In a Catallaxy thread Jason Soon, in debate with Peter Saunders (the CIS sociologist, not the UNSW sociologist), argues for a guaranteed minimum income or negative income tax approach to welfare policy. The discussion is rejoined over at Club Troppo, where Don Arthur examines the libertarian and conservative views on welfare.
In this debate, I come down firmly on the libertarian side. One of the refreshing things about Julia Gillard’s approach to policy, as revealed in a number of recent interviews, is that she has moved beyond the authoritarian Third Way communitarianism that was Latham’s stock in trade towards a view that the left needs to encourage decentralised and community based approaches to social policy. There is no need whatsoever for the left to have some sort of unreflective support for big government per se, and in particular, there’s no need to defend intrusive and paternalistic welfare bureaucracies out of some sort of “government is always better” view.
People in need of welfare benefits are the best judges of their own choices, and it’s more empowering to enable them to choose to search for work should they wish rather than to attempt to impose choices on them through a mixture of low rates of welfare and authoritarian and paternalist “assistance” and punitive penalties for not showing up at appointments and the like. I’ve put my two cents worth in over at Troppo, in a comment I’ll reproduce below the fold, but I’d be interested to see what people here think. It’s an important debate for the left too.
I’m with Jason. I’ve been arguing for a long time we should get rid of the intrusive and paternalistic bureaucracy which obsesses about turning people into compliant “work readyâ€? citizens. It’s important in this debate to note that social norms exist alongside of but also separately from the creation of incentives to “reinforceâ€? them. In our society, the work ethic is sufficiently embedded anyway. If people choose to write novels or surf all day on a guaranteed minimum income, I for one, don’t care. I strongly suspect most wouldn’t. You could still have programmes to encourage vocational and job search skills for those who choose to take part in them. And I think that it’s likely that this manner of delivering welfare would be far cheaper to the taxpayer than the massive machine of compliance bureaucracy that is Centrelink and the largely wasteful quasi-market setup for employment services.A lot of people from Gen X, like me, who graduated in the early 90s with Arts degrees or whatever, ended up on the dole for a period of time. Middle class educated twenty something or not, the labour market was very difficult to enter in the early 90s in the context of the recession – and a lot of the casual or contract entry points that exist now didn’t exist to the same degree then (it wasn’t til 1994 that full time employment fell below 50% of jobs). So we’ve been on the receiving end of mutual obligation and pointless form filling and mindlessly useless and ill directed training schemes. Working Nation was about the only one that had any real value, and it was expensive. I wish in these debates more people would try to put themselves in the position of the unemployed themselves, rather than seeing them in simply abstract terms.
It’s because I’ve been there and done that, and a lot of my friends have too, that I feel strongly about a guaranteed minimum wage – along with my libertarian instincts.
good post, Mark.
Thanks, Joe.
Classy stuff, Mark.
My dad was on the dole the whole time I was at uni first time around, and I saw the pointless form filling crap he was put through – this despite the fact that he was old, sick and had a criminal record, which closed him out of many jobs. I couldn’t see any way clear of the paternalistic crap for me, either, so worked 2 jobs Austudy and both wrote & studied. The writing caused a shit-fight, but at least I didn’t have to go on the dole. And you’re right about the lack of entry level positions, too. It seemed impossible to start anywhere.
Yes, it was a tough time.
I remember a friend of mine who graduated with first class honours in English lit being put through a course on how to become a service station attendant by Centrelink (not kidding!) – and I had a “mutual obligation” interview where the guy ranted at me about how he had an Arts degree and how much he hated his job, and told me I should become a storeman. So I had to sign an agreement that I would apply for jobs in factories.
There’s some interesting discussion in various places about how Gen X’s approach to financial matters and work has been shaped by the experience of the recession. As I’ve suggested in my comment at Troppo – it wasn’t just that jobs dried up, but also big structural change in the labour market (ie – lots of the traditional clerical/admin career paths had been downsized or technologised out of existence and many of the new opportunities now around had not yet come into being). It’s interesting to contemplate the difference in attitudes towards money and the labour market with Gen Y middle class kids who’ve never lived through a recession or a crap labour market.
Might ask comrade Bakunin to look in on this thread. His experience (way back) of researching the economics of TEAS might be of interest.
Both he and I suspect that the cost of a minimum income entitlement approach to welfare delivery might be less costly than the current emphasis on targetted welfare; I know of one bizarre case where a Centrelink review (at how much cost in salary I can’t guess) resulted in a $10 per fortnight – i.e. $520 per year – reduction in benefit entitlements. If you toss in the costs of a potential appeal, you have to wonder how much is saved in such an exercise.
And on the subject of “work readiness” – as far as Centrelink is concerned it’s still defined as ready, able and willing to work for someone else. Alternative approaches to getting off welfare, which might be more personally congenial or better for your own health are nowhere near being on the agenda.
I’d be interested in the thoughts of anyone who’s looked into the economics of it, Gummo. But it seems to me that most of Centrelink’s staff work on basically administration, calculation of benefits and compliance. If you had a flat rate for everyone and no sanctions or compliance, you wouldn’t need much in the way of admistration at all. The social workers, psychologists, etc. employed by Centrelink I’m sure are a minority of employees – particularly since a lot of these roles have been outsourced to the employment service providers.
I’m not sure exactly what you mean by Lathams Authoritarian Communitarianism and of Gillard moving beyond it. Is it mainly a question of strategy (which of course preconditions outcomes)?
Wht do you plan to build in the charred ruins of CentreLink? Maybe I’ll find some answers over at Troppo.
Dead right, Mark. My 16 year old nephew is living with my partner and me at present – came up from Brisbane when my brother chucked him out (long story). I realise CQ is in the middle of a boom at the moment, but even so it only took him ONE AFTERNOON to get a part-time job that pays approx $200 p/w. One afternoon… I still find that stunning. And bearing in mind this kid didn’t finish year 12, and is indigenous (he’s at TAFE now).
My incredulity exists despite the fact that my partner (carpenter/builder) is having to get people to form a queue – there’s so much work going around. Because he worked his ringer out paying my HECS while I studied law, he’s trying to take it easy. I’m in the nice well paid job – the deal was he could take 6 months off and just go fishing/hunting. He only got two months off, and started getting offers he couldn’t refuse. Both of us have tried to explain to my nephew what it was like for us in the early 90s, but I don’t think he gets it. I suspect he thinks we’re bullshitting.
Yes, I think it is hard for Gen Y kids to imagine – I get that impression when I’m teaching stuff about the changing sociology of work.
Michael – communitarianism is basically an authoritarian ideology with strong incentives to comply with social norms built into its policy perspective. To this degree, it’s a point of tension with the less statist versions of Third Way (or indeed classic social democratic) thought. Latham leant heavily to the former pole – witness his support for restricting payments to parents who didn’t attend parenting classes, whose kids were truants, whatever. It’s a big part of New Labour thinking in the UK – anti-social behaviour orders, etc. At one stage Blair even wanted to legislate for people’s behaviour walking on footpaths – eg staying on the left, and when to overtake! There were going to be painted lanes and footpath cops – it’s just nuts.
As to the charred ruins of Centrelink, my view is that you wouldn’t need much administrative stuff at all with a single rate payment – and you could free up some money for genuinely helpful (but voluntary) labour market programmes – most of them at the moment are either basically useless or punitive.
Ah, Thanks Mark. I think I understand. communitarianism’s been on my ‘to figure out’ list for a while now.
But you’re asking the libertarian or conservative question within a kind, of third way, civil society paradigm, no? That’s different to the classical liberals who are ultimately aiming at inidividual oriented solutions. I would have thought this would lead to very different policy prescriptions, despite them both being focused on decentralisation. Maybe the common ground can last further than I thought.
Yes, in short!
Is this deregulation of organised employment structures….also something like work choices? All bureacracy should be minimised, including unions and the IRC.
The argument that welfare should also include a moral element seems misplaced, I think Jasons view is the more appropriate. Spending a small fortune on employing bureaucrats to harass unemployed could also be termed as immoral, it is certainly a waste of precious time and money.
Mark
The conventional wisdom (OECD, Washinton Consensus etc) is that welfare should be more targeted rathet than less, so I’m finding this all rather puzzling. Just a few queries.
I graduated in the 1980s recession and spent nine months on the dole. I had to fill in forms and present them to the authorities. As I recall, this took about twenty minutes per fortnight (it helped that I lived only five minutes’ walk from the Newtown CES). There were no complusory courses. Was it very different in your case? If not, what was so arduous about it?
When you say that the form-filling is pointless, what do you mean exactly? That is, do you mean that it doesn’t serve its stated aim, which is to ensure that only unemployed people get unemployment benefits; or that you don’t agree with the stated aim?
Finally, approximately what would be the level of your unconditional benefit? About the same as the current unemployment benefit?
Finally, would it really be totally unconditional? For example, would it be the same for teenager living at home as one living with his parents? If not, should the authorities ask for proof, or is that too paternalistic?
Please excuse me for my unreflective support for big government per se, but not all of us are born refelective!
I remember a friend of mine who graduated with first class honours in English lit being put through a course on how to become a service station attendant by Centrelink (not kidding!) – and I had a “mutual obligationâ€? interview where the guy ranted at me about how he had an Arts degree and how much he hated his job, and told me I should become a storeman. So I had to sign an agreement that I would apply for jobs in factories.
All too true. Some bloggers will remember that I started my blog partly out of the frustration of not being able to find work. I never mentioned it at the time, but one defining moment for me was when, as part of a mutual obligation program, I had to do a weekend course at an IPA job centre on Hunter Street, on – finding a job. The second day, the course was run by a woman who had just got a job at that place – previously worked in Tasmania, or somewhere like that. She didn’t engage with us at all, basically went through a number of points in a book; at lunchtime, she gave us all 16 cards with different jobs written on them. It was pretty obvious what we were supposed to do – rank the cards in a sort of grid, according to which jobs ‘we wanted to do’ and which jobs ‘we were able to do’. By the time I’d set the 16 cards out like this, she was still stumbling her way through the instructions in the book, and I think at one point she looked up, saw what I’d done, and said, ‘Oh no, you’re not supposed to do that. ‘ A few minutes later, she worked out her mistake. It was a stupid, pointless activity, one of many we were supposed to do.
Although I have a few memories of that time, I have to say, my overwhelming memories are of huge frustration, a constant, nagging guilt (that I was being paid other people’s money), not to mention a mixed reaction of anger and compliance towards Centrelink.
There must be ways of making it a better system – because it sure as hell can’t be much worse.
I just want to say that Work Choices doesn’t minimise or decrease bureaucracy. It increases bureacracy and expands regulation all at the whim of the Minister at the expense of tribunals and courts. It cannot be represented as deregulation in its current form.
During the recent IT bust and subsequent flood of out of work IT specialists a friend of mine who suffered in the job cuts was told by Centrelink to go to courses on how to write job applications and do interviews. This guy has degrees, had held steady jobs and was just unfortunate enough to lose his job at a time when lots of others with his skills also lost their jobs and companies were downsizing those positions. He, I think, rightly refused to go to time wasting courses and spent his time at home honing his skills so that when the industry turnaround happened he was still up to date with the changes in computing programming etc when it was time to get another job. Centrelink just isn’t in a position to be able to help people like this.
I’m just thinking out loud and in generalities here, I don’t claim to have done any specific costings BUT
The conventional wisdom is of course based on the assumption that everyone should be employed in some capacity or another. Now, it’s one thing to say we should be concerned if there are people who want to work and can’t find work and therefore have no opportunities to attain the standard of living they want. But should we be concerned if we do attain a society where no one is involuntarily unemployed and there is a very, very small minority who choose not to work and are quite happy to just live on whatever ’social wage’ we are prepared to pay?
My answer would be no, it doesn’t matter, as long as there are no incentive effects which induce too high a rate of ‘drop out’ – and I am only concerned with this because it means the guaranteed minimum income isn’t fiscally sustainable in the long run, not because I would care (if let’s assume) 100% of the population consensually decided to just become bludgers and go back to living on a subsistnce level.
But I doubt that such nightmare scenarios would ever occur even under pretty generous welfare conditions, in fact I am highly optimistic that they would not. The work ethic is safe and well in our society and will remain so. As a libertarian this is the price (Faustian bargain?) I’d be willing to pay to have governments interfere less in all markets (including labour markets).
Mark, et al
You might find this review of interest. Brittan has influenced my thinking on welfare a fair bit. It’s basically on my wavelength. Samuel Brittan btw is a famous economic libertarian columnist in the UK (also the brother of former Thatcher Minister Leon Brittan)
http://www.samuelbrittan.co.uk/text88_p.html
Excellent topic you have raised, Mark.
This issue is one where I have changed my opinion many times and I’m still fairly unsure about my current position. I got my degree with distinction in the late 80s and I think only one or two other students in my course graduated with distinction in that year. Nonetheless I was unable to get a job even remotely related to my degree and after a few months fell into a deep depression, drunk like a fish and slept half the day. That was the Keating/Hawke era and I don’t think it was a good welfare system at all. All I had to do was fill in the dole form every 2 weeks and that was it. No support, no counselling, no obligations, just zippo, like you didn’t even exist. Coming from the lower end of the lumpen proletariat, I’m aware that various other people I knew were similarly not helped by that old style approach to welfare.
I think a mutual obligation approach is far better, although the current system is, I believe, too harsh and punitive. I also think the Dole payment should be increased significantly and especially the rent assistance component.
While many folk on the Left dislike Work for Dole, I’m aware of people who have benefited from it in terms of self esteem and in one case getting an informal referral that led to a job. Nonetheless I think Work for the Dole should include some more productive and rewarding schemes and that participants should be paid a decent allowance on top of the Dole in recognition of the work they do.
In addition to the above, I should point that I worked in Workers Compensation for the military for about 10 years. I dealt with countless poorly educated soldiers who were medically discharged because of a dodgy knee, back etc. I noted that the ones who stayed on benefits rather than quickly return to work would often deteriorate mentally and become semi-dysfunctional human beings. I would say that in nine cases out of ten these people were perfectly capable of working light duties or reduced hours, but they had convinced themselves they were totally unfit for work. Based on my experience, I fear that the approach to welfare you advocate would lead to an enlarged underclass of passive welfare recipients on “sit down” money.
I reckon the paternalistic, nanny state approach to welfare that we see in the Nordic countries is a far better option for both society and the individual.
Having said all that, I used to strongly support a Guaranteed Minimum Income- I even wrote a detailed submission on it for the Vic Greens welfare spokesperson- so I’ve definitely come full circle.
I’m really quite tired after the election liveblogging, so I’ll just answer James’ question about what being on the dole in the mid 90s involved and come back to the rest of the comments tomorrow.
I think I was also on the dole for about 2 months in the 80s, and it was indeed preremptory.
By the mid 90s, it involved very much what it does now – pointless courses like the ones TimT described, refusals to give you any training which in your view might improve your job prospects, the dole diary where you have to fill in 10 job “efforts” a week, constant interviews and “information sessions” at Centrelink many of which were of dubious value, miscalculations about your entitlements and ongoing disputes (check out the figures as to how much error in payments is Centrelink’s fault), being pushed to apply for jobs for which I knew I wasn’t suitable, etc, etc. I always wanted either to have a job or be in full time information and I got one then the other, but when my Austudy entitlement for honours ran out, had to go back on the dole combined with casual work.
Oh, and this was when the CES still existed – friends of mine have even worse tales to tell about the crap advice and condescending treatment they get from employment service providers.
Oh, and James, you should see how complex the forms have got.
Just to clear up some confusion about my position that arose at Troppo, I’m not buying the whole of Murray’s kit and kaboodle, just agreeing with Jason insofar as we both support replacing payments and benefits with a guaranteed minimum income and dismantling Centrelink.
I’ve explained this at greater length in a comment on Don’s new thread:
http://www.clubtroppo.com.au/2006/09/10/selling-out/#comment-46265
“But I doubt that such nightmare scenarios would ever occur even under pretty generous welfare conditions, in fact I am highly optimistic that they would not.”
I agree with every thing in your post Jason, including the above inasmuch as it refers to your own expectations and beliefs. I am less optimistic than you however, and I wonder why you think that the vast majority would volunteer to work when life experience would indicate otherwise?
PeterTB
What are you thinking that I was proposing setting this guaranteed minimum income at? Certainly not average weekly earnings.
Would you be happy to throw in the towel and not work at all in return for getting the dole every year unconditonally? I wouldn’t.
Also thought I’d add in my comments on Troppo
http://www.clubtroppo.com.au/2006/09/10/selling-out/#comment-46358
Don
I’m open minded about how much of the ‘welfare state’ gets ‘cash granted’ (Murray sounds like he wants all of it treated that way) and how much of it gets voucherised or earmarked in some way even though ultimately all of it in the end is treated like a ‘portfolio’ of the individual. Voucherisation (the most obvious application here is for education) introduces an element of paternalism because it means that some of this money must be spent for specific purposes. So I’m quite open minded on the details. In the end my system might end up looking like a combination of Murray’s, Friedman’s vouchers and a variation of the Singaporean provident fund system.
What is this urban myth that the poor in Sweden are doing it better? Tim Worstall disagrees http://www.tcsdaily.com/article.aspx?id=082806E
Last time I went on the dole, I get half a payment and then found a job.
Any job is better than no job.
Actually, I got half a payment and then found a job.
Rog
They’re identical if you ignore social services [link]
While in some ways C/link is getting worse in others its…slowly…getting better. There are a lot of other government bureacracies I would abolish before it. The Defence dept and PMs dept for example. Much of whats wrong with C/link today is the top down micro-managing directives from the PM’s oriface. My model for abolishing harmful and regressive meddling is the famous topdown shutdown of the HAL computor in ‘ 2001 a space odyssey’.
Leave the life supports alone.
BTW I remember a universal guaranteed income proposal of US $5000 per person coming up in the 1972 USA election. McGovern must have been behind it 110% but this seems to be what is…slowly…the coming thing.
The universal guaranteed income support.
And a good thing it is too.
We are not all cut out for brutal Darwinian struggle in the Capitalist jungle.
DISCLOSURE – I first went on the dole when it was $10 a week ( 1970)
Now I’m on the Disabilty support, work in areas such as victimless crime and the black economy and make the average wage. We have a good system here that is the envy of many other places – lets not blow it.
Rog,
You are not being entirely honest. As Anthony points out, you need to factor in social income, which is much higher in Sweden than in the US.
Rog,
Now that I look more closely at the article to which you link, it is almost completely dishonest. For example it says Sweden doesn’t have a minimum wage. What a slimey piece of dishonest nonsense. Sweden has over 90% unionisation and as such an effective minimum wage does exist in every conceivable occupation as a result of union negotiated agreements.
Actually, the reality in Sweden of union power coupled with a strong economy knocks down yet another of the conservative/right libertarian myths about the way an economy actually works.
It is a great shame that the Australian media and even Left leaning intellectuals haven’t paid close attention to the Nordic Model countries. We need to stop looking only at other Anglosphere countries for policy guidance.
A view expressed by Christopher Pearson in the Oz.
James, on your question – I’d pitch the level above the dole – perhaps around the former level of disability and parenting payments, and I’d want as little complexity as possible in terms of criteria and eligibility. Use the money saved for genuine labour market programmes, not the dogs breakfast we’ve got. And I agree with Jason that the social incentives to work are sufficiently strong without the need for a massively expensive and intrusive sticks policy with only a few tiny carrots.
“Actually, the reality in Sweden of union power coupled with a strong economy knocks down yet another of the conservative/right libertarian myths about the way an economy actually works.”
What NONSENSE are you talking about now Munn.
What on earth do you think you’ve proved or disproved. Be specific.
Mark,
You appear convinced that a Guaranteed Minimum Income would not destroy the work ethic. When I wrote a submission on GMI for the Vic Greens I couldn’t find any persuasive empirical evidence that would support that contention. I did however find a report on a limited Negative Income Tax scheme in Canada that suggested propensity to work was adversely affected by the scheme. However the sample was small and the effect minimal. I lost my paper in a complete computer malfunction 12 months ago and I haven’t been able to refind this study on the Net unfortunately.
I would also strongly argue that the work ethic as it applies to the underclass is very different from how it applies to the middle class.
Further, there are a range of factors that complicate GMI. For instance, do singles get the same rates as couples? Do children get a separate rate? Does a single person paying $200 rent in Sydney get the same amount as a single homeowner in Bendigo? Should there be topup payments for people with a total or partial incapacity for work? etc etc etc
As one who is currently in receipt that wonderful government subsidy to the culturally creative (Newstart), might I offer one or two observations. We will start with work for the dole, that programme beloved by hairy chested populists and right wingers. I wouldn’t have a problem with it if there was real meaningful work to be done. My own experience has been that most of the activities are the equivalent of painting rocks, or digging holes in order to fill them in again.
Training. Most training is inappropriate and irrelevant. I have an undergraduate degree plus post graduate quals, and the only vocational training I have been offered in an attempt to make me more employable was a Cert I in Asset Maintenance – commercial cleaning. I dutifully attended all the expensively offered accredited courses, graduated, and then found that without a drivers license and a vehicle, no-one was willing to offer me even a lowly paid cleaning job.
Job Network providers. These are the people who have taken over at the coal face and are supposed to be facilitating my way into paid employment. Except they can’t do any of the things that will actually help make me more employable. Like assisting me to regain my drivers licence, of gaining Aussie citizenship so that I can be eligible for Public Service jobs, or getting a security clearance. They have given me a weekly bus ticket so that I can attend their office three times a week and be seen to be searching for a job, but this is about the extent of it. In the last two years I have been referred to one, and one only job, and that was four days worth of work taking down marquees.
Mutual Obligation. Like job search requirements. I have done at least two of those f$%*ing job search diaries where I have to contact ten employers a week and record the results over a six week period. The diary is then handed into Cengtrelink, where I suspect that it disappears into the ether – there is no way that Centrelink can have the staff to verify whether I actually did what I said I’d done. If my experience is any guide to what goes on around Australia, literally ,millions of person hours are wasted on these, and other useless activities that contribute nothing, zip, zilch, nada to getting a paid job.
In the meantime, I am gradually getting my music and literary career to the point where they can and will provide me with sufficient funds to live on, and in this way I can and will become independent of government funds, but the requirements that I have to fulfill in the meantime are a positive obstacle to achieving this. I could go on about Centrelink, but it represents a system that is fatally flawed at best, and damaging anbd destructive at worst.
Anyway…
Cheers…
steve, you need to see the work ethic more in sociological terms than just as a function of economic incentives.
And from what I hear, Mick’s experience is not at all unique. Sadly.
Having been involved extensively from 2003 until 2005 with the training of people on a work for the dole scheme, I’d have to say that by the time they got to us maybe one in ten felt any genuine work ethic. I’d also go on to say that three in ten would probably never feel any work ethic – at least not without a major life changing experience – and the others would need substantial changes in their lives and lifestyles to affect the change. But we are talking about people that have been unemployed for at least 6 months and most of them were jobless at least 3 years so it’s not a completely representative sample but it’ll give you an idea of what’s out there .
Firstly, let me say, the current system sucks. I’ve seen backyard operators become millionaires almost overnight because they’d managed to collect a government contract to find work for ‘dole-bludgers’ and to administer the ‘training schemes’. I’ve seen situations where they have fucked up and they’ve blamed it upon the benefit receiver. In one case a particularly promising student (one of the two in ten with a work ethic) was breached, had her payments stopped and removed from the w4td programme, because they ‘thought’ she had found a job – she hadn’t – and as a result after six weeks of no dole they realised their mistake they dumped her into another programme digging ditches for the rest of her w4td term. That sort of bureaucratic nightmare is not something a 21 year old kid overcomes quickly. So, let me reaffirm that I hate the current system, but I have to say that GMI is not the answer.
With a GMI you’re essentially removing ‘the stick’ option as a means of motivating people. Now it shouldn’t be used as frequently as it is under the current system, but it shouldn’t be dismissed altogether either. The scheme would essentially abandon the long-term unemployed to life-long poverty. I would say that eighty percent of the people we saw would gladly stay on the dole indefinitely if they could, because the incentives to work and the perceived benefits just aren’t enough to warrant the stresses involved. Who wants to risk, to them, certain failure when you don’t need to? In one case we had a guy who was a brilliant software coder – who could easily been earning a 6 figure salary – but who would spend all his time at home playing computer games. The only time he had any social interaction with anyone other than his mother was when he bought new equipment or was forced to hand in his form each fortnight – and attend w4td. He was 27 when we saw him and he’d been unemployed since he left school at 17. The only thing he really lacked was confidence and I’ll admit ‘the stick’ never even moved him far but at least he moved. With a GMI he would have been locked in his room until the day he (or his mother) died. Some of my students only got jobs after they were forced to leave their comfort zone. And that’s the key to any social welfare system: enough so they won’t starve, but not enough to get comfortable. Rights with responsibilities. The balancing point is tenuous.
Do I know how to achieve that? Nope. If I did I’d be consulting for the government and making millions in the process. But an absolutely guaranteed income is not the answer. The current system’s buck-passing hell isn’t either.
BTW I know how soul-destroying it can be to unemployed. Like many that have responded I graduated smack-bang in the ‘recession we had to have’ and found myself joining my peers in the dole queues. I was eventually thrown off after 2 years for – wait for it – attending a job interview instead of an interview at the CES. Didn’t get te job either.. Go figure.
Oh, just for the record, I never got paid for doing the training. Just in case you were wondering if I was one of the millionaires bludging off the dole-bludgers.
Like job search requirements. I have done at least two of those f$%*ing job search diaries where I have to contact ten employers a week and record the results over a six week period.
‘Contact’? Yes, I had to ‘contact’ employers too. That’s the problem with these government organisations; they’re constructed so ingeniously, with such a beautiful organisation, and so many neatly-printed out sheets and forms and books waiting to be filled out and signed. It didn’t matter what you filled them out with, however …
I used to worry that I’d get in trouble for not fulfilling one of the arcane obligations they whacked on me; but I don’t think I should ever have worried. They would have stamped the sheet, then whacked it in a folder never to be seen again.
Keep at it, Mick – pay as little attention as possible to those fucking forms they give you, and more attention to the employers and the job hunt. Maybe consider moving to a place with more work?
The flipside of the dole diary and contact requirements is that employers get lots of applications from applicants who aren’t really at all interested because they’re just doing them to comply with Centrelink requirements. So it can add considerable costs to employers doing recruitment as well. The system, as it actually operates, as we’re seeing from a lot of comments here, really is a farce and a cruel joke.
Yeah, I’m thinking of moving to where there is more work. Like New Zealand. I have an NZ passport, so there will be no problem getting a Public service job, I won’t have to put up with this bureacratic shit. Like the edict that makes me ineligible for a HECS loan, even though I’ve been here 36 years. I found this out, BTW, when I tried to back to Uni to do a Dip Ed to become a High School Science teacher – a class of person that is, I understand, in very short supply. Half way through the semester, after it was too late to withdraw without penalty, I was handed a bill for full up front HECS…. Something about being a resident non-citizen. I can come and go as often as I like, stay as long as I like, but under the HECS ruling I am not eligible for the up-front loan. Needless to say that there was no assistance to try and deal with this. And, finally, I had to pay back the money I had already received on AUSTUDY, because they transferred me from Newstart to student Allowances – this I am still doing at $50 per fortnight….Great. Go back to uni to requalify in a desperately needed profession, get less money than I would’ve on Newstart, get a bill up front for thousands, and then have to pay back the pittance that I was supposed to be living on…. Go figure… Anyway.
Cheers…
Yeah, Mick, the upfront fees thing is only a relatively recent development for NZ citizens. It’s also a farce that AUSTUDY and Youth Allowance are at a much lower level than the dole. 24 year old students who are “lucky” enough to have parents on very modest incomes are struggling along on about $90 a week, while they could go off and just become a full time job applicator on Newstart when they turn 25 and collect $200 a week (with rent assistance). The incentive not to do tertiary or TAFE study full time is one of the most ridiculous of signals sent by the system we have at the moment.
Granted from this distance it’s pretty impossible for me to guess what this whole Centrelink bizniss must be like (though, with a delightfully Orwellian name like Centrelink, I can make a few choice guesses), but from a big-picture POV, it always strikes me that these sorts of programs rarely work well to help their targets (either politically or practically) because, among other reasons, they fail to make useful categories, distinctions, or definitions.
From my own closer to home observation, f’rinstance, one of the reasons it’s so hard for government to solve, say, the so-called ‘homeless’ problem, is because there isn’t really such a thing as a group called ‘the homeless’. What there really is, in fact, is a plethora of diverse troubled populations who all happen to have in common the fact that some of their set may be homeless at any given moment. The mentally ill, the alcohol and drug addicted, the abused, the sick, the criminal, the lazy, the incompetent and the just plain unlucky are all distinctly different populations, each with their own specific problems, and in any one of these sets, some will be homeless and others will not be. And they all need different approaches to solving their particular problems. Creating group shelters as catch-alls for all these folks is plainly a disaster, as is trying to settle them in housing next door to working folks, as is ludicrously expecting that they will somehow get jobs someday and pay their way; all these non-solutions are flawed from the start, because of the lumpen definition.
I reckon it must be the same with unemployment. People are out of work for any number of peculiar reasons; rather than legislating and creating programs for ‘the jobless,’ who don’t actually exist, shouldn’t a government target, say, the top dozen categories/reasons why people are without work, and tailor the solutions to each category separately? It’d be just a start, but I bet it would get more practical results.
btw, I have to say, I’m quite baffled by what I see as an incredibly different attitude towards the culture of the dole in Commonwealth countries, as opposed to the US. The (relatively speaking) ease of cultural acceptance of public assistance in the Commonwealth countries blows my mind. I wonder if this general attitude might in some way contribute to the problem itself.
Spot on about the distinctions between people and categories, j_p_z.
For example – the “consultants” employed by the Employment Service Providers are often in their early 20s and make lousy money – 30-40k I believe is standard. So they can have both less experience of the workforce and less education than many of their “clients”.
But the system is so stuffed that people who are actually motivated to work but need temporary income support end up with the employment service providers anyway and the latter happily take their 4k payment or whatever it is from the gov’t when the job seeker gets a job – usually by their own efforts and despite any “help” they got rather than because of it.
“These are the people who have taken over at the coal face and are supposed to be facilitating my way into paid employment. Except they can’t do any of the things that will actually help make me more employable. Like assisting me to regain my drivers licence, of gaining Aussie citizenship so that I can be eligible for Public Service jobs, or getting a security clearance. They have given me a weekly bus ticket so that I can attend their office three times a week and be seen to be searching for a job, but this is about the extent of it.”
I’m a bit puzzled. Anyone can apply for Australian citizenship, Mick, providing they meet the eligibility criteria (presumably you’re currently a Permanent Resident?). I agree that it would be of benefit if you’re looking at public service employment but I’m not entirely clear on what you think a Job Network provider could be doing to facilitate your citizenship. The application forms are downloadable from the DIMIA website. All you have to do is fill them in and lodge them with the $120 application fee.
I agree that Job Network providers should provide paid support for acquiring a driving licence.
Actually, I’ve never had one, Geoff, and that’s one thing I asked for way back when in 93. Since the dude was particularly insistent that I become a storeman, it would have been a help to be able to drive a forklift…
Mark,
Skribe’s view after having worked on the front line in Centrelink is almost identical to mine having spent 10 years in Military Compensation. If you are going to advocate GMI then you must have a considered response to the points we raise. Comments like “you need to see the work ethic more in sociological terms than just as a function of economic incentives” are pretty damned obscure.
Let me add further weight to my case. My sister currently works at Centrelink as social worker and is doing Welfare to Work assessments. She is seeing lots of people who have fallen thru the cracks- the isolated, the depressed, the socially dysfunctional who have been rotting away for years. GMI would damn these people and add many more to their number. Let’s not forget that we live in a country where doctors already write out over ten million scripts for anti-depressants each year.
I’m also aware that the Centrelink system is currently shocking. For example, the Centrelink Welfare to Work social workers are currently doing 2-3 in depth case assessments each day. On the other hand, outside providers are doing up to 7 and treating the whole thing as a tick’n'flick exercise. The Centrelink social workers have been told they will lose their positions unless they match the ouput of the outsourced providers. There is absolutely no quality control in the system.
I’m sorry for being damned obscure, steve, but I was up til 2.30am finishing off some stuff on the Queensland election (paid work) and I’ve been writing lectures this afternoon (paid work), and I’d like to actually relax on Sunday night. Tomorrow I’m teaching from 10am til 7.30pm with only an hour and a half’s break. So when I have some leisure time to expand and I’m not as tired as I am now, I’ll do so.
Geoff, I don’t know what planet you live on, but finding $120 to apply for citizenship ain’t a straightforward task. Not when you are living on $200 a week, and your rent swallows over half of it. That is before I buy food, transport myself, that sort of thing… Why is the government even charging us to apply to become a citizen anyway? Given all the advertising about it, I would have thought that I should be paid to sign up…
I also have a bit of a philosophical thing about it. I came here when I had no choice, now that I able to become a citizen under my own bat, I feel a tad reluctant to make an oath or affirmation to the Queen (whom I don’t support as head of state) and to promise to obey the laws of the land (when I don’t support them and have broken many of – all drug laws, but there you go). I don’t know how you feel, but the idea of making a solemn oath, affirmation or promise that you don’t believe in and will not keep seems to be the height of hypocrisy… I know this probably won’t be a popular view, but there you go.
Cheers…
Sorry Mark. Sometimes I forget that not everyone in the blogosphere is a gentleman of leisure, such as myself.
No probs, steve!
I reckon it must be the same with unemployment. People are out of work for any number of peculiar reasons; rather than legislating and creating programs for ‘the jobless,’ who don’t actually exist, shouldn’t a government target, say, the top dozen categories/reasons why people are without work, and tailor the solutions to each category separately? It’d be just a start, but I bet it would get more practical results.
btw, I have to say, I’m quite baffled by what I see as an incredibly different attitude towards the culture of the dole in Commonwealth countries, as opposed to the US. The (relatively speaking) ease of cultural acceptance of public assistance in the Commonwealth countries blows my mind. I wonder if this general attitude might in some way contribute to the problem itself.
Dunno about the first point, j_p_z. I don’t think an organisation like Centrelink (or any other conceivable publically funded organisation) would be able to make those sort of distinctions between different groups. A number of the questions on Centrelink forms actually try and separate out people into different demographics (single, married, student, working part-time, etc), and they obviously have enough trouble sorting out those categories.
Bearing on your second point – it’s examples like the one I’ve outlined above that make me wonder whether public assistance is really worth all the time, bother, and expense anyway. Necessity, as they say, is a great motivator. Could be that best thing governments could do for the unemployed is adopt a US style system. I do believe there is an element of paternalistic authoritarianism that you can’t ever get rid of in any welfare system for the unemployed, anyway. Maybe that’s why both left and right conservative types have been so attracted to ‘mutual obligation’, it’s a predictable consequence of this paternalistic authoritarianism.
“Geoff, I don’t know what planet you live on, but finding $120 to apply for citizenship ain’t a straightforward task. Not when you are living on $200 a week, and your rent swallows over half of it. That is before I buy food, transport myself, that sort of thing… Why is the government even charging us to apply to become a citizen anyway? Given all the advertising about it, I would have thought that I should be paid to sign up…
I also have a bit of a philosophical thing about it. I came here when I had no choice, now that I able to become a citizen under my own bat, I feel a tad reluctant to make an oath or affirmation to the Queen (whom I don’t support as head of state) and to promise to obey the laws of the land (when I don’t support them and have broken many of – all drug laws, but there you go). I don’t know how you feel, but the idea of making a solemn oath, affirmation or promise that you don’t believe in and will not keep seems to be the height of hypocrisy… I know this probably won’t be a popular view, but there you go.
Cheers…”
I live on a planet where I deal with beneficiaries on a constant basis. If it’s the money that’s standing in the way of a citizenship application, Mick, I’m happy to give it to you.
However, if you think that supporting the law of the land is some sort of intolerable burden you might have more of a problem than 120 bucks can solve.
Geoff. Many and heartfelt thanks for the offer of the loan. I’ll be in touch with the details. But as to the other part, I don’t think you have understood. My argument is not that it is an insufferable burden to support the law of the land – on the whole I can and I do. And I am quite happy to accept the consequences if I am caught breaking the lasw of the land. My argument is with making an oath, affirmation, promise, vow, whatever, that I don’t believe in and cannot and will not be in a position to keep. Could you yourself swear to an oath or make an affirmation to something you didn’t believe in, where you knew you would break some of the conditions of that same oath or affirmation? I happen to think that it would not reflect particularly well upon my character to make such an oath or affirmation – one that I know full well that I cannot/will not keep. Or do you think taking out citizenship is a shallow committment that should be made carelessly in order to gain some short term economic advantage?
Cheers…
PS. Try the b-quote function…. It works…
Thanks for answering the questions, Mark. It does indeed sound as though the requirements were more onerous in your day than in mine, and even worse now. It sounds as though it could be a waste resources too.
I have a few more questions. Sorry if they have a bit of a nagging tone to them, but (as an uncritical social democrat) I find the idea of a universal unconditional income transfer so impractical that I obviously need a crash course if I’m going to get with the program. Answer them whenever you get around to it.
Would you apply any means test? Do you think current means tests for various benefits are too intrusive, and, if not, what is the philosophical difference between those and tests designed to distinguish genuinely uenmployed from other non-employed? Do you think that if means tests were abolished, the resulting additional entitlements could be funded by the savings on red tape; or, for that matter, that we could cease requiring people to substantiate their claims for income tax deductions, and fund the resulting blow-out in refunds by abolishing the ATO’s auditing department?
Finally, what do you think about Nicholas’s proposal, on Don’s thread?
I suppose the negative income tax proposal contains an income mean test. So I’m thinking more in terms of an assets test.
James,
When I supported GMI I believed that it would have to be a universal payment, ie paid to evryone irrespective of whether they worked. If it was paid this way administraive expeneses would be minimal. Each fortnight an EFT would deposit the requisite amount into a nominal bank account that had no interest and no fees. This would keep the administrative burden to an absolute minimum. Universality would also ensure middle class support for the system, as per Medicare. Without universality, and the middle class support it generates, any welfare regime is at serious risk of being pruned back or killed off by conservative governments.
A universal GMI would require Australia to have the approximately 45-50% Government share of GDP as per Sweden. So in reality GMI is an innovative, future orientated type of policy of the type suited to the Greens and Democrats. There is no way Labor could seriously contemplate such a policy under current circumstances.
I should add that under the universal GMI proposal employers would be able to reduce wages by the amount of the GMI benefit. For example if the GMI benefit for Citizen X was $250pw and his weekly earnings were $750pw, his employer would drop his wages to $500pw.
Accordingly a fortutious side-effect of a universal GMI scheme is that it would reduce the cost of Labour vis-a-vis Capital, thus providing a strong incentive for employers to hire more staff.
If I can be bothered I might try to resurrect the submission I wrote on GMI, from memory, and put it up on the Net just for the heck of it.
Thanks, Steve.
I can see that if it’s universal, the administrative expenses of paying it would be minimal! I think the 45-50% could be about right. Suppose it could be arranged that current full and part time workers, after getting the GMI and paying their taxes, ended up with the same net income on average as now. And those currently getting pensions and unemployment benefits still get the same amount. But there’s still 10-15% of the adult population – let’s say two million people – who don’t currently receive any income or transfers. If you’re going to pay them all $25,000 a year, that’s about $50 billion, or 6% of GDP, which must be several times the cost of the entire social security apparatus. That’s without any supply effect, i.e. people dropping out of the work force to surf and read Chaucer. So the tax burden the remaining workers would have to increase. These numbers are just guesses, but they can’t be out by an order of magnitude.
Mick, this is the pledge provided for by the 1994 amendment:
“From this time forward, I pledge my loyalty to Australia and its people, whose democratic beliefs I share, whose rights and liberties I respect, and whose laws I will uphold and obey.”
It doesn’t, in my view, mean you have to agree with the details of every piece of legislation on the statute book. It’s more about affirming the principles upon which lawmaking is based.
Jeez. Anyone would think that you’re desperately looking for reasons not to do it
James and steve, I haven’t actually myself given much thought to the details or studied the matter in any depth. It’s for that reason I’m grateful for and intensely interested in the views of those who have. My support really is just as a principle – and I’m agnostic as to the implementation. But I think that the point has been made repeatedly on this thread from people’s actual experience that what we have now is a ballsup. And I think it’s great to hear those stories and factor them into policy thinking – it happens too rarely.
What I was getting at in distinguishing between a sociological view of how norms of work could be encouraged and sustained and incentive or disincentive effects predicted by labour supply theory was that there are other ways to encourage a work ethic than simply economic measures. In any case the present system rests in practice far more on punitive measures than incentives or disincentives in regard to income. But again I’ll have to beg your indulgence if I save elaborating for a later time.
I meant to add that I’d be very interested in reading your paper, steve, if you do put it online.
Well, I dunno Geoff. Maybe you are right with that last bit. Maybe I’d read the letter of the law rather than the intent if I were on the High Court, but this clause don’t seem to leave much to interpretation – either you obey them all, or you don’t. And my personal experience with the law has always been that it is absolute. Either “guilty or not guilty”, “offence proved or not proved”, that sort of thing. I’d be happy to be able to swear to obey all of the existing laws, knowing all the while that I might be out to score next week…. but IMHE the law won’t ever extend me that same courtesy….. And it don’t get round my problem of not wanting to make an oath or affirmation that includes a statement that I know to be a lie…
Cheers…
Just chiming in with my Centrelink experience – after graduating two years ago with two degrees from MelbUni, and relevant long-term work experience in my chosen career (at a junior level, but hey, I wasn’t just doing retail or waitressing), I went to Centrelink to get NewStart & find a job.
I was told that I would have to use a local job network provider, “though they won’t have any jobs you’re interested in” – I offered to travel to the city, to perhaps find a job network who would be likely to have jobs in the field I was interested in – nope. Not allowed. Had to be the local.
I was told, up front, by the woman who interviewed me at Centrelink to “just fill in the form with whatever, mcdonalds or something. Someone with your qualifications will get a job in three weeks time anyway, so all this is just a waste of time for you and me”. I was then forced to attend a seminar on how to write a resume – no one actually checked the resume I had with me to see if I needed the training. Nope. Cookie cutter all the way. It was so frustrating – I wanted to do the right thing, I wanted to find a job, but the system was forcing me to lie in order to have any money for food, while wasting my time making me attend a job network interview and skills assessment for jobs that were a waste of my education.
Aggh! so frustrating!
I was put through ‘job-search training’ twice – late ’90s then early ’00s – and both times was made to undergo resume and letter writing classes. Like Laurie, in neither case was my existing resume examined, nor my letter-writing skills. In both cases, the ‘facillitator’ was at best semi-literate, and both were from a sales background. The job network member’s handouts were riddled with errata, out of date and so general as to be of use only to someone with NO experience or insight into anything whatsoever. With one exception, staff had zero personal skills, and zero ability (or to be fair, discretion) to tailor assistance to individual cases.
It was basically a worst-case scenario, leaving me severely depressed for weeks after.
IIRC every one of my students had been on a 3 week fulltime course to learn how to write a resume. I can understand if they were just out of school – and some were – but most of them were in their late twenties, thirties and forties some with better qualifications, experience and resumes than me. It’s a complete Mickey Mouse job straight from the ‘too hard’ basket.
skepticlawyer – why on earth did your partner pay your HECS for?? if there is any argument for improvements in financial literacy then your example has to be it?
Why?
Why?
Why?
I’m with Razor – why would anyone pay off HECS fees when doing almost anything else with it would have a better return? It doesn’t even affect your credit rating to have a HECS debt. As Razor says:
The thinking might be that HECS is payable not on a progressive scale like tax but as a flat % of your gross. So once you get over 60k in annual income, you find that 7% is being taken out of your pay every fortnight – on every dollar you earn – it’s not graduated. The first time I got a full time job after finishing various degrees I found I was paying $180 in HECS a fortnight. The benefit is that you pay it off quickly. But I suppose some might want the discretion over their net income – if you care to throw a few figures into the ATO’s online tax calculator – you can see that if you’re up around 60-70k or higher it makes a lot of difference to your take home pay whether or not you’ve got a HECS debt.
Those figures are only approximations – not got time to check – but it’s all on the ATO website:
http://www.ato.gov.au
Mark – scepticlawyer says that their partner “he worked his ringer out paying my HECS while I studied” and also that they were on Austudy etc.
Your suggested reasoning doesn’t match with the struggle that skepticlawyer and their partner went through, for some unknown reason.
Your reasoning is also illogical. Depriving yourself when you are struggling to make ends meet as a student because you think that you want the ‘discretion over their net income’ (whatever that means??) is muddled thinking.
HECS and the muddled understanding of it is one of the biggest frauds the Left has ever pulled on the Australian Public.
I am a financial advisor and I cannot believe the number of times I have had completely rational, quite well off people sitting in my office wondering if thy should pay off their childrens’ HECS debts. Answer – NO.No.no . . . oh and if you didn’t get it before – NOOOOOOO.
1. Assuming a degree is gained ( and even a part degree sometimes) the earning capacity is significantly increased compard to not having one.
2. The money is lent at a rate of interest equal to inflation – the debt remains the same in real terms.
3. The repayment rate once threshholds are crossed is not a huge burden. They are more likely to spend more on mobile telephones, alcohol, travel and other non-esential expenditure annually than they are on HECS repayments.
4. If they never earn enough to cross the threshhold and they die – the debt is written off.
5. Only pay upfront for the 25% discount if you have a binding written contract with your off-spring for them to repay you.
6. Only make voluntary contributions for the 15% reduction if you have the free cash and it clears your debt. do this in June and see the result in next tax return.
If you want to financially help your kids give them something they will appreciate – buy them a car or an airline ticket.
I moved to Melb in 1991, into v. dark employment times – The Age jobs section some Saturdays (this is pre-Internet – so all employment was advertised in the paper or on job boards at the old CES)
The whole employment section was a single broadsheet of sometimes not even 4 pages – for the whole of Melbourne and most ads were responses to older job adverts saying: “To the 290 applicants – don’t bother sending in another application and please don’t ring the office or visit the premises etc
I remember being rung by a friend working at a cake/coffee shop on Brunswick St after 4/5 months of looking for ANY work at all, that one of the girls had left, and I ran down straight down to get the job, but was beaten to the shop by another girl, who lived 300 metres closer than me, another worker in the shop had rung her friend….
My ex-partner and I used to walk down Smith St, Collingwood and we’d have to hide from fruit shop owners and other shop owners… as we’d try to do the veg and deli shopping at different shops each fortnight on dole day…. to spread out our tiny spending amongst all the struggling shops. They’d see you coming, and come out of the shop to greet you.
Like a depression baby of the 30’s. I always have lots of double ups of dry groceries and 2 lots of toilet paper etc in the cupboards, I hate running out.
The only saving grace was that the DSS (Dept of Social Scrutiny) was pretty benign and the paperwork was v. minimal.
Razor, I hadn’t read SL’s comment – only the reference to it – I haven’t read the whole thread – I assumed that what was being referred to was paying off HECS after a person is in full time employment. Apologies for jumping to conclusions.
My ex-partner and I used to walk down Smith St, Collingwood and we’d have to hide from fruit shop owners and other shop owners… as we’d try to do the veg and deli shopping at different shops each fortnight on dole day…. to spread out our tiny spending amongst all the struggling shops. They’d see you coming, and come out of the shop to greet you.
Now that’s Melbourne for you!
TimT
Melbourne shopkeepers used to be the best by far, haven’t been back for quite awhile, so things might have changed, I hope not!
3. The repayment rate once threshholds are crossed is not a huge burden. They are more likely to spend more on mobile telephones, alcohol, travel and other non-esential expenditure annually than they are on HECS repayments.
The weekly repayments are not burdensome I agree and I have no great objection to the concept of HECS. It is however a pain to put in a tax return and find you owe an extra few grand on top of what’s already been witheld from your pay ($30-40 a week) all year. Any tax return otherwise due all immediately taken for HECS and have to scrape every deduction I can find just so I don’t end up owing a lump sum. So, pay the bastard off and get it out of your life if you can is my advice.
It’s good advice, Amanda. I was once confronted with a bill for $4600 which was entirely accounted for by HECS – because I had more than one employer so HECS was being taken out of my separate pays as if they were the total of my income.
Mark – apology accepted.
I’d still like to hear from skepticlawyer about why they made the decision they did re paying off HECS.
No probs, Razor.
From what SL is saying over at Catallaxy, she’s in and out of court today and only intermittently on line.
Amanda – if you tick the correct box on your Tax File Number declaration Form then your employer with withhold enough for you, unless you have other non-employer sources of income.
If you did tick the correct box and your employer didn’t withhold enough then there could be something fishy going on, or a clerical error.
The withholding rates are designed so you generally don’t end up with a tax bill.
Doesn’t work so well when you have two or three employers, Razor, as I did in the year that I was hit by the ATO with a bill. Unless you can suggest something I should have thought of?
There is nothing fishy, according to the eight billion different people in HR and phone monkeys at the ATO and elsewhere I have spoken to. Anecdotally, it is quite common.
Mark,
‘Not claiming the Tax Free Threshold’ is the box that you tick on your Employment Declaration form – at your second and third employers.
If you are having trouble with multiple employers not withholding enough PAYG, ring your accountant and do some projections of your annual gross income and add up the PAYG currently being withheld, and do a back of envelope estimate, to see if youre in the ball park.
At least it’s not unexpected when it comes – or upgrade your work related stuff….
And same for HECs too Mark.
I originally posted this on another thread but this one is more relevant, and I have also corrected a few over-simplifications.
The simple arithmetic of an unconditional GMI
Simplifying the system and making it more humane are admirable goals, but I still see major problems with an unconditional guaranteed minimum income.
These numbers are rough, but I think that they are around the right order of magnitude.
There are around 15.65 million people aged 18 and over or close to 17 million aged 16 and over in Australia. The current rate of age pension is $512 per fortnight or $13,312 per year. Paying all adults over 18 this amount would men that an unconditional GMI would have a “gross cost� of around $208 billion a year (or $226 billion if you went from 16).
The current outlays administered through Centrelink are close to $63 billion, but around $15 billion of this is family payments and services, so if you abolish the rest of the social security system you save around $48 billion (you will actually have a bit less than this because of rent assistance which would still need to be paid, plus a range of other small payments). Total Centrelink administration is around $2.2 billion a year (of which $1.5 billion is salaries). Employment and Workplace relations manages around $2.2 billion in employment programmes and costs about $1 billion a year to run.
Let’s say all this is abolished but Family and Community Services is left to manage the Family programmes. This means that you can save perhaps $53-$55 billion.
This means that you have to come up with another $153-$180 billion to pay an unconditional GMI.
Current Commonwealth receipts are around $220 billion, so we’re talking a gross increase in government revenues at the Commonwealth level of more than 68%. Income tax is roughly $100 billion, so we would have to at least double it if that was the way of financing the GMI. (This would be the logical way of doing it since the GMI is a direct income transfer, which acts as the effective tax threshold). Alternatively, the GST collects around $35 billion, but I wouldn’t like to think what rate you would have to charge to collect $200 billion. In addition, you would have to increase the gross GMI amount to offset the higher GST if you didn’t want to make current pensioners and beneficiaries worse off.
Fairly old estimates I’ve seen suggest we would need a flat income tax applying from the first dollar of private income of roughly 50% to pay for an unconditional GMI. It may be a little higher now because real benefit levels are more generous. (Perhaps benefits can be paid through the tax system, but I imagine that people would still want to get fortnightly payments, so you probably have to keep a bit of Centrelink to do this.)
Now of course everyone who gets the GMI is actually getting an offset to the higher taxes, so for some their disposable income doesn’t necessarily change, but if you actually pay this in cash up front, you are talking about an incredible amount of churning.
Most importantly, who benefits from a GMI?
Nobody has to jump through any mutual obligation hoops. Clear winners.
Ex-Centrelink and DEWR staff are obviously financial losers, until they get “real� jobs.
Most poor people who are currently on benefits get nothing extra. Single age pensioners, single disability and carer pensioners and lone parents get the same amount of money as now. The single unemployed and sick get more, and couples on pensions and benefits also have an increase if the GMI is individually-based. (In theory, of course, you could save money and have a family-based system, but then you have to be able to decide whether people who are cohabiting are living as partners, so you end up with a system that is intrusive like now.)
So where does most of this money go?
Well retired people whose incomes and assets are too high to qualify for an age pension (about 20% of them) get up to an extra $13,000 a year. (And a sizeable number of them are ex-public servants.)
But I would guess that most of the money goes to people whose partners earn too much for them to get social security benefits, and probably most of these are mothers at home looking after children. So what we have achieved is a really big Family Tax Benefit Part B.
Of course, you could devise a system of special tax surcharges to get the money back off people you didn’t want to get it, but what you would do is recreate in the tax system what Centrelink already currently does.
Alternatively, you could start with a partial basic income, say paying all adults $5,000 a year, for example. But if you leave the current social security system as it is (offset by the smaller basic income) you still have to make people jump through the administrative hoops and the “administrative savings� don’t eventuate.
Speaking personally, I don’t think that an unconditional GMI is a goer. This doesn’t mean that the current system couldn’t be more efficient and administered more humanely.