Communist Party of Australia

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Issue #1562      29 August 2012


Entrenching disadvantage

The gap between unemployment benefits (Newstart a) and other government payments and workers’ wages has widened considerably over the past two decades. The present single Newstart base payment is $245 per week or $35 per day. The minimum wage, which is considered to be a safety net, is $606.40. The dole is less than half this amount – 45 percent – of what is considered to be the minimum required for basic living expenses. The gap has also widened between Newstart and other government payments.

For example, since 1997, Newstart has fallen from 91 percent of the Aged Pension (in 1997) to 65 percent. The current payment is more than $130 below the poverty line. The gap continues to widen as the half-yearly increases in Newstart are based on changes in the consumer price index and those of the aged pension in line with rises in average male earnings. At present the aged pension is rising at twice the rate of the Newstart payment.

At the instigation of the Greens, the Senate is holding an inquiry into the payments system. The Greens are demanding an immediate increase of $50 per week in the benefit and improvements in infrastructure and other services for the unemployed. But not everyone appearing before the inquiry is seeking an increase in the payment or improvements to the system.

ANZ CEO Mike Smith, for example, claims higher welfare payments would make labour less mobile. “… the welfare net in Australia did not give people an incentive to move,” Smith said. Whereas lower payments would see the unemployed flock to mining operations in remote Western Australia and Queensland. Smith claims that would ease labour shortages and provide mining corporations with a source of cheaper labour and so make Australia more competitive on international markets (meaning higher profits). For Smith, whose pay package last year was $14 million, $35 is only a fraction of what he spends on one bottle of wine (wine is one of his hobbies).

As various social welfare, community and trade union organisations have pointed out, slashing the dole will not find people jobs. Inadequate support forces already vulnerable people into deeper poverty, “entrenching their disadvantage and making it more difficult for them to get a job,” national director of UnitingCare (Tasmania) Lin Hatfield Dodds said.

According to the OECD, any increase in base rate from $245 a week will have “the distinct disadvantage of reducing employment incentives, especially for those who can only obtain low-paying employment.” The implication is that the 550,000 people on Newstart are there by choice.

If starvation rates were an “incentive” to work, then how much lower than $35 a day would it have to go! More than 60 percent of Newstart recipients are long-term unemployed, many relying on charities and family and friends for survival. More than 25 percent are over 50.

Cutting Newstart is part of the process of winding back the “welfare state”, of governments abdicating their responsibility for the wellbeing of society. Apart from reducing government spending, balancing budgets and funding future corporate tax cuts, lower unemployment benefits provide the conditions for employers to instil fear in workers and force them to accept lower wages and working conditions or face destitution.

It also diverts attention from the causes of unemployment – capitalism – and the failure of governments to take any serious measures to reduce unemployment. The government looks on as manufacturing jobs continue to go up in smoke, trusting the “markets” to find the “right balance”. Employment and workplace relations minister Bill Shorten believes Labor has “got the balance about right particularly when delivering a surplus and continuing our strong economic management.” But the budget surplus is running into trouble and the government’s concept of “strong economic management” is limited to budget cuts, in particular to slashing social welfare, sacking public servants and privatisation.

The government should be taking strong measures to rebuild the manufacturing sector, to expand the public sector and plan the future direction and development of the Australian economy. Expand public transport, public housing, research and development of renewable energy sources and expand the public sector where services are in short supply. Remove the barriers to employment. Apart from job creation, improve services to the unemployed; abolish TAFE and university fees; increase income support for students and trainees; provide affordable, quality child care places; and increase Newstart payments.

Next article – Cowper Street Victory

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