Equality of opportunity: is more policy intervention needed?

Yesterday, BG picked up one thread of the “mega blog discussion” kicked off by Don Arthur. I want to pick up another. In the discussion on Arthur’s post, BG and I seemed to agree that, apart from a firm safety net which encouraged able-bodied people to work, the social policy goal should be to strive for more equal opportunity rather than more equality of outcomes per se (although the first generally leads to the second). I believe this view is also shared by a majority of Australians as polls suggest they respond coolly to passive redistribution to low income persons of working age but warmly to the idea of giving them equal opportunity.

However, some rightly queried what such a goal would mean in practical policy terms: do we really need more policy intervention to address inequalities of opportunity in Australia?

The answer to this question depends on how one responds to five other sub-questions:
(i) What do we (and mainstream Australia) mean by equality of opportunity as a policy goal and in particular how does one deal with natural endowments (a question posed by TIOW and in my view only partially answered by Don)?
(ii) Hasnt Australia already come pretty close to achieving the ideal of equal opportunity in practice i.e. isnt it broadly true that Australians are able, through their own efforts and skills, to move easily to a higher class or social status than those of their social origin?
(iii) Even if the answer to (ii) is no, will the benefits of government intervention outweigh the economic costs of higher taxation?
(iv) How does a policy maker weigh equality of opportunity as a goal against other dimensions of fairness such as individual freedom of choice, self-reliance and individual responsibility – values which Australians are also strongly committed to?
(v) Will governments be able to effectively deliver opportunity-leveling programs i.e. is government failure worse than market failure?

I have written a great deal on each of these questions in recent years including in an
extensive discussion paper in 2006 (http://www.tai.org.au/documents/dp_fulltext/DP85.pdf.)

I might try one day to summarise and update my views on each of these five questions perhaps in 2 or 3 large installments – but only if there is sufficient interest in this topic among Club Troppo readers. Alternatively, we could just have a free rein discussion.

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23 Responses to Equality of opportunity: is more policy intervention needed?

  1. NPOV says:

    “…polls suggest they respond coolly to passive redistribution to low income persons of working age but warmly to the idea of giving them equal opportunity”.

    Well, we already have substantial passive redistribution to low (or no) income persons of working age, so are the majority of the population unhappy with that? I personally think a case can be made for increasing it slightly, primarily to those at the very very bottom. The fact that the majority of the population “respond coolly” to the idea doesn’t seem like a particularly good reason in itself for dismissing it as good policy.

    I also think if you framed the question as, e.g.,

    “Is it important to you to know that were you or a loved one to find yourself in a position tomorrow that you were unable to earn very much income, sufficent government assistance was available that you and your family would still be able to live comfortably, if modestly?”

    You might get a very different response.

  2. NPOV says:

    Further, I’d also point out that with a very restricted income, your opportunities are always somewhat reduced anyway. E.g. not being able to afford to run a car significantly reduces your employment opportunities, and in many areas, your educational options. There surely must be a class of people whose chance of improving their lot would increase significantly were they able to (temporarily) draw on greater government hand-outs. But I accept that the class of people who would not use such hand-outs wisely is probably larger, hence there is good reason to be wary of too much passive assistance. OTOH, I’m equally wary of the government taking too active a role in determining exactly how people should be spending the little money they have (and there are various examples of such well-meaning programs having unfortunate unintended consequences).
    Perhaps the passive assistance should go to charities, who make it their job to actively work to help people out of poverty?

  3. Fred Argy says:

    NPOV, I should have said that most Australians “respond coolly to the idea of passive redistribution to able-bodied people of working age”.

    Of course, a person who is suffering from poor health or trauma or disabilities should (and generally does) receive generous assistance. And it is clear that Australians want to see such assistance (including to the aged) not only maintained but even increased a little.

    As to giving more help to able-bodied people, it is clear that Australians (and I count myself amongst them) are hostile to reforms like WorkChoices which reduce the existing wellbeing of low-paid workers. But if polls were to ask “should high income workers be asked to pay higher marginal tax rates in order to give more tax credits or other unconditional benefits to able-bodied low-paid workers”, I suspect the response would be fairly lukewarm.

    At least that was my understanding of the polls a few years ago. I wonder what Andrew Norton, who has his finger on the latest pulse, thinks? Nicholas Gruen is right in his perception that reciprocal obligation is a deeply ingrained belief in Australia, as in the US.

  4. Patrick says:

    Of course we’d be interested, Fred, that’s why we read clubtroppo!

  5. NPOV says:

    Fred, then it would seem to come down to how you define poor health/trauma/disability. Is having an IQ below 95 a disability? Does having extremely low self-esteem classify as a mental health problem? Does family breakup count as a case of trauma?

    Most of what I hear from those who have gone through various rough periods in their lives, is that the hoops you are expected to jump through to prove that you “deserve” such assistance are thoroughly dispiriting and dehumanising (see http://www.ozforums.com.au/viewtopic.php?id=2578 for example). On that basis, regardless of the fact that most people (myself included) are skeptical of making government assistance too easy to get, it seems we’re a long way from being in that position currently.

  6. Thinking in old ways says:

    I think your idea is good and it makes good sense to tackle it in stages. In particular working through the first two questions is critical to the others.

    To make some early points on these:

    (i) I keep being haunted by the productivity then and now chart in Frijters and Gregorys From Golden Age to Golden Age paper http://eprints.qut.edu.au/archive/00003626/01/3626.pdf, which is one of my reasons for raising the issue of endowments what might equality of opportunity mean in a society when the capacity to make use of even ‘middle’ opportunities might increasingly be linked to cognitive and personality attributes.

    (ii) Would be well guided by some empirical work Andew Leigh might help out, and by some consideration of what barriers might exist. Obviously equality of quality of education is important, but what do we do about cultural values which curtail any ideas about opportunities. While we have gone well past the point where the girls across the road from me were pulled out of school at age 16 because what is the use of an education since they were only going to get married and raise kids I fear that other cultural values are playing as much a role today in many other communities.

  7. Fred Argy says:

    TIOW, I am well aware of Andrew’s pioneering work on income mobility in Australia and how we fare relative to other countries. He was kind enough to show me early drafts of his research findings (some inter-generational and some intra-generational) which I freely used in my 2006 paper.

    But international comparisons of intergenerational mobility tend to have a long historical perspective and tell us little of what is happening to mobility at present in the light of recent developments (good and bad) in Australia. Nor do they tell us if we can or should be doing better e.g. match the Scandinavian levels of mobility. In my work I have tried to address the latter issue by looking at the incidence of discrimination, inequalities of access, imbalances in employment markets etc.

    NPOV, I accept without question that present welfare to work policies need to be humanized (and have repeatedly said so) – but without destroying their basic intent. People on welfare are entitled to be treated with dignity.

  8. Thinking in old ways says:

    I was also thinking of Andrew’s work on education – I don’t know if he has looked that much at the variation in quality of education in the school system and what the consequences of this are in terms of equality of opportunity. Certainly the anecdotal evidence suggests there is an increasing perception that what school – including what public school you go to is important to the quality of education you will obtain.

    Similarly some of the work of Richard Teese would seem relevant.

  9. Greg says:

    An IQ below 95 might not be a disability, but below 90 probably is.

    Low self-esteem may not itself be a mental health issue, but I’d say it’s not unlikely that it stems from or is the presenting symptom of one (or more).

    Family break-ups and the history leading up to them can indeed produce lasting trauma, although the studies indicating this are only beginning to come to maturity.

    But I think I want to hear more about these natural endowments. I’ve heard some disturbing remarks over the years about rhythm, sports, maths, etc.

  10. NPOV says:

    Greg, that’s my point – who makes these decisions as to what conditions qualify you for extra support, and on what basis? I think I’d prefer to see a system that doesn’t ask you to prove why you need extra assistance, but perhaps a system where you automatically qualify for increased benefits the longer you’ve been on them, on the basis that the most likely reason for remaining on benefits for a considerable period of time is that you really do suffer a condition that makes being able to support oneself genuinely impossible. Of course any system you come with can be abused and rorted, but who is going to wait around 5 years doing no work just so they can get sufficient benefits to live a truly decent lifestyle?

  11. Helen says:

    Surely the availability of public education is crucial. It’s not a “good” like cash which can be passively received, and it’s possibly the most useful provision to make for future generations.

    There is always this popular meme that taxi drivers and other battlers who really value education! are sending their kids to private schools, even posh private schools, but I would ask,

    1. How much is that funded by debt which will come back to bite said taxi driver
    2. Is the education being funded by someone else, e.g. grandparents, and
    3. How much is the education contributing to family misery e.g. parents working second jobs, parents always working, no money for family holidays or other memory-making activities / pets / hobbies, parents putting crushing load of guilt and neurosis on child/ren, parents giving boys preference
    4. How many genuine low-income earners do buy private education.

    At present how well you do seems to be mostly determined by your parents’ socioeconomic status, so if you wanted a genuinely merit based society, plus all the concomitant benefits from having a well educated population, I’d suggest fixing the public education system. And I mean REALLY fix it. (I’m not going to use those dreadful words “world class” though!)

  12. Fred Argy says:

    TIOW and Helen, my 2006 discussion paper (see earlier link) highlighted the growing incidence of education inequality – pre-school, primary, late secondary. It also saw university subsidies as poorly targeted.

    Education is one of eight key barriers to income mobility in Australia. The other barriers come under seven headings: vestiges of discrimination (on grounds of age, remoteness, gender etc); initial income and wealth; welfare traps; imperfect labour markets; inequalities of access to preventative and community health care; housing; and public transport. On re-reading my material I would now be somewhat less gloomy on some of these fronts but would still stand by my final conclusion – that “one’s life chances depend in good part on one’s innate qualities and character but they depend at least as much on the circumstances into which one is born”.

    But this view (which many do not accept) only helps to answer question (ii). It does not “prove” that more policy intervention is needed. The other four questions posed are crucial.

  13. Mike Pepperday says:

    I don’t see that in (iv) equality of opportunity is in conflict with choice, self-reliance and individual responsibility. I think they are complementary. Equality of outcome would be in conflict.

    (v) Will governments be able to effectively deliver opportunity-leveling programs

    Surely. America, the land of opportunity and self-reliance, has a public school system intended to give each person an equal opportunity at the start of life. It seems to work, sort of.

    I have an equality of outcome question. Presumably outcome reflects opportunity. It doesn’t necessarily follow in each individual case and at the statistical level it might be simply wrong (eg far less than 50% of skateboarders and chess masters are female yet no one suggests lack of opportunity). But mostly it must be so, eg if 3% of the population is Aboriginal and 30% of jail inmates are Aboriginal, there is only one reasonable conclusion.

    So an inequality of outcome is an indicator of a likely inequality of opportunity.

    We seek equality of opportunity but it is nigh on impossible to measure. Outcome, however, is straightforward to measure. What I wonder is whether any government ever set a general outcome target as a policy aim. It could be a Gini coefficient or simply limiting the proportion of wealth held by the top 20%. It seems that such a target would not limit any persons opportunities (which is the usual compaint against affirmative action). A political problem is that there is going to be something like a generation delay between policy implementation and outcome but I am just wondering if anywhere ever tried it.

  14. Backroom Girl says:

    NPOV, I can’t really agree with your suggestion that the longer you are reliant on income support the more you should get. This would be particularly problematic if the income support was unconditional, as I think you also suggest. In the first place, that would be an open invitation to those people who feel that society does indeed owe them a living, as well as those who have a good income from the black economy or criminal activity already and just pick up their income support as a bonus. In the second place, I have a real concern that if income support was unconditional it is likely that we would simply write off a large group of people who are marginal to the labour market, on the pretext that we have already provided for their needs.

    Since, contrary to popular belief in some circles, I also have significant doubts that a system of unconditional income support would be cheaper than what we have now, we would also have even less money to spend on the kind of programs that could help people at the back of the queue take better advantage of whatever opportunities were available.

    I agree with Fred that of course people should be treated with respect, but don’t you think that is more likely to happen if recipients and the people helping them both know that the purpose of the exercise is to help them find a job and have a better life? Providing unconditional income support is only likely to exacerbate resentment against ‘bludgers’.

  15. Backroom Girl says:

    The fact that the majority of the population respond coolly to the idea doesnt seem like a particularly good reason in itself for dismissing it as good policy.

    No, but it does seem like a good reason to put some effort into persuading them that it is good policy before you go ahead and implement it.

    I think it is too easy to dismiss public opinion on these issues as simply uninformed. I suspect that while it may only be informed by personal experience rather than academic study, most people on the street could tell you pretty clearly why it is that they don’t think that unconditional welfare is a good idea.

  16. NPOV says:

    BG, I guess I’m not really suggesting completely unconditional income support, but I do think there rather too much arbitrary judgement going on in determining who has a “genuine” need for it or not. I also don’t see less conditional income support as being in conflict with the need for programs that actively offer additional assistance in helping people out of unfortunate circumstances. I’m really not sure anything much can be done for those that are able to do useful work but simply choose not to…determined bludgers will find some way to bludge off others no matter what the rules are.

    As far as public opinion goes, in most cases when policy is introduced against public opinion, if the policy proves workable, the public will generally come around to accepting it (e.g. GST), and if not, the pressure at the ballot box to get the policy changed is usually strong enough to ensure that it does (WorkChoices).
    Spending a bunch of money trying to persuade the public that it really is a good idea is probably pretty futile (again, WorkChoices!).

  17. Backroom Girl says:

    NPOV – it is, however, a brave government that introduces a policy that it knows the community will not like.

    My take on it is that the public will support unconditional income support for people who are clearly not able to support themselves (many but not all people with disability, for example) and also for other groups that they feel should not be required to seek work – most notably people past an accepted retirement age, but also people with significant caring commitments, including parents of very young children.

    One of the things that has changed along with the increased employment of women is the understanding that workforce participation is now the norm, especially once all of a person’s children are at school. So while I don’t necessarily agree with all of the details of how welfare to work has been implemented, I think that it is appropriate to expect people to seek at least part-time employment once they are in that situation.

    On the issue of education, I am inclined to agree with a number of commenters here that education opportunities are not equally distributed, even and perhaps especially among students in the public school system. That is why I have sympathy for suggestions that good teachers should be paid more if they agree to take up jobs in disadvantaged schools. But as with income inequality, I suspect that the quality of education for the most disadvantaged children will not be improved just by splashing extra money around, but will need quite carefully targeted interventions. I am, however, broadly in favour of making education to Year 12 available, either free or at low cost, to all citizens whatever their age so that people who drop out early for whatever reason are able to resume their education once they have a mind to.

    On the issue of post-school education or training, I am firmly of the view that it is a question of horses for courses (no pun intended). I don’t favour education/training as a ‘one size fits all’ solution to low human capital, because this will inevitably end up wasting a lot of people’s time and money. However, my preferred approach to labour market assistance would allow low-skilled people who wished to upgrade their skills prior to entering the labour market to do so. I think that only a small proportion of income support recipients would be likely ever to take up this option. For people who do not wish to upgrade their skills or don’t yet know what they would like to do, I would expect them to do what they can to find a job with the skill set they already have. And of course give them a variety of assistance to do so that meets their actual needs. This is what the Job Network is supposed to do in theory, perhaps we need to work out how to get it to work in practice.

  18. Stephen Hill says:

    Just from what NPOV is saying, I don’t know about raising Newstart, maybe a small amount to deal with food and rental inflation, which I’m guessing would be above CPI, (although there are probably things that could be reinstated, like allowances to help someone if they get an interview interstate, and relocation or material allowances which I hear are only be eligible to people defined as long-term unemployed.)

    But I must admit I’m sceptical about the stickiness of the dole, I think there is already plenty of big incentives to move from the dole to work (the minimum wage is about double the dole, the social stigma of being unemployed, the opportunity of career advancement and the chance to widen social networks are just some of the big incentives that come mind). From this I think most people who are unemployed are capable of making a rational decision, and as rational agents there should not be the need for anything other than minimal intervention (in the case of there being substantiated signs that the individual is shirking the responsibility of looking for any work). And say only after about 12 months then the individual should be forced more rigorously to reappraise career goals.

    Just from talking to friends, there is at the moment a little too much emphasis on short-term savings over long-term position placement, particular in the case of graduates who after just three months out of work are coerced by Job Networks into the ethos of “”screw whatever you studied, and apply for THIS job,” which often turns out unsatisfactory to both parties. I have one friend who has 2-3 days part-time work in the field in which he studied, he’s making about $200 a week, and is forced by the Job Network into jeopardising this position by the requirements that he take full-time work if provided (can’t have any unprofitable clients you see). Of cause the outcomes that eventuate from these policies end up driving him and job recruiters completely mad, as he’s happy as Larry that he is getting valuable experience to place on his resume, and from what I gather will probably in a few months time be offered a full-time position. I was just thinking about this when I encountered this in an English paper.

    Life on the dole ‘is better for students than temping work’

    “Students are better off in the long-term if they go on the dole after graduation rather than take a “stop-gap” job, an expert said yesterday.

    “Under-employed” graduates suffer even worse levels of mental health and motivation than those who are unemployed, his research shows.

    Although the low-paid jobs were meant to be temporary, they could end up dragging graduates down and preventing them pursuing their ambitions, said study leader Professor Tony Cassidy.

    Professor Cassidy, from the University of Ulster, studied 248 recent graduates whose Daily Mail Reporter psychological and physical health was monitored over 18 to 24 months.

    Nine months after graduation just over half were in jobs, a fifth were unemployed, and the rest were on post-graduate education courses.

    “Of the employed group almost 70 per cent were not in jobs they wanted to be in; they were stop-gap jobs that did not utilise their skills,” said Professor Cassidy.

    Although the unemployed group had increased levels of depression and anxiety, loss of optimism, unhealthy behaviours such as drinking to excess, and lack of achievement, the under-employed group had the same problems to an even worse degree.

    “They are moving out of the normal range of levels of psychological well-being into the area of clinical depression,” said Professor Cassidy, who presented his results at the British Psychological Society’s annual meeting in Dublin.

    He said on balance being out of work might be better for career-minded graduates than taking a menial job.

    “I think graduates need to think about how they’re going to get into their career,’ he said.

    “If that means taking time out from work they are probably better off doing that than taking a stop-gap job that might prevent them getting where they want to be.”

    Professor Cassidy urged universities to do more to help students plan their futures.

    He warned that investment in higher education, including moves to widen access, was “being wasted”, because many graduates were ending up in jobs far below their skill level.

    State school pupils are taking a smaller share of places at Cambridge University than in any year since 2003 just 55 per cent.

    The university spends

  19. Backroom Girl says:

    Stephen, I agree with you there needs to be some balance and I am also sceptical of the value of making people take a job, any old job. But since the Job Network only gets paid (some of) its money if people stay in their new job for at least 13 weeks, I would have thought that would provide a fairly strong financial incentive for JN providers to aim for a reasonable match in the first place.

    I also agree that the majority of people who become unemployed are strongly motivated to get back into work as soon as possible, not least because they won’t survive financially. But as always these are not really the people that we need to worry about. Among the stock of unemployed people (as opposed to the ‘flow’) longer-term recipients are a much larger proportion and some of them have already spent fairly long periods on other income support payments, such as single parent pensions. These are people who are unlikely to find their way of payment if left to their own devices, so once again you need a system that is able to pick up on who needs the extra help, and in come cases supervision, and who doesn’t.

    Don’t know about that Irish study – may or may not be applicable here, but I guess I wouldn’t be all that surprised to find that people who have spent years training for a particular job might end up unhappy if they can’t get a job in their field. Don’t know what you do if you just have an excess of supply over demand though – obviously you can’t let people go on looking for a job in their preferred field forever.

  20. rog (bring back the meadowbank mauler) says:

    To be fair “equality of opportunity” should apply to employers and employees equally.

  21. Fred Argy says:

    Thank you all for the interesting exchanges on unconditional welfare. BG, I generally share your view and hope we get more of your perspective in future blogs.

    I just want to comment here on Mike Pepperday’s proposition that there is no conflict between equality of opportunity and choice and self-reliance. I am very sympathetic to this viewpoint but I prefer to have a bet each way along the following lines.

    Individual freedom of choice and action – the idea that people should be left to lead their own lives according to their own idea of what is good, so long as they do not harm others – is an important dimension of ‘equity’, broadly defined. Active equal opportunity programs will inevitably require higher taxes and possibly more labour market regulations – at least in the short/medium term. This will interfere with individual freedom.

    However individual ‘freedom’ is an elusive concept. It is not just about the right of an individual to retain what he or she earns or produces and to choose from the consumption possibilities in the market. It is also about capability the ability to participate actively in society (positive liberty) and overcome barriers to reaching their full potential. From the latter viewpoint, equal opportunity programs can offer more freedom than ‘small government’ policies. They widen the range of longer term employment opportunities and choices available to low-paid and jobless workers affected by structural change and make it easier for them to achieve their full potential.

    Inconclusive, I know, but isn’t that inevitable in a topic of this sort?

  22. Mike Pepperday says:

    “Active equal opportunity programs will inevitably require higher taxes and possibly more labour market regulations – at least in the short/medium term.”

    Yes – and programs may even be permanent as the American school system is. And perhaps this does interfere with some people’s negative freedom. I suppose everything is inconclusive but a clearer conception is possible.

    If you believe in choice and self-reliance then you have to believe in equal opportunity – if you are going to be consistent. If the opportunity is not there then the choice, the self-reliance and the freedom cannot be there. That is actually what you are saying in your second-last line about widening opportunities and choices available.

    Individuals are not always consistent but a community, as it discusses things, would tend to weed out inconsistencies. I think the US school system, which really seems quite socialist, is explained this way.

    If you believe in choice, self-reliance, and freedom, what is the freedom for? It is freedom to compete, freedom to “get ahead”. Competition is not genuine unless opportunity is equal. If the opportunities are not equal the competition will be a sham. Then instead of the magic of the invisible hand there will be the dead hand of privilege.

    All very black and white but I am tracking a principle. It’s the culture war of our time: self-reliance, negative freedom, equal opportunity are behind one set of barricades and behind the opposing barricades are interdependence, positive freedom and equality of outcome.

  23. Fred Argy says:

    Mike, very eloquentkly expressed. I am a soul mate of yours but …

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