Troppo readers may have noticed a Christmas “silly season” debate about an ill-advised assertion by Minister for Families, Housing, Community Services and Indigenous Affairs Jenny Macklin to the effect that she could live on Newstart Allowance (aka “the dole”) if she had to.
The assertion was in response to a typical media “gotcha” question of the sort that inevitably reduces political debate to the sub-puerile level. In a strictly logical sense Macklin’s answer was clearly correct. As Samuel J points out at Catallaxy:
All of the 330,000 people receiving Newstart are able to survive on it, otherwise they would have moved to the local cemetery. There are an estimated 182,000 long-term Newstart recipients – surely they are surviving on Newstart, or are we now paying Newstart to dead people?
The point was to lure Macklin into providing a response that would enable her to be painted … as arrogant, insensitive and out of touch with “real” people and their concerns.
Given that Jenny Macklin is almost certainly more knowledgeable and resourceful than the average Newstart recipient, there really isn’t any doubt that she could re-arrange her life and priorities and budget to survive on Newstart if circumstances required it. But of course that wasn’t the point of the question. The point was to lure Macklin into providing a response that would enable her to be painted (no doubt spuriously) by the tabloid media as arrogant, insensitive and out of touch with “real” people and their concerns. Having regard to subsequent coverage, the glib journo’s gambit succeeded brilliantly.
However, although this is just the sort of meaningless “gotcha” journalism that is sadly now typical of Australian media including what were once the “quality” broadsheets, it actually raises some important issues: Is Newstart allowance fixed at an appropriate rate? Should it be much less than long-term pensions and benefits like Parenting Payment or the Age or Disability Pension (as it currently is)? By how much? Should parents be forced off the Parenting Payment when their youngest child reaches eight? Should there be exceptions to such a general rule?
As John Quiggin explains:
Over the late 1960s and early 1970s, pensions were increased to approximately the Henderson poverty line. In combination with some additional concessions and the introduction of Medicare, these changes virtually eliminated poverty among the old.
The changes to the value of the old age pension, relative to weekly earnings have been sustained. Initially, unemployment benefits and supporting parents benefits (which replaced the former widows pension, IIRC) rose in line with the old age pension. Both were indexed to the CPI, but ad hoc adjustments kept them broadly in line with AWE. But the Howard government replaced CPI adjustment with AWE adjustment for pensions, while retaining indexation to the CPI for unemployment benefits. The result has been that the value of UB (now Newstart or some similarly Orwellian name) has fallen relative to both pensions and incomes generally.
The Howard government began forcing Parenting Payment recipients onto Newstart in 2006, but “grandfathered” existing entitlements of people already on Parenting Payment at that time. Macklin’s new “reforms” merely remove the grandfathering privilege.
In fact the gap between Newstart rates and other pensions (including the Parenting Payment) is now very large indeed, because Average Weekly Earnings have risen by around 65% over the last decade while CPI has risen by significantly less than 40% over the same period. Pseudonymous but very knowledgeable Canberra blogger Dave notes that the drop in weekly income for a Parenting Payment recipient with no income from part-time/casual work who is compulsorily transferred onto Newstart is $66 per week.
However, the reduction is much larger (up to $170 per week) for recipients who have been performing part-time/casual work to supplement their government benefit, because Newstart income test rules are much more punitive than the corresponding Parenting Payment rules. This chart from Dave’s blog shows the differences:
Does it make sense to penalise the most those parents who have diligently sought and obtained casual work in a difficult economy? What if they simply can’t obtain any additional shifts once forced onto Newstart,(as may well be the case given employment conditions in much of south-east Australia)?
John Quiggin succinctly summarises a general approach with which I agree:
There is a defensible case for setting the old age pension higher than UB (Newstart), particularly if the government pursues active labour market policies to help the long-term unemployed find jobs. The pension needs to be enough to live on for decades, over which time household goods have to be replaced, and other long-term expenses addressed. Most spells of unemployment last only a few months, so various kinds of expenditure can be deferred. But the gap that has emerged over the past 15 years is much larger than can be justified in this way, particularly in the case of supporting parents, who are more likely to spend long periods out of employment. Instead of completing the Howard agenda, the Gillard government ought to be looking at increasing the real value of benefits, allowing the unemployed to share in some of the growth in incomes for the community as a whole.
Finally, although the journalist’s question to Macklin was clearly asked in bad faith and without any interest in these very real issues (they have not subsequently been covered in the MSM), just how easy is it to live on Newstart? Clearly there are many variables, including not only number of children but also availability of part-time work and a range of other factors. But for ease of calculation let’s just focus on the situation of a single parent Newstart recipient with one or two children and no casual work income. This person receives $266.50 per week Newstart payment. 11. KP: She/he will also receive some other family allowance benefits but let’s leave those out of calculation for present purposes because they don’t change when a person moves from Parenting Payment to Newstart. [↩]
Of course, she/he is then immediately subject to the very strict job-seeking requirements applicable to Newstart. Compliance with those requirements necessarily involves recipients in spending significant money each fortnight on public transport fares (to get to job interviews and Centrelink offices, and get to a public library to search newspapers and the Internet for jobs); a mobile phone account (so prospective employers can contact them readily and vice versa); and probably more “dressy” clothing than they may have needed while caring full-time for their young children. Can they afford these things? Let’s construct a hypothetical weekly budget for our newly compulsorily transferred Newstart sole parent. Let’s assume she/he lives in Darwin, where I am most familiar with the cost of living:
Rent (NT public housing) $61.30
Food, groceries etc $130.00
Note that this “bare bones” budget has completely expended the family’s Newstart allowance, but contains no budget items for clothing and footwear;44. KP: As already noted, recipients will certainly need respectable clothing to have any chance in the job market, not to mention the recipient and children retaining some shred of personal dignity. [↩] medical, dental or pharmaceutical expenses; leisure or sporting activities for children; or transport fares on weekends to allow relationships to be maintained with extended family.
As John Quiggin notes, for people who are unemployed for a relatively short space of time, some of the above expenses can be deferred until work is found. But the longer unemployment continues the less deferral of expenses is feasible. The things the family can’t afford begin impacting more and more directly and severely on the family’s life and dignity, and restrict the recipient’s ability to find work more and more as time goes on. So the complete but relatively succinct answer to the question Jenny Macklin was asked is: I could survive on Newstart in a bare subsistence sense, but I could not live a life of human dignity for any sustained period of time if circumstances forced me into that position.
We already have an estimated 182,000 long-term Newstart recipients. That number can only increase as more and more parents with children over eight years are forced onto Newstart. Many will never find any more than transient, insecure, minimum wage casual employment, and quite a few will never find work at all. The changes Minister Macklin has just introduced finish the job the Howard government started, ensuring that a further generation of children will be condemned to a childhood of desperate borderline poverty followed by an adulthood of welfare dependency of their own. Is that really the sort of Australia with which we feel comfortable in 2013?