproduced below, I pointed to Brian Howe (behind his back) and whispered to the person next to me that he should take a bow.
Look at the reduction in child poverty that followed the policies that Howe championed and which are sadly associated with Bob Hawke’s unfortunate improvising from his written policy speech in 1987.
* Different methodologies are used for the green and the orange bars, so
if you’re comparing across time the correct comparison is between bars of the
As most Troppodillians will know, the speech from which Hawke read said “by 1990, no child need live in poverty”. It was the best thing done by a government in my lifetime that I can think of. There weren’t lots of votes in it. They did it because they believed in it.
And fortunately, contrary to all the hype about Howard being hell bent on taking from the poor and giving to the rich, Howard has kept the pattern of generous family payments – though he’s lightened up on the means testing to spread the money around to those most swinging of constituents in the middle of the income stream. There have also been some reductions in inequality lately at least as reported in recent NATSEM material driven it seems by improvements in the part time pay of those near the minimum wage (I guess they’re being asked to work longer hours) and tossing $600 to each child as an election comes up. Well the nakedness of the bribe is unprecedented, but I can think of worse electoral bribes (and so has Howard!).
And how’s this for a graph to make you proud. Here’s the disposable income as a percentage of median income of a lone parent with dependent kids working full time at the minimum wage.
Below the fold are some other charts of interest.
Percentage of children living in poverty.
Note the countries to the left are (mostly) the Nordics. We do quite well given how much less revenue our government takes. The US doesn’t look too flash. Still, I guess it’s not clear how much it’s demographics and how much it’s policy.
And here’s a table on how child poverty has been changing in different countries and what’s been driving it.
And now for some bad news. Australia has one of the highest rates of jobless households in the developed world. I think this is a graph illustrating the difference between the actual rate of jobless households and some predicted level of joblessness with the inference being that the change is policy induced. (Peter Whiteford or someone who was at the seminar will probably be along to correct this or clarify it if approrpiate).
Naturally one wonders of the extent to which this is the logical consequence of the subsidies we pay parents and the high effective marginal tax rates (EMTRs) this puts them on when they move into the workforce. Well it’s partly that – though our EMTRs are not as high as many countries they must go over a longer range of income than many.
But the other reason is that we’ve had one of the laxest programmes for trying to ‘activate’ parents – to send them the signal that they’re expected to pay at least some of their way in the labour market when it becomes practicable for them to do so – for instance when their kids get to school. We’re now changing that to a substantial extent. In the US those ‘signals’ of imposing work tests on supporting mothers cut in as early as three months after birth! Subsidies to child care in the Northern European countries also increase parental participation in the labour market.