Nicholas kindly suggested to me that we might like to cross post our three favourite posts from August at each other’s blogs to see if commenters’ reaction is different. So here’s the first of mine, originally published at LP.
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One interesting by-product of the tax stoushes that Naomi wrote about the other day might be an awareness of how few Australians are in the top bracket, and how many are struggling along with 30-60k household incomes (and that’s before we even talk about the large number of really poor people on welfare and/or very low incomes). There may or may not be a case for tax reform at the top end, but Emerson and Swan are quite right to say that fixing the welfare to work barriers and meaningful tax reform for the great majority of Australian citizens are far higher priorities. In this context, Wayne Swan’s book Postcodes: The Splintering of a Nation might be an instructive read for citizens, and particularly commentators and journos.
It’s not hard to assume from the assumptions that underlie most media reporting (with some distinguished exceptions like George Megalogenis) and interviews by the likes of Maxine McKew that the Canberra elites seem to have great difficulty understanding that over a decade of economic growth doesn’t mean that most Australians are rolling in dosh, driving SUVs, feeling aspirational, obsessed with property, building McMansions, troubled only by whether to go for the platinum as opposed to the gold Visa card, and so on. It’s been really weird watching McKew’s face as various Labor pollies and ACTU folks have explained the circumstances and choices which beset rather than empower most working Australians.
Sociological research – beginning in the 1960s with the debate over the (then) new phenomenon of the affluent worker – has shown that most people have very little idea of the prevailing wage levels and distributions across the economy as a whole. Rather, people pick what they know as a comparator. Thus, journalists like McKew or pollies like Costello who think it’s important to preserve uber-generous super lest Parliament become populated by useless timeservers, are probably comparing their own generous remuneration to the much higher levels of professionals and business people with whom they interact. Similarly, white collar workers in most public sector organisations earning in the low to mid 40ks will tend to compare their wages to those below them and above them and think in terms of what they could get through their next pay increment or promotion.
The individualised myth of meritocracy so deeply embedded in our society – reinforced by constant hammering on the bludgers and ladders of opportunity themes – tends to make those doing really badly more aware of the constant stories – often reported in the tabloid press – of prosperity and average wages over 50k and assume either that they are in fact the useless old economy drones the press and pollies accuse them of being or to place false hope in the promises of social mobility constantly held out as a carrot, even as they labour under the many sticks of a deeply unfair tax and welfare system.
So one of the many merits of Swan’s book – which deserves not only a wide audience but also careful study by the punditry and political classes – is the way that he uses both statistical data from the ABS and also puts a human face on the real situation of many families to drive home the facts about actually existing inequality and financial distress in this land of plenty. I was struck, among many other things, by his pointing out that the Byron Hospital only has 28 beds. You may well think – hey, that’s ok, people can travel to Lismore if they need to access hospital services (for instance, bulk-billed specialists or day surgery). But the bus fare is $26. That might sound like nothing to you and me, and in fact I’m enjoying a glass of Pinot worth $25.99 a bottle as I type, but think of how you’d manage it on a regular basis if you were a single parent with health problems. Most of us here in the blogosphere might not be on a Maxine McKew wage, but we’re generally doing ok comparative to most folks. Again, Swan points out that in suburbs where the average mortgage is over 400k, repayments are $150 a week more than the minimum wage. And we should never forget that 75% of people earn under 50k a year, according to the ABS.
That’s why we need to take with a massive truckload of salt Howard’s claims about wages growth for all of us, for a start.
All this provides a necessary and important platform for evaluating and formulating policy. There’s no doubt scope for another post on Swan’s policy ideas and suggested approach for the ALP. But think also – next time you’re on a bus – of this woman’s experience:
If you look hard enough, it’s not difficult to see what’s going on. Consider, for instance, the 40 year-old mother sitting by herself on the early morning bus. She might seem to be heading out for a day’s shopping but in fact she is returning from her shift cleaning someone’s office. Behind her blank expression, beyond the exhausted look, she is fretting about getting home before her husband has been called out for casual work. She is worrying about making the kids’ school lunches, about unpaid gas or electricity bills and the precious time she will have to spend on the phone negotiating a late payment – time she would rather spend sleeping before heading out on the night shift again. Most of all she is wondering how to arrest her family’s spiralling descent into poverty. On that bus, dignity masks the distress of financial hardship and failing hope.
Try it with your three least favourite posts, too. See if the insults are different.
“… where the average mortgage is over 400k, repayments are $150 a week more than the minimum wage. And we should never forget that 75% of people earn under 50k a year …”
Studies of incomes, earnings and wages are full of traps for young players. Yes, 75% of people earn under $50k a year – but earnings include those of small businessmen (including farmers) as well as wages, where current income is a poor guide to economic status (thats why the bottom decile of income in Australia consumes more goods than the fourth decile). And the great bulk of substantial home mortgages are paid off by more than one wage – except for the 20+% that are geared investments partly paid by rent.
None of which undermines your point about how most of us are out of touch with how the other half lives, and geographic sorting is a big reason that’s so – its just that income and earnings data need very careful interpretation if you’re using it to try and get that sense.
Readers would certainly be wise to employ a pinch of salt when assessing claims by Peter Costello about how extraordinarily prosperous and fortunate Australians are under the Coalition government. But they’d be equally wise to be sceptical about claims by Labor shills like Wayne Swan that things are crook in Tallarook (or Byron Bay), with poverty and inequality rampant and worsening under the evil Howard dictatorship.
While also acknowledging that there are lies, damn lies and statistics (and especially noting Derrida Derider’s points), it’s a bit difficult to take Swan’s doom and gloom stuff too seriously in view of ABS statistics. For example:
“Australia experienced significant real income growth during the past decade. Between 1993-94 and 2003-04, real net national disposable income per capita grew by an average annual rate of 3.1% a year. … From 1994-95 to 2002-03 the real income of low income Australians rose by 12%.” (http://www.abs.gov.au/ausstats/abs@.nsf/0/9394b094a6108eb0ca256fe400130871?OpenDocument)
“Household income inequality, as measured by the Gini coefficient, increased in Australia by 2.3% during the period between 1994-95 and 2002-03.” (http://www.abs.gov.au/Ausstats/abs@.nsf/0/4bcff19ac4fff7a1ca2570680074ea66?OpenDocument)
Does Swan acknowledge these inconvenient figures (for his argument) and try to put a negative spin on them, or does he pretend they’re not real? The ABS data seem to show that, while there’s been a very small increase in inequality over the last decade, it’s been swamped by a quite large increase in real incomes right across the board. However much Swan, Beazley et al may try to paint a gloomier picture (with Mark B’s endorsement), the reality seems to be pretty positive (even for that poor single mother in Byron Bay who can’t get into the local hospital to get her sunburn treated). Moreover, this is the bottom line reason why the majority of the punters keep voting for Howard (leaving aside poor performances and major strategic misjudgments by successive ALP leaders).
There have always been suburbs and towns that are pockets of poverty. Their locus may be changing somewhat over time, in response to changing demography and evolving industry patterns in an open, globalised economy. Does Swan argue that this is necessarily a bad thing? The anecdotal material recounted in Mark’s post prove nothing meaningful at all. Analyses showing changes in the distribution of relative poverty by postcode may assist governments in assessing where social welfare and retraining measures are most needed, but that’s about as far as it goes. One suspects that Swan is attempting to squeeze much more condemnatory conclusions than that out of the data. He’s unlikely to succeed except with luvvies who conclusively deem Howard and his minions to be heartless, greedy bastards irrespective of the facts.
Round about 12% of the population are involved in running a non-farm business which is a very disparate grouping including people who are contractors on lower remuneration than those in the workforce and Dentists and Lawyers! I don’t have figures on farmers to hand, but I suspect they’re a very small percentage of the population.
Ken, Swan acknowledges the relative increase in income among the lowest deciles of the population. The point as always is between those who will acknowledge that poverty is relative – that is to say, the increase in the cost of essentials such as housing, food and petrol tends to be higher than the CPI – and increasingly goods which used to be provided as part of the social wage must be paid for wholly or in part.
If you feel that I’m politically biassed on this, then I suggest you read Swan’s book and see for yourself.
As to anecdotes, I’d have thought that humanising the problem was a worthwhile endeavour. And that it makes for more interesting writing than long discussions of ABS stats. But it’s a matter of taste I guess. I imagine I couldn’t win in terms of your reaction either way I played it.
Mark
I’m entirely open to persuasion by statistics or some similar reasonably objective measure. And I’d take the time to read Swan’s book if I’d seen anything in your post to suggest that it might be a worthwhile exercise. I’m not open to meaningless, emotive anecdotal material, whether you label it “humanising the problem” or otherwise.
BTW, and again according to ABS, the price of food in Australia rose by 1.9% over the last 12 months, slightly LESS than the general CPI. See http://www.abs.gov.au/AUSSTATS/abs@.nsf/0/938DA570A34A8EDACA2568A900139350?OpenDocument . I don’t know whether that is typical of the last decade or not, but it doesn’t at first blush suggest that food prices have increased so much faster than general CPI as to negate the apparent 12% rise in real incomes of the lowest paid workers during that decade (which appears to be your argument, and presumably Swan’s).
Ken, you need to look at the prices of goods that I’ve mentioned above – not just food but particularly housing. Try some stats on housing stress for a start.
I’m sorry that you regard writing about the plight of real people as “meaningless” and “emotive”. But that’s life, I guess.
You might also like to have a look at the material put out by St. Vincent de Paul on poverty and inequality if numbers are more to your taste.
BTW I should have added that the real story is that the picture of economic growth and rising incomes across the board IS extremely positive, but has very largely been a consequence of Howard and Costello maintaining the generally excellent policies that Paul Keating initially had the guts to implement. The successive electoral failures of Beazley, Crean, Latham and now Beazley again have to a considerable extent been a consequence of their tacitly disowning Keating’s policy successes and thereby leaving the economic field to Howard and Costello by default. It looked for a short time after Beazley’s resurrection that he had learned by that mistake. But Swan’s effort, at least judging by Mark’s post about it, seems to represent a reversion to the previous fuzzy, feel good marshmallow leftism that led directly to those four successive electoral disasters. Surely it would be better to acknowledge the extraordinary (and undeniable) success of the Australian economy, take credit for it (via Keating), and then point to the fact that the Coalition is now asleep at the wheel and therefore potentially jeopardising all that has been gained, or at least failing to maximise Australia’s potential. Swan should be talking about the need for skills training, infrastructure spending, support for R & D etc etc, not attempting to conjure a picture of inequality and poverty out of figures that just don’t show it. Some of Beazley’s rhetoric soon after re-assuming leadership took that sort of line, but Swan seems to be undermining/detracting from that thrust.
Ken, he does both. As you might note from the post, it’s the first part of what I plan to write on Swan’s book – I’ll be having a look at his substantive policy proposals in the areas you mention when I get a chance.
I don’t think he conjures “a picture of inequality and poverty” out of figures – in fact it’s probably the most searching and far-ranging use of ABS data I’ve seen. I lack the time to cite it all at the moment, but I’d strongly recommend the book to you.
I’d also suggest that you have a look at the paper at the St Vincent de Paul website showing why measures of rising income are misleading when it comes to lower income groups:
http://www.vinnies.org.au/files/NATIONAL.MicrosoftWord-SPIP1%5B1%5D%5B1%5D.doc.pdf
Anyway, nice to see you stoushing again!
Mark
The same ABS document linked in my last comment but one showed that rents for the last 12 months increased by 2.1% i.e. exactly the same as CPI excluding housing. Housing PURCHASE costs by comparison rose by a massive 5%. Moreover, given that the housing bubble had well and truly burst in south eastern Australia well before the last 12 months, it’s reasonable to suggest that the contribution of housing purcahse costs to the overall housing figure would have been even greater in the previous few years.
Again, I haven’t done the figures myself and I’m quite prepared to be proven wrong (not having either the time or expertise to crunch the numbers in detail myself), but I strongly suspect that rents (as opposed to housing purchase costs) haven’t increased vastly more rapidly than the general CPI over the last decade. Lower income groups tend not to be home purchasers. The housing bubble (which certainly was in considerable part an artefact of various Howard government policies – see Nicholas’s recent posts and the comment threads attached to them) mostly affected the younger aspirational middle class, but one would expect to see the market progressively correcting this situation. And indeed we do see some modest signs of a fall, with housing purchase costs rising only 0.9% in the June quarter (an annualised rate of 3.6% compared with 5% for the year as a whole).
As for my alleged indifference to the “plight of real people”, Charles Dickens’ fictionalised depiction of such plights in the nineteenth century was so powerful because it reflected a real and growing reality of poverty and desperation in those times. That isn’t the reality in today’s Australia, however self-seeking politicians (or NGOs) may try to massage the data. They only manage to paint such pictures by using relative poverty measures and ignoring figures showing that just about everyone is getting richer in real terms while the accompanying rise in inequality of income distribution is very marginal.
That isn’t to deny that there are poor people whose stories merit our compassion and help, but their plight isn’t reflective of massive social problems requiring huge changes of policy direction. And telling their stories isn’t a substitute for a reasoned analysis of the data.
Ken, the national increase in rental costs is a very imprecise measure. For instance in 2003 it was 1.9% nationally and 18% in Canberra.
Most of the growth in private rentals was between 94 and 99. At the same time the stock of public housing and boarding house accommodation fell.
You can also look at the mean rent paid by those receiving Commonwealth rent assistance (ie those on benefits and pensions). In 2002 the mean rent assistance was $72 a week and mean rent was $253. The basic rate of the dole is currently $220 a week for a single person.
And the point isn’t relative inequality in my view but the degree to which those on low incomes can access the basic essentials of life.
In any case, Swan isn’t “massaging the data”. It’s not a long book – won’t take you long to read it.
I’m not so sure how many of us are out of touch with the way the other half lives.
I suspect many people on the internet don’t have a lot of real cash, though many of them are either students or deliberately locked into a life which is creative enough to keep them poor but happy.
It can also be a haven for people with some kind of disability, whether temporary or permanent. When MT started to charge, there was a huge outcry, although the actual amounts were not high.