Re-imagining a Labor election manifesto

Despite the fact that Federal Labor has consistently led in opinion polls over the last year or so by between four and six percentage points, most pundits (including the writer) have very little confidence that Labor will win the next election. In fact I expect they will more than likely lose.

Bill Shorten (assuming he survives as leader) is unlikely to win by continuing with his small target “me too” strategy where there isn’t a cigarette paper’s width between the policies of Labor and the Coalition on hot button issues like national security/terrorism and asylum seekers.

This article is based on the (admittedly courageous) proposition that a small target strategy is not the only way to win an election from opposition. It is possible to achieve government by winning people’s hearts and minds with an imaginative and popular positive policy platform, even though the last Opposition Leader who succeeded in doing so was Gough Whitlam in 1972. Of course I might be wrong, but here is my stab at an election policy manifesto that I reckon Shorten or his successor should adopt:

  1. Corporate tax cut – Cut the company tax rate by 5% to 25% (a little less in the case of small companies). Australia’s current company tax rate is 5% higher than the OECD average, and this is clearly having an effect on our competitiveness and attractiveness to overseas capital.
  2. Cut the adult minimum wage to $12 per hour (a cut of a little over five dollars per hour). Australia’s current minimum wage is the highest in the world bar none. It is clearly contributing to the shutdown of our remaining manufacturing industries and the high and growing rate of long-term unemployment. Low-skilled workers are simply priced out of the marketplace – they cost employers more than the income they generate for the business.
  3. Implement a negative income tax equal to the cut in the adult minimum wage, so that low income earners do not lose out.
  4. Employee benefits to outsourced workers – Require the actual “employers”/end users of longer term pseudo-independent contractors, casual workers and employees of labour hire companies to provide a fully portable package of basic employee benefits to their workers, including annual leave, sick leave, long service leave, superannuation etc.
  5. Require banks to give mortgage interest and repayment holidays to unemployed workers for up to 6 months. – Given that banks now get the overt benefit of government guarantees of their solvency, it isn’t unreasonable that they be required to fulfil a basic social contract function like this.  Obviously they will pass the additional cost on to their customers, but I doubt that most people would begrudge a tiny increase in borrowing costs given the peace of mind this measure will generate.  In an age of increasing insecurity, “there but for the grace of God go I” is a ubiquitous and debilitating feeling.
  6. Re-introduce the full needs-based Gonski education funding package partially abolished by the Abbott government.
  7. Require the States to abolish stamp duty on real property transfers. This would enhance labour mobility.
  8. Convene a Tax Summit of all business and community “stakeholders” towards the end of the new government’s first term. Its task would be to build on the work of the Abbott government’s forthcoming Tax White Paper and seek broad agreement or at least general understanding on a suite of measures to get the federal budget back to structural surplus (to the extent that the stimulatory effect of some of the above measures does not grow the economic cake by enough to make tax increases unnecessary). Abolishing or quarantining negative gearing deductions on residential rental properties; taxing superannuation contributions as income; and seriously cracking down on multinational company tax avoidance would all be obvious targets for discussion.
  9. Guest worker visas for northern Australia – Enter into agreements with our neighbours Indonesia, Malaysia and East Timor to allow guest workers to come and work in northern Australia for up to 5 years on a streamlined, low red tape visa system.
  10. Negotiate offshore asylum seeker processing agreements with Indonesia, Malaysia and East Timor, whereby Australia would pay the full cost of accommodating and processing asylum seekers in those countries, they would officially sanction boat “turnbacks” to the extent necessary to deter irregular arrivals, and Australia would agree to source the vast majority of our offshore humanitarian migrant intake from people found to be refugees after offshore processing in those countries. In the meantime, continue with the current offshore processing arrangements with the corrupt regimes of Papua New Guinea and Nauru, but with vastly enhanced safeguards and transparency to ensure humane treatment.

Shifting the national discussion onto these issues would refocus political debate onto the positive mindset of how to make Australia a fairer and more prosperous country, while inhibiting Tony Abbott’s relentless “three card trick” fear and loathing campaign on confected or exaggerated national security issues.

As regular Troppo readers would be well aware, I am not an economist. I would be very interested in whatever feedback our numerous economist readers might have on the above policy ideas. I know it’s very unlikely they will be adopted given current conventional political wisdom, but I still think it’s an interesting and potentially worthwhile thought game.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Florence nee Fedup
Florence nee Fedup
6 years ago

If there is so much money to be made in the north, why is it occurring now.

Alan
Alan
6 years ago

East Timor remains implacably opposed to refugee processing int heir territory. Human rights in Malaysia have deteriorated considerably since the idiocy of the Malaysia situation was put forward. It takes a brave and visionary soul to imagine why Indonesia would be eager to solve Australia’s domestic political problems by adding to it’s own.

Australia does not have and has never had a refugee problem approaching the size of that faced by Malaysia or Indonesia. Australia is not now and has never been a preferred refugee destination over the US and Europe. What we have is a political class convinced (I suspect wrongly) that the Swabian housewives will punish them electorally if they even admit the possibility of a solution that goes deeper than capering and posturing on the borders.

Alan
Alan
6 years ago
Reply to  Ken Parish

Your claim is that proposing offshore processing in East Timor, Indonesia and Malaysia will somehow gain votes for Labor. I say that is simply wishful thinking. The Coalition’s first line of attack will be that the three governments effected will not agree to it. It is no answer to my argument for you to reply with a series of wistful statements about why East Timor would agree to offshore processing and why Malaysia is not cracking down on refugees.

The strongest evidence that refugeez mean votez is that offered by the vat creatures of Sussex St immediately before the Gillard coup in 2010. Gillard dutifully lurched right on refugees and dutifully lost a number of seats that her lurchiness was supposed to save.

There is simply no way to outbid the Coalition. If Labor proposed camps in Malaysia the Coalition would propose camps on Macquarie Island. There is no evidence even that lurchiness will detach votes from the Coalition. There is certainly no seat where you can point to a specific group of voters and say look those guys voted for lurchiness.

A far better strategy would be simply to scrap lurchiness entirely and try to regain those voters who have left Labor over the issue. A far better strategy would be to notice what happened on same sex marriage where electoral lurchiness became a positive embarrassment because opinion shifted on the issue.

Andrew Elder
6 years ago

I understand that the most likely alternative to the incumbent government is a Labor government, but what you’re proposing here Ken doesn’t look particularly ‘Labor’. It’s on thing for you to consider a measure to be important or even necessary, but that doesn’t make it likely or even desirable for Labor to take it on.

My numbering follows yours:
1. Why? If Australia is a locus for value creation, why is it not a locus for taxation given government’s role in value creation? The decision-making processes of overseas capital are vague except where there is a real crisis.

2. This certainly isn’t a Labor measure, and would serve only to dampen incentives to get more value from human labour. Given emerging technologies that seek to replace labour, cutting wages looks like a con in the absence of both a proper consideration of human labour value, and real labour costs (i.e. real costs faced by real people in real Australian communities, and what the value of their labour really means). The only document I have seen that really explores that value was the Harvester judgment of 1907 which itemised commodity costs for a man supporting a wife and three children.

4. I’ve been a “pseudo independent contractor” for most of my working life. I have just returned from three weeks in Europe. I have no idea what annual/sick leave might mean from organisations for which I no longer work. I suspect any such arrangements might be lip-service only, the employment-relationship equivalent of customer-service cliches like “your call is important to us” that increase rather than abate cynicism.

5. Mass unemployment drives down housing prices like nothing else does. Banks should encourage the unemployed to turning their debts over with as few exit impediments as possible, in order to inject liquidity into the circumstances of an individual (or, in the case of a sharp increase in unemployment, across the economy). Whether or not this should be government/corporate policy is unclear.

6. Couldn’t agree more.

8. This effectively happened before the current government was elected. They mostly agreed they should pay less tax and supported the Coalition accordingly. Consulting such people does little good.

I support the notion you hinted at in your fifth point where those who receive government support should be required to give something back, and wish you had explored it further when it comes to tax. Industries that would be impossible without extensive regulations and generous subsidies (e.g. banking, mining, defence) should be taxed more heavily than those that can get by with a much lighter regulatory touch (e.g. tourism). Government should unashamedly seek returns on its risks.

9. These are regions with high unemployment. It is unclear why, assuming there is money to be made from such ventures, measures should be put in place from having some of that money go to local workers in local communities.

10. Re the above point, why shouldn’t asylum-seekers be granted the sorts of visas you describe?

The detention centres in Nauru and PNG are dysfunctional and no further money should be spent perpetuating them, with punishment for abusive and neglectful staff at whatever level of responsibility. If people wrongfully imprisoned in Australia should be eligible for compensation, so too people wrongfully detained beyond Australia by its government should also be compensated – including being granted the right to live and work in this country.

When we allow asylum-seekers into our country, do we undermine the governments of other countries – and does this not therefore cause those countries to resent us? This is an important point little canvassed in these debates. In times past, countries might have been glad for troublemakers to go as far away as possible, but not any more. Yugoslavia knew it would be undone by its expat communities, who funded its civil wars during the 1990s. The military government of Sri Lanka feared those wily enough to slip its clutches, and there are other repressive regimes who keep close eyes on those who’ve made it this far. The joyous ad slogan from telecommunication companies that no-one’s far from anyone anymore can be given a Kafkaeque/Orwellian twist very easily, something that neither the paranoid fearmonger nor the open-borders patsies truly appreciate.

Alan
Alan
6 years ago

There is no public policy motivation for offshore processing. Offshore processing is harsher, much less accountable and vastly more expensive. Offshore processing exists only because it allowed John Howard to make ridiculous claims about the Tampa passengers and their prospects of settlement in Australia. Where, by the way, are most of the Tampa passengers now living?

Moz in Oz
Moz in Oz
6 years ago

Alan: New Zealand, I thought.

The negative income tax strikes me as a good idea, and if you have to call it that to make it acceptable to the lumpenbourgeois then by all means go for it. I’ll even quietly refrain from the more useful guaranteed minimum income label, as long as you promise to make it that rather than the NZ-style transfer from those in poverty on benefits to those in poverty but employed.

Northern Australia seems to be a great place to mine stuff and spend government money but not good for a whole lot else right now. I think we’ve demonstrated pretty thoroughly that farming up there is tricky and intensive farming is not workable. But we could reasonably try solar farming, as that’s not been done before and might work. Throw HVDC cables from Darwin to Adelaide and Weipa to Brisbane and see what happens (just a guess, you probably want engineers making those decisions rather than politicians or internet commentators (not necessarily in that order of competence))

Alan
Alan
6 years ago
Reply to  Moz in Oz

150 of the 438 Tampa passengers were accepted by new Zealand. All are now citizens of that country with access to Australia under the trans-Tasman arrangements. The remainder were ultimately, except for 11 who were refused refugee status, resettled in Australia. The Pacific Solution, like all the other big-S solutions to this problem, was security theatre and nothing more.

Lt. Fred
Lt. Fred
6 years ago

A manifesto for which party?

In what sense does this broadly fit in with Labor’s priorities? Which injustice does this overcome? Which minority does this help?

Well, the rich, sure, but I don’t think that’s what they mean!

1) Hand free money to the rich. No.

2) Take money away from the poor so the Reserve Bank can raise interest rates (assuming that you’re even right that good wages cause unemployment, probably untrue). Obviously the Reserve Bank aren’t going to allow unemployment to get below NAIRU so this is just a wash – except, of course, for hitting the poor in the balls.

3) Guaranteed national income, sure, except that it will be wildly unpopular and politically impossible (giving free money to lazy shiftless, etc).

4) Yep, good idea.

5) A legal nightmare.

6) Obvious and long-standing Labor policy.

7) Encourage some great new urban sprawl with real estate speculation sprinkled on the top (while defunding the states). What fun. This will decrease the “mobility” that people care about – the ability to easily get to work.

8) The budget is in structural surplus, probably, or at least very close. Labor should baldly promise to get rid of negative gearing

9) Silly.

10) Ban mandatory detention and treat asylum seekers appropriately in an onshore ultra-minimum security jail run directly by the state with a maximum length of detention of a few weeks after which claims will be processed in the community. Nothing less is acceptable.

derrida derider
derrida derider
6 years ago

1) Cutting company tax
The headline rates of Australian company tax and that of most countries are not comparable, because most others operate the classic “double tax” method (ie a profit is taxed, then the dividend from which it is paid is treated as taxable personal income) while we have dividend imputation. This radically changes the economic incidence. You can argue our company tax is too high (or too low), but doing so just by comparing headline rates with others is quite misleading.
2) Yes, our minimum wage was the highest in the world in $US terms while the $A was above parity in 2011 – it really meant nothing. True, using Purchasing Power Parity it is still near the highest, depending which PPP scales you use, but then all our wages are near the highest in the world (in part because we still have low on-costs, despite compulsory super). By the usual method of measuring its impact on the labour market – the minimum to median wage ratio – its not particularly high; above the OECD average, but not by much.
3) I’ve always been a big believer in the NIT (better yet, a Basic Income) but it makes no sense without quite radical changes elsewhere in our welfare and tax systems. Your opponents will be quick to point this out and spread a whole lot of FUD.
4) You’ve just boosted employers’ costs for unskilled workers by much more than you reduced them with your minimum wage cut. If you really believe a high min wage costs jobs, then why wouldn’t this?
5) Agree, but its largely symbolic. Given the costs (both direct and PR) of foreclosure banks usually do this anyway.
6) Absolutely – this government’s obvious penchant for elite schools at the direct expense of public education is a damned disgrace.
7) “Require the states”- how? Under what head of power?
8) The direct loser from this is unskilled Australians – including indigenous people. Core Labour voters. If employers want workers they should pay the market rate – not look for discounted product. And how are you gonna keep them in the North – internal passports?
9) Not another bloody Summit! Look, in tax everyone knows what the issues are. But the big issue is that you simply cannot do major tax reform without it taking an awful lot of money from some people to give it to others – and as a broad generalisation moving to a more efficient tax tends to take the money from those who have least, not most (I can explain why given length – basically price elasticities of demand are negatively correlated with income elasticities). There’s a reason tax reform – good or bad – is rarely a vote winner.
10) Such arrangements face obvious legal problems. They face even bigger negotiating problems – if it was in Indonesia’s interest to be so helpful such an agreement would have been struck long ago.

Sorry, I think if they ran on such a platform the ALP would end up with less representation than the DLP. That would, of course, be after the massive internal party splits anyway.

Paul Montgomery
Paul Montgomery
6 years ago

Yet again, Club Troppo acts as a technocratic scold for Labor, arguing for “centrist” policies which seem to be cribbed from neoliberal think tanks, or Treasury which can sometimes be the same thing.

Combining a cut in the minimum wage with a negative income tax and a cut in company tax would be a massive subsidy to employers, and the only known result from such experiments has been a reduction in the incentive to work – something that we probably don’t need in this age of plummeting labour force participation. This is a supply-side fix whereas the problems we have are mostly demand-side in nature. If you’re going to go supply-side, focus on productivity, not ye olde confidence fairy. It’s the type of idea which I would have thought the 1980s would have beaten out of you.

A Tax Summit is a useless idea. You would project it to take place in 2019, with any policies coming out of it not implemented and having any effect until at least 2020. That is unacceptable. We know what is to be done, we need good politicians to educate and convince the public of their worth. Wonks in suits getting on their hind legs in Canberra and expelling hot air will achieve nothing, because all it takes is one opportunistic leader from the other side to run a scare campaign, and I don’t see any local wonk with the cojones of a Krugman to fight that war in public.

The whole point of Labor is to increase living standards, especially for the poor, through targeted spending and progressive taxes. We have one of the best places to live in the world, largely because of a successful mix of liberalism and progressivism. Lowering our standards to match global minimums is precisely the wrong thing to do, especially for Labor. Leave that sort of rubbish to the opposition.

Duncan
Duncan
6 years ago

“As regular Troppo readers would be well aware, I am not an economist.”

I think given the batshit crazy part of some of your proposals, that’s a given and doesn’t need to be pointed out.

conrad
conrad
6 years ago

Speaking of non-economist (I’m not either), I can never work out how the NIT could ever be fiscally viable, so perhaps someone could tell me how it could be. For example, if there are 10 million people who don’t work and are over 18, and you want to give each one a mere 20K, then that’s 200 billion dollars (not including administrative costs), which is 55 billion more than the entire welfare spend we have on everything now.

Liam O'Dea
Liam O'Dea
6 years ago

Most of the budget problems of the current government, and also the previous one, are attributable to the all the lollies that Howard and Costello gave themselves and their mates with their tax cuts and freebies in 2006.
Implementing Ken Henry’s tax reform proposals would be a good start.

Liam O'Dea
Liam O'Dea
6 years ago

If you examine ALL the factors driving refugees towards or away from Australia (i.e. situations in country of origin, opportunity, timing, changes in Australian policies et al.) it is apparent that our policies have only a minor influence on their decision.
Sure, a naval blockade can stop the boats from reaching Australia, but at what cost? To the refugees, to our foreign relations, to our tax payers ?
We already have about half a million foreign workers in Australia. Why not replace a few thousand of them with refugees.?
Oh, sorry. I forgot. They’re out to get us. Tony said so.

John Goss
John Goss
6 years ago

Derrida Derider has dissected your ideas rather well. I worry Ken, that you, a person of obvious intelligence and compassion and a former Labor member of the Legislative Assembly has fallen for the neo-liberal bullshit on economic policy. Which economists do you read? Do you read Quiggin’s stuff?
As Keynes said ‘The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist’.
What dead or undead philosopher/economists are influencing you?
And I’m not asking in a narky way. I am genuinely interested as to what are the economic intellectual influences for the right wing of the ALP.

John Goss
John Goss
6 years ago

Dear Ken
Thank you for your clarifications. But I still think you’re stuck in the past on issues like the minimum wage. Deridda Derider has changed his views on this since his interchange in 2009 with Bill Mitchell http://bilbo.economicoutlook.net/blog/?p=3320.
The Economist has changed its view.
‘No-one who has studied the effects of Britain’s minimum wage now thinks it has raised unemployment. Partly as a result of this experiment on our homestead The Economist has changed its mind. A colleague who surveyed the most recent evidence on employment found that some formerly implacable academic opponents of the minimum wage have softened their stance towards it, and that the IMF and the OECD both now reckon that minimum wages do little harm and may do some good’. http://www.economist.com/blogs/democracyinamerica/2014/05/minimum-wage

And I think Andrew Leigh’s views have changed. Andrew Leigh’s work in this area was very important. He showed that thinking an increase in the minimum wage in Australia will lead to a massive improvement in inequality is wrong. In fact it can increase inequality. And that result still stands. But he does not argue for a decrease in the minimum wage.
I know you want to compensate for the lower minimum wage by a NIT. But apart from the interaction with the tax/welfare system that DD mentioned, it is also politically a bad idea. Once the minimum wage is lowered it would be very difficult to get it back up. But the NIT could easily be reduced or abolished if economic times became difficult.

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago

Oppositions never win over first term government unless that Government is on the nose.
Abbott is making a good fist of doing this.

Hence it doesn’t matter if the Opposition is a big target or small target except if the Government is on the nose a small target means most of the opprobrium stays with the Government. What matters more is IF the Opposition is prepared for Government. The present Government clearly wasn’t.

If Ken thinks the ALP will lose then put your house on them given his record!!!

The five economists ( noun plural) made the best contribution to reducing the minimum wage but you need family tax credits to help here and it is expensive. The minimum wage as a % of the median wage has been declining for a long time certainly right through the previous government.

Ken, surely a practitioner in law knows economist is a noun and never an adjective.
Are you trying to Americanise the English language?

derrida derider
derrida derider
6 years ago

Yes, real minimum wages have been rising elsewhere but falling in Australia. In the 1990s it was true on many measures to say Australia had the highest min wage in the world – ‘taint so now. That’s one reason I’ve shifted my position a little (not a lot) since that blog exchange John Goss pointed to (note I was arguing there against someone who wanted to raise min wages while I’m arguing here against someone who wants to cut them, so the other reason for the shift is my blogistic contrariness :-) ).
As for Ken’s wider point about an NIT or EITC potentially supporting working poor incomes while you cut those minimum wages its mostly true, though the reality is (as usual) a bit more complex. It depends on several different things which a simple Econ 101 supply and demand chart can’t capture (as well as one – the relative slopes of the labour demand and labour supply schedules – which it can). But then as I said my query is more about the political, not economic, feasibility of his proposal.

derrida derider
derrida derider
6 years ago

The Neumark and Wascher metastudy has been very convincingly criticised – basically it puts far too much weight on the older studies now recognised to have been methodologically flawed. They are definitely on one side of the US debate. Even so their claimed “consensus” estimate of the elasticity of employment WRT min wages is quite small. In fact in the US even if you accept their estimate when you work through the numbers you can see that raising the min wage will on balance reduce poverty there. That is not so, on that estimate, so in Australia.

My basic position on the Oz min wage has not changed a lot – it doesn’t do huge harm (because of the likely small disemployment effect) but doesn’t reduce poverty much either (because in Oz few households getting it are dependent on it, unlike the US).

Yes, our min wage is in absolute terms up towards the highest in the world (though not the “highest in the world bar none” you originally claimed) – but that’s largely because ALL our wages are up towards the highest in the world. That’s got little to do with bolshie unions – mostly its about other countries’ social security and similar levies paid by employers. If you calculate the cost to an employer of hiring someone rather than the part which is actual wages then a somewhat different picture emerges – though compulsory super has dragged us back to the field a bit here.

But its the ratio of the regulated minimum wage to other wages (ie the size of the “bite” it takes out of the distribution of earnings) that matters for low skilled employment – and that has until recently been falling because other wages were rising strongly. Try choosing the bottom series in that OECD.Stat page you linked to – Minimum Relative to Average Wages of Full time Workers.

As a BTW OECD.Stat is a terrific resource for international comparisons of all sorts of economic and social data, especially if you’re lucky or wealthy enough to access the really detailed databases (it stinks they charge for that – so much for open data). It has a rather clunky frontend but the OECD has a lot of people working to make the underlying data as comparable as possible across countries, unlike some of the other sources for international data which can easily lead you to compare apples with oranges.

Factory
Factory
6 years ago

Steps 1,3 & 7 are all revenue negative, whereas 8 is a sorta maybe revenue positive. Argueably 2 & 9 may be stimulative, but it’s a maybe.

Given that it’s supposed to be a package you are selling to an electorate, it’s a good idea to have it full of goodies and no responsibility to actually fund them. However after the election win they’ll either have to go into debt or have some less fun stuff in there.

Also on the tax summit, I don’t think we need yet more talking about tax. The issues around the Australian tax system are well known, another summit/paper isn’t going to reveal anything new.