Picking up on Nicholas Gruens posting of 4 March on Bowles and Gintis essay (“Is equality passe?”), I notice that B and G point to opinion survey evidence that Americans, while hating welfare, support many redistribution measures which are consistent with reciprocity norms, including employee “ownership of their workplaces”, improved educational opportunity, well targeted policies to support home ownership and measures to promote employment opportunities and earnings such as wage subsidies and retraining.
As you know, I have argued in my various papers that strong reciprocity is as much a feature of Australian welfare morality as it is in the USA. Like Americans, most Australians are cynical of passive welfare but strongly support opportunity-levelling measures of the kind outlined above. In one of my papers I point to surveys showing lukewarm support for closing the gap between rich and poor and strong support for “a hard line on responsibilities of unemployed people to actively seek work”. Yet the ideal of equality of opportunity is rated very highly by Australians and they support policies which make it easier for people, through their own efforts, to move up the social ladder.
So perhaps Australians are not that much different from Americans after all?
There is a clear message for Rudd: implement tough welfare to work policies but invest in programs which will facilitate entry into the work force, starting very early in the life cycle.
Fred
I agree – but perhaps the label should be ” effective” welfare to work policies, rather than tough. Employment rates among lone mother in most Scandinvian countries are above 70% while Australia’s is below 60%, and I see no reason why Australia shouldn’t aim for the same level. This will require investing in support for people in work and looking for work.
Australian attitudes to welfare might be more difficult to interpret that it seems.
If you ask respondents about whether people on welfare ought to look for work or participate in work for the dole you’ll probably get a high percentage agreeing.
But if you ask respondents specifically about the older unemployed or unemployed people with young children the response will be different.
A 1999 study by the SPRC asked respondents whether various groups ought to be required to look for work, participate in work for the dole or meet various other conditions.
Just as an example, when asked whether the following groups ought to be required to look for work the results were:
Young unemployed (under 25)………92.8%
Long-term unemployed (of any age)…81.2%
Older unemployed (50+)…………..53.7%
Unemployed people
with young children……………..51.6%
People affected by a
disability……………………..33.5%
I suspect that when people answer a general question about the ‘unemployed’ or ‘people on the dole’ they are actually giving an answer to about a prototypical unemployed person on the dole.
The prototype is probably young, male and a little bit Shane Paxtonish.
Perhaps if we deregulated childcare, all those single mothers could be running their own childcare facilties from home, rather than make them jump through all the health, safety and accreditation mallarchy, which would put childcare within reach of other lower socio-economic unemployed.
While we’re at it, let’s get ditch all the other regulatory mallarchy like health inspectors and automobile safety checks, and put food and motoring within reach of the poor too.
Actually, France’s high single mother participation rates are partly due (or at least dependent on) to the multitude of women running two, three or four child nurseries in their houses.
They do have to be licenced, in principle (and most are). But they don’t have to have OHS certified houses, diplomas or prepare food in a commercial kitchen.
James,
Although I note your sarcasm, there is some benefit in discussing the deregulation of all health & safety regulation.
Have you ever encountered the concept of risk compensation?
Not to mention that the costs and benefits of regulation don’t fall on the same people.
The cost of childcare regulation is more expensive childcare and less employment in childcare, which falls on low income parents and the unemployed.
The benefit of a regulated childcare industry is high standards that go to middle/upper-middle class families whom value high standards, and would choose more expensive childcare with strict educational and nutritional programmes anyway, even if regulations didn’t exist.
Poor people may care about those things, but if they can’t afford to pay for it and the government prevents them from accessing cheaper childcare, then they get no childcare, and are uanble to work and forced to take welfare.
A person with no children or one that can afford to pay for high quality childcare may sit back and say that it is a right for parents to access high quality childcare, but that doesn’t mean that everyone can. The minimum requirement for childcare is that children are returned to parents without being harmed, everything else is an additional service.
“Frances high single mother participation rates”
of course the other reason France has a high pariticpation rate in that category is that child care is free (or essentially free once you consider tax arrangments). There are also heaps of illegal immigrants willing to to do it for a very cheap rate, although then you don’t get the tax freebies.
“Older unemployed (50+)”
This is really going to be a more and more crazy category, especially as education goes for longer and longer. If you finish education at 25 and manage to work 100% of the rest of the time until 50, then you are working less than 1/3 of your life on average.
Well, there a lot of reasons. Amongst (yet) others is that the compulsory periods of maternity leave appear to have fostered a strong social presumption that you will return to work once dearest tot ticks over three months, which strikes me as absurdly early.
Re ‘older unemployed’ I can’t agree with you more.
Thanks everyone. Peter, I agree “effective” is better than “tough”. Brutal intimidation of the unemployed is neither nice nor necessary. Arthur, thanks, I should have made it clear that the support for reciprocity in Australia is mainly directed at able bodied people and excludes the aged, disabled etc. Brendan, I agree that governments should always monitor the costs and benefits of regulations. They need to clarify their objectives and ensure the regulations are well targeted and that alternative more market-friendly devices are not available. That said, politicians would need a lot of convincing to scale down child care and occupational health and safety regulations.
Brendan,
You have spotted James’ weak point. “Have you ever encountered the concept of risk compensation?”
James never has. I went to the footy with him. I actually said to him “the problem with you is that you have never encountered the concept of risk compensation.” And you know what he said? “What’s risk compensation?”
Need I say more. This is why he supports things like mandated levels of road safety for cars, regulation of the safety of the food supply. For all I know he supports safety regulation for civil airlines. If only he understood.
Back on the topic of passive welfare versus opportunity levelling redistribution, I would support passive welfare, since this would be the cheapest to implement, especially if it was done in conjunction with tax reform that lowered the effective marginal tax rates that welfare recipients are faced with.
The problem I see with opportunity levelling redistribution is that you have to monitor recipients, which is costly and intrusive, and it is unlikely that you would be able to completely replace passive welfar anyway. There will always be some people who will not cooperate to better themselves in the narrow way that the state expects them to, and neither should they be expected to.
A guaranteed minimum income, non-means tested, and operated as a negative income tax would be my preferred welfare system until that point in time when we can do away with welfare altogether and rely on private charity.
Why are universally available education and healthcare (the two most obvious examples of opportunity levelling redistribution) costly and intrusive?
It would seem to me that it would be highly costly NOT to make education and healthcare universally available. Both are investments that pay themselves off very handsomely.
“until that point in time when we can do away with welfare altogether and rely on private charity”
Would that be:
(1) When humanity somehow develops reliable altruism?
(2) When you get a government that doesn’t give a shit about the poor to the extent that it’s relaxed and comfortable about consigning them (deserving and otherwise) to the arbitrary sympathies of the rich without safeguards?
(3) Some other point in time and if so how will we know when we’ve reached it?
NPOV,
Define universal healthcare and education.
Does it mean that someone living in Kakadu or Kununura should receive the same level of healthcare and education as someone living in Paddington or Prahan?
What is the pay off period for saving the life of an alcoholic? How about for a chronically ill pensioner? Don’t talk investment when you don’t mean it, otherwise I’ll ask for a cost benefit analysis of putting a new heart in an obese smoker who has never worked a day in their life.
What is the point of 12 years education if there are no jobs in your area, partly because it is illegal to employ you at a wage that would make it worth an employer hiring you? Do we educate people only to prevent them access to employment and condemn them to live in the depressing environment of state housing, increasing the stigma of their existence and contributing to their continued unemployability?
Ken,
A wealthy society like Australia with high levels of employment should not need a government provided safety net, individuals should and would provide for their own safety net. We expect owners of cars to have insurance, we even legislate for third party injury insurance. Some car owners want comprehensive insurance, others suffice with third party damage, some go for the minimum legislated insurance. We don’t expect the state to provide car owners with insurance, why should we expect the state to provide insurance for individuals. Or does the state ultimately own us? Does the state have a claim on each of us that trumps our own claim on ourelves? Are we reduced to animals in a zoo making noise when the zoo keeper doesn’t provide for us? Do you really think the number of individuals who are truly incapable of providing for themselves is that high that charity can’t look after them?
Libertarians are often accused of wanting a return to the Victorian era of laissez faire capitalism, child labour and poor houses, as if the picture Dickens’ painted was a reflection of libertopia. The point isn’t that conditions during the 19th century were harsh compared to today, the point is that the conditions in the 18th and 17th centuries were considerably harsher than the 19th, and that the reason life got better for people during the 19th century wasn’t better government welfare programmes, but that capitalists were able more safely and reliably increase their stock of capital under the rule of law and secure property rights, floating the welfare of all with them. The life at the bottom in 19th century London was much better than life at the bottom for 17th century Londoners.
The problem in the transition is to clean up the messes that collectivised welfare have created. Motivating mollycoddled citizens into taking responsibility for themselves and showing them that their investment in themselves pays them out a high return will be hard. Much of the welfare system is already trying to deal with these problems. It is tough to ask people to take responsibility for themselves when you’ve spent the last couple of generations catering for them as if they can’t.
I didn’t say “universal healthcare and education”, I said “universally available”.
And of course there will be variations in quality, but I would consider the level of public education and healthcare available currently to be adequate as a base level that everyone has access to, regardless of their situation.
The fact that healthcare and education won’t save everyone is irrelevant. The point is that nobody should be denied it because of circumstances out of their control.
NPOV,
That sounds like a get out clause to me. What does universally available mean? That somewhere in the universe there is a service I can use? Does that service have to be free at the point of use? Doesn’t a free open market with priced services provide universally available services?
Don’t dodge the investment question. What do you mean by investment? Who benefits out of universally available healtcare? Who invests? How do we measure the return on investment? The costs and benefits of state provided healthcare fall on different people, making a CBA difficult. What discount rate do you use? Is it different for different people? You said investment, back it up please.
However, if you invest in your own and your family’s health insurance, then it is a simpler calculation.
If you invest in your own and your family’s education, then it is a simpler calculation.
A free open market with priced services obviously doesn’t make things universally available, because not everyone has enough earning capacity to purchase priced services. And if you don’t have enough earning capacity to purchase education, you’ll probably never be able to achieve decent earning capacity. About as bad a poverty trap as you could ask for. Healthcare equally so – once you have a costly health condition, your earning capacity is automatically reduced, and yet your expenses go up.
As far as education and healthcare being an investment, I agree it would be very difficult to do a genuine cost-benefit analysis. How, for instance, do you calculate the risk of infectious disease breakouts? But if you genuinely believe a country would be more economically productive without ensuring all its citizens had access to education and healthcare, then put your case to the treasury department.
Don
I was interested to see you quote that SPRC study. I think that part of the problem there was that the SPRC presented the options as a variation on ‘one size fits all’. That is, they asked questions along the lines of:
Do you think members of the following groups should be required to do:
– Work for the Dole
– Job search
– Work related training
etc?
If the only possible answers are either Yes or No, well most people can think of older unemployed people or disabled people or parents of young children for whom a mandatory requirement of this kind would be unfair, so the only option in that case might be to answer “No”.
My understanding of Australian community attitudes to ‘mutual obligation’ (for want of a better word, though I was interested to see that Bowles and Gintis used it way back when, before it came into vogue in Australia), is that people (including income support recipients themselves) are quite strongly of the opinion that people receiving income support should not have a free ride and should be expected to make a reasonable attempt to do something that will improve their capacity to find a job and reduce their reliance of welfare. It’s just that their understanding of the reality is somewhat more nuanced than the more typical ‘one size fits all’ solution that is sadly still the approach taken by most policy makers here.
Brendan
I’m always a bit bemused by people who think that life would be so much better (for whom?) if we could only go back to the good old days when welfare was provided by private charity. Where do you think the welfare state came from, if not a reaction precisely against that form of welfare?
Your other point about how people should be expected to insure themselves against all manner of eventualities also seems to miss the point that there are some people who either wouldn’t be able to get insurance or for whom the cost would be prohibitive.
It is one thing to think that it is reasonable for well-educated middle-class people to ensure themselves against illness, unemployment, etc but entirely another to imagine that a poorly-educated, low-skilled person with a variety of health problems (and probably a history of unemployment) might be able to do so.
I’m not saying that we couldn’t do things better and indeed that is what Fred’s post is about. I’m all for “motivating mollycoddled citizens into taking responsibility for themselves” and I’m sure that is what most Australian taxpayers would favour as well. The only problem in the end is the people who, no matter how well-motivated they are, are not capable of (fully) taking care of themselves. Most people don’t want to see them left to the vagaries of the ‘system’.
backroom girl,
Just how many Australians are so incapable of looking after themselves that they need welfare? Does it justify the pervasiveness of the welfare system which makes us all beholden to the state?
How wealthy do we have to become before we can be trusted to look after ourselves? The Australian median income in 2006 is $53,404.
Brendan, you wouldn’t get any argument from me that there are many of us receiving welfare that don’t really need it (e.g. baby bonuses, first home owner’s grants, family tax benefits etc.). I suspect that sort of welfare is just the price we pay for democracy, and tighter restrictions on our democracy would be the only solution.
However there are a lot of people with significantly reduced earning capacity usually through little fault of their own. While they might be able to survive OK with far less help, as long as we have the capacity to help them, I don’t see a moral case for not doing so. There may be rare cases of giving too much help too easily, but this is a small price to pay for ensuring that should misfortune befall any of us, the help is there. And ultimately if people decide to rely on welfare and not make something of their own lifes, the chances are taking the welfare away would not make them more motivated or productive people.
NPOV,
Churn is the price we pay when political parties bribe us with our own momey, and charge us the dead weight cost of this churn. Many families pay tax and then receive direct payments that equal or exceed their tax contributions, and yet it costs real resources to turn this money around.
The Howard government had an expanding economy and bracket creep to fund his promises, will Rudd be so lucky? Will Australians easily give up their middle class welfare? Or will we be forced to to go back into debt to fund these bribes? It is possible for statists governments to go into a lot of debt, stealing from future generations to pay for the welfare consumption of today. France’s government runs a <a href=”https://www.cia.gov/library/publications/the-world-factbook/print/fr.html”national debt that is equal to 66.6% of GDP. How much pressure is that putting on future French taxpayers, all so their parents and grandparents can live high on the hog today.
Well then, let us give them less in the form of a non-means tested guaranteed minimum income and then let private charities top that up with targetted benevolence. A nice little negative income tax, high tax free threshold and flat tax scheme would do the trick, with the benefit that individual’s effective marginal tax rate would always be the same, eliminating any discentive. Not being means tested would lower the overhead cost of welfare, and also be a lot less intrusive in people’s lives. It is soul destroying for people to have to prove their worthiness of benefits, with the constant threat of being investigated for fraud hanging over them. The complicated benefits system in place at the moment invites fraud, just as the complicated tax code invites tax avoidance and complicated and expensive (but legal) tax minimisation schemes.
“A nice little negative income tax, high tax free threshold and flat tax scheme would do the trick”
I have some sympathy for negative income tax and a higher tax free threshhold. Even “flat tax” as described is not so bad (because it isn’t really flat at all).
But I don’t see how it’s much different to means tested benefits.
I certainly agree there’s a lot of room for simplification and improvement of Australia’s tax/benefit system. But I can’t imagine ever agreeing that it should be reduced to being solely a collection scheme for funding basic government services only, and that all welfare should be left to vagaries of private charity.
What I would like to see is for wealth redistribution to be as automated as possible, to minimise the cost of churn. There should be no need for the vast majority of Australians to even submit tax returns.
NPOV,
On this I wholeheartedly agree.
I’m sorry Brendan, but I don’t see how the median income is relevant to whether or not we should help people who, if left to their own best efforts, would end up with an income far below that. I don’t believe I said anywhere that welfare should be directed to people with median income or above. And I’m quite happy for churn to be eliminated as much as possible, which I would point out is quite possible for families to do now as they can claim their FTB entitlements in their tax return, rather than receiving them as cash payments from Centrelink.
You didn’t really answer my point about the difficulty that the people down the bottom would have in insuring themselves, either.
As to whether it would be so much better to give everyone a non-means-tested basic income and let those who needed more money go cap in hand to charities, I’m not convinced that that would be cheaper except by setting payments very low relative to current rates. (Simpler, certainly, though I’m sure there would still be avenues for fraud and people happy to exploit them). And by definition you would still have a lot of churn.
Are we defining churn as the same thing? Churn is when you pay tax and then receive benefits, but you pay the tax first.
You would not have churn with a negative income tax, that is the whole point. If you are paying tax, you are not receiving benefits. It is only when you earn below the tax free threshold that you receive any benefit. If you set the the threshold at $30,000 and the NIT at 30%, if you earn absolutely nothing, you’d receive 30% of $30,000, or $9,000. If you earn $10,000, you’d receive $6,000 in benefits. Once you earn $30,000, you pay no tax and receive no benefits. Above $30,000, and you pay tax at a flat rate of 30%.
How do you know that people at the bottom will have trouble affording insurance? They may have trouble recognising that they need insurance or prioritising it over other consumption choices, but they should be able to afford it, if their tax burden is reduced. As I said, the transition to a self-sufficient society will be treacherous, as many people don’t know how to provide for themselves because they have never been asked to do so (or allowed).
The market is pretty good at matching people’s needs, insurance markets already exist for healthcare and income protection, even when they must compete against “free at point of use” government services. There could be a role for mutual societies or unions to pool resources and operate employment insurance for members. People are creative and more than capable of looking out for themselves and others without having their humanity reduced by relying on state welfare.
Brendan, do you honestly feel your humanity is reduced because you are able to claim benefits from the government? Do you honestly feel if some horrible misfortunate befell you tomorrow that drastically slashed your disposable income, that the act of then claiming extra benefits from the government would reduce your humanity? And that somehow sitting around and hoping that some private charity might arbitrarily take pity on you would be better?
Oddly, I see it quite the other way around – a society where there is no guaranteed assistance for those that need it most is one that has truly lost its humanity.
NPOV,
I’m not going to play this game. Human experience is enhanced by being fully responsible for your own welfare. It is an affirmation of your individuality, your self-sufficiency, your independence, to be able to stand up and say that it is my life and I pay my own way. Of course I don’t discount inter-dependence between people, we all look and need assistance at different times in out lives, and all look to help others and pass on our own hard fought for knowledge and experience.
I just don’t want that sort for help and gift given to be channeled through the demhumanising state apparatus. It is dehumanising to feel that you are just a number, just a social security number or tax file number. It is dehumanising to have to line up and prove your worthfulness to bureaucrats whose jobs are compartmentalised and are set targets and limits. The less the state has to with you the better, even if it means that *if* you fall on hard times, you need to look to family and community institutions for assistance, and be forced to humbly ask for help, rather than expect it as a right.
“It is dehumanising to feel that you are just a number, just a social security number or tax file number”
I guess it might be, but who exactly does feel that? Personally I’ve found government agencies are far more pleasant and “human” to deal with than many large corporations.
“The less the state has to with you the better, even if it means that *if* you fall on hard times, you need to look to family and community institutions for assistance, and be forced to humbly ask for help, rather than expect it as a right.”
That’s pure opinion, and one that I would guess the vast majority of Australians would strongly disgree with.
Brendan
I don’t see that there is really all that much difference between society insuring its members collectively, either through a social insurance system as is common in Europe, or via general taxation as we do here and everyone insuring themselves individually. Except that, unless you have some kind of community rating (ie government controlled) system, under private insurance people with a high risk of claiming benefits would have to pay more than people with a low risk – isn’t that how insurance works. Now if the people with the highest risk have the lowest incomes, surely there is a possibility that the insurance premiums might be too high for them to meet. Or in the most extreme cases, that insurance companies would simply refuse to insure them.
I don’t think it is pure coincidence that all developed countries in the world (even the US, though in a more limited way) have chosen to go with the collective, rather than individual, insurance model.
And the problem with your simple ‘no churn’ model of NIT plus flat tax is that the only way you would have no churn at all would be for people to have their entitlement/liability calculated once a year. I don’t think that would really work all that well for people who need their NIT now so that they could pay rent, buy food, etc. Once you have people collecting fortnightly or monthly payments for some part of the year and possibly paying tax for some other part of the year, you will end up with some version of churn won’t you?
Backroom Girl,
I’ve already suggested a solution to your uninsurables, mutual societies with strong community input, whereby locals exercise demonstrably their compassion and benevolence by operating insurance schemes. But even with mutual societies you’d have the benefit that the beneficiary would be forced to pay, and thus have direct financial feedback regarding their decisions.
In an open market, employment insurance would only last so long, and people would be impelled to consider employment that they otherwise wouldn’t. Stacking shelves, picking fruit, labouring, collecting garbage, these are all legitimate and valuable jobs, but that some unemployed choose to reject, instead waiting it out on the benefits for the “perfect job”.
In an open market, smokers would pay more for their health insurance, thus providing a market incentive to quit smoking or not take it up. Instead, it is a pollitical football to suggest that smokers, the obese and others who make unhealthy decisions should have their access to state provided healthcare restricted, after all, the smokers and the obese have “paid their taxes”.
I’ll have to defer to <a href=”http://www.cis.org.au/policy_monographs/pm70.pdf”John Humphreys and the CIS to explain the NIT and flat tax policy better than I can.
Oops, that last line should read:
Ill have to defer to John Humphreys and the CIS to explain the NIT and flat tax policy better than I can.
“…smokers would pay more for their health insurance, thus providing a market incentive to quit smoking or not take it up…”
Can’t we test this hypothesis? Take one country where health insurance premiums are not based on smoking habits, and another very similar country whether they are, and compare the rate of smoking (or the rate of the decline of smoking).
As it is, smokers have a high “market incentive” to quit anyway, given a) they pay for the cigarettes themselves, plus the high taxes on them, and b) they pay for all the extra doctor’s visits and medicines that single-payer healthcare doesn’t fully cover. But realistically, surely the actual health costs (emphysema, lung cancer, etc.) are a far stronger incentive to quit smoking than any monetary proxy for them.
Being married to someone who has been trying to give up smoking for the last 7 years, I doubt higher health insurance premiums would be very much of an additional incentive at all.
In an truly open market for health insurance, customers would have to pay based on whatever genetic conditions they had been born with. If you believe this is fair and reasonable, then I suggest you have never been close to anyone who has been born with a genetic condition that significantly affects both their earning capacity and their need for expensive healthcare.
NPOV,
What part of community based mutual societies don’t you understand? Do you really think that humans aren’t capable of community based initiatives without the state being involved? You must truly underestimate the ability of people to care for their fellow man.
Why should personal experience dictate public policy? Should we have the death penalty back simply because some family members of murder victims call for it?
Why don’t you just come out and call me a right wing death beast rather than merely hint at my utter heartlessness in the face of individual tragedy?
It would be much more effective for the limited number of true hardship cases to be treated individually, than heave some overarching public policy on everyone.
“Do you really think that humans arent capable of community based initiatives without the state being involved?”
Of course we are. But we live in communities of such a size (millions of people per city) that the state is surely exactly the logical entity to arrange such initiatives.
I don’t believe you are heartless, just that you haven’t really thought through the logical consequences of believing that everyone should have to pay solely for their own health expenses, relying only on private and arbitrary charity for cases when they are unable to.
Why would it “be much more effective for the limited number of true hardship cases to be treated individually”? I highly doubt it would be more cost effective, for a start. At best it might be effective at eliminating bad genes from the human gene pool.
NPOV,
Absolutely not. Do you really think that with more members, that personal choice becomes more homogenous?
How did personal choice get into it? If I wind in a wheelchair tomorrow, I just want to be sure that I will be looked after by somebody, and that it won’t finanically ruin my family to do so. The fact that I have limited choice over how I insurance myself against such an outcome is simply a non-issue, and it surely is for the vast majority of Australians. I will agree that there is a good case for more choice of where I receive the medical care from, and I’m quite open to privatising of all medical *care* (which is the situation in Canada, as I understand it, a country with an enviable healthcare system), but honestly, why would I care about choosing how it gets paid for? The system in the U.S., where individuals and businesses are constantly grappling with how to medically insure themselves is a disaster – something I didn’t really appreciate fully until being here and observing first hand the constant hassle it causes.