Home > Economics - General > Poverty and income gaps

Poverty and income gaps

June 20th, 2004

A couple of readers have written to me suggesting it would be a good time to post about poverty and income inequality. First, I’ve been alerted to this story by Miranda Devine saying that the tragic house fire in Sydney a couple of days happened because the family couldn’t afford blankets. It’s often been asserted that poverty is an out-of-date concept, but there is still plenty of absolute deprivation in modern societies. There’s some evidence onhunger in the US here. Although I don’t have the data handy, the proportion of the population living below the US poverty line (based on a PPP conversion) is actually slightly higher in Australia than in the US – much higher in both countries than in most developed countries. Of course the biggest problems are those of indigenous Australians (from Devine’s report, this includes the family in the Sydney tragedy) but there’s nothing to be complacent about more generally. And there’s no justification for looking only within Australia. We can ignore poverty in the world as a whole if we choose, but that doesn’t mean the world will choose to ignore us.

Devine’s article focuses on the need for more charitable effort on the part of those of us who are doing well, and this is an important point. Most of us could give more than we do without suffering too much as a result. We should all think about it and try to make more of an effort. But it’s equally important to look at the economic structures and government policies that have led to growing (or, depending on how you measure it) unimproved poverty rates over a long period of reasonably good economic growth[1].

This brings me on to a point raised by Tim Blair, which is worth taking seriously. Blair says

I’ve never understood all this concern about the gap [between rich and poor]. What benefits does a small gap bring? If you are poor, how are your circumstances improved by everybody else also being poor?

There are two main responses to this. First, if there’s a big gap that means that there’s a potential to redistribute income so as to reduce poverty. The same aggregate income is consistent with widely different levels of social wellbeing. A big gap suggests that measures of average income overstate the welfare of the average person and particularly of those at the bottom of the income distribution. That is, for given income, a big gap between rich and poor means that the poor are worse off in absolute terms.

Second, although I don’t like purely relative measures of poverty it is true that, in important respects, you are worse off being poor when most other people are well off. For example, if most people have cars, all sorts of social arrangements will be made on the assumption that people will drive to them. So doing without a car becomes more of a burden. At a more day-to-day level, I’ve noticed that participation in school and sporting club events has got more expensive over time, as average incomes have risen. For example whereas sports uniforms were once cheap and often pooled, there’s now an expectation that they should be brand new and that they should be bought specially for particular events. Accommodation has largely gone from billeting to motels. The cost of participating is that much higher, and kids from poor families are, at best, shown up as poor and at worst excluded altogether.

The first of these points is more relevant in relation to the very rich. The point here is not so much that the rest of us are worse off because, say, Kerry Packer is very rich, but that economic growth isn’t of much benefit if it mostly enhances the fortune of the very rich. In this context we should look a lot more at median than at mean incomes. The second point relates mainly to the distance between the median and the bottom tail of the income distribution.

[1] In this context, I’m equally dissatisfied with those rightwingers who want to leave everything to private charity and with those leftwingers who excuse themselves from charitable giving on the ground that this is a job for government.

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  1. June 21st, 2004 at 00:05 | #1

    Richard Wilkinson argues that “life expectancy in different countries is dramatically improved where income differences are smaller and societies are more socially cohesive.”

    Althought Wilkinson’s views are controversial there seems to be growing evidence that oppressive hierarchies and social dominance are bad for health.

  2. Brian Bahnisch
    June 21st, 2004 at 00:22 | #2

    Tim Dunlop blogged on the issue of health and your position in the hierarchy once a long time ago. I think it may be related to how much power you have over your life, what stresses and anxieties the lack of power produces and the impact this has on your immune system.

    But that’s just a theory.

  3. June 21st, 2004 at 00:57 | #3

    THe simplest test of social equity is the Rawlsian mxi-min difference principle which judges a society by the absolute condition of the worst off, who are the indigenous people. By that measure, Australia is not doing very well. This article reports a study that claims Australian indigenes are still doing it tough, although it does not go into the causes of their relative deprivation.

    The quality of life of Australia’s Aborigines is the second worst on the planet, according to a Canadian study of 100 countries.
    Australia, however, ranked fourth after Norway, Iceland and Sweden on the level of human development accorded its general population.

    Perhaps a more representative measure is the income level of median households. By this measure Australia is not doing too badly. The ABS reports that:

    The average Australian is someone in their mid-thirties, who has a weekly individual income of $300 – $399 and a weekly family income of $800 – $999, according to selected averages from the 2001 Census

    Average household income has been rising at about 3% pa over the nineties, mostly from extra working hours plus growth in productivity. Much of the increases have accrued to the top end of the income distribution.

  4. June 21st, 2004 at 06:54 | #4

    Oh, thank you, Professor, for taking my point seriously. I’m deeply honoured.

    Patronising academic loser.

  5. June 21st, 2004 at 07:03 | #5

    Incidentally, John, you’re rich, at least partly through a tax-funded fellowship. You’re increasing the gap — becoming wealthier via the taxes of those less rich than you.

  6. Harry Clarke
    June 21st, 2004 at 09:08 | #6

    The March 31 Business Week article “”Working and Poor” (suscription only) points out that 28 million people — one-quarter of the workforce –earn less than $9-04 an hour — the US poverty line of $18,800 for a family of 4. It’s a stunning figure and one that puts the strong US growth performance over the last decade or so into perspective.

    The article writes of the Wal-Martization of the economy. Wal-Mart pays its 1.2 ,million employees $9-64 an hour leaving 53% of them without company health insurance. This is a serious matter in the US where health costs are so high.

  7. June 21st, 2004 at 09:16 | #7

    Tim’s satire is always biting, but his logic needs a valve job. There seems to be a contradiction between name-calling pr. Q as a:

    Patronising academic loser.

    and complaining that pr. Q was

    rich [through winning an academic] fellowship

    ps Am I out of the sin-bin?

  8. snuh
    June 21st, 2004 at 09:36 | #8

    perhaps, tim, after such petulance, the professor will cease to take anything you say seriously.

    so far as i can tell, you don’t have a response to any argument in this post. you don’t even have one of those snarky, witty, one-line type responses. you’ve got nothing.

  9. Dave Ricardo
    June 21st, 2004 at 10:14 | #9

    “patronising academic loser”.

    Timbo, John Q’s turn of phrase “deserves to be taken seriously” is commonly used high praise in academic circles. If you feel patronised by it, you need to go to your therapist and get your self esteem raised.

    And, while John Q may be many things, a loser he aint.

    John – I’m delighted to see your federation fellowship continues to attract the fury of people like Tim Blair. They must feel really, really betrayed that their government gave you all this money.

  10. Fyodor
    June 21st, 2004 at 10:35 | #10

    JQ,

    You’ve chosen a sensationalist backdrop for a highly opportunistic post. There’s a whole lot more than simple poverty involved in the family tragedy you mention.

    Australians, on average – whether by mean, median or mode – are far better off in material terms than they were 10 years ago, and continue to improve their circumstances. That should be the starting point for any rational debate on “poverty” in this country.

    Your first argument, that wealth disparity causes poverty, is facile. Poverty is a relative concept, and we will always have “poor” people so long as we have unequal divisions of wealth/power/status, as your second argument demonstrates. I would object strongly to having to pay more taxes so that every family in Australia can have a plasma TV screen, lest they feel deprived.

    You mention hunger in the US, which is an excellent example of absolute versus relative poverty. The USA has become the first country in history to reach a point of such stupendous wealth that the poor are fatter than the rich. Yes, the poor are eating crap, but they’re doing a damn sight better than the poor people of Darfur province, Sudan, that have plenty of income equality.

    I don’t give a stuff how much money Big Kezza makes so long as I have a chance to do the same, without having to share half of it (or more) with the government.

  11. June 21st, 2004 at 11:45 | #11

    The phrase deserves to be taken seriously occurs 2,600 times in google.
    I was not able to find a single instance where this occurs in a patronising context.

  12. June 21st, 2004 at 14:22 | #12

    wow!! what’s gotten into Timbo? I thought right-wingers were against envy? If you’re so right-wing why aren’t you rich? anyway given recent revelations I’d rather my money go to eminent scholars than to the Defence or Foreign Affairs departments.

  13. John Quiggin
    June 21st, 2004 at 14:23 | #13

    I didn’t intend to give offence, but obviously it was taken.

    Probably it was a mistake to link at all, but a reader did ask for comment on this specific post, and I thought it was worth a response.

  14. June 21st, 2004 at 19:37 | #14

    Maybe Tim wants to be treated as a joke? I don’t know…

  15. gordon
    June 21st, 2004 at 20:25 | #15

    Prof. Quiggin notes that growth is of little benefit if it mostly enhances the fortunes of the rich. In this connection, people may be interested in the UNU/WIDER report of 2001 which found that, as inequality rises, economic growth by itself has less and less ability to reduce poverty. The implications for the usual market-oriented approach to poverty (increase growth) are obvious. The report is entitled: “Inequality, Growth and Poverty in the Era of Liberalization and Globalization” and can be found on the WIDER website at http://www.wider.unu.edu/publications/publications.htm
    The large WIDER World Income Inequality Database can also be found and accessed from the WIDER site.

  16. gordon
    June 21st, 2004 at 20:37 | #16

    Brian Bahnisch may be interested in the four excellent Health Report (ABC Radio) programs broadcast in Nov. 1998 called Mastering the Control Factor (Parts 1 to 4). These programs reviewed the evidence for a connection between social and organisational position/power and health. It’s more than just a theory. The archived transcripts are at http://www.abc.net.au/rn/talks/8.30/helthrpt/index/hrChrono1998.htm

  17. June 21st, 2004 at 22:47 | #17

    There is more to this topic of course, as John knows. Large inequalities undermine co-operation between capital and labour, and hence productivity, and generally erode social co-operation among everyone whose contribution depends on a belief in fairness (i.e. everyone). Socially, growing inequality is strongly linked with increased crime and ill-health, showing up as social problems and economic costs. Environmentally, inequality impedes ecological sustainability where equality of sacrifice is necessary for reining in excessive levels of production and consumption. Politically, extreme inequality also undermines the principle of ‘one person one vote’, clashing with the principle of ‘one dollar one vote’, as money can buy services that effectively produce more or better rights. The idea of equal rights before the law has an uneasy relationship with the existence of pervasive economic inequalities. While it is foolish to pretend to equal incomes, at some point the alternative – extreme inequality – will destroy freedom. A very unequal society is an insecure society – economically, politically and, as tim demonstrates, psychologically.

  18. Brian Bahnisch
    June 21st, 2004 at 22:48 | #18

    Thankyou gordon, I’ll check the transcripts out when I get time.

    btw I’ve long accepted “a connection between social and organisational position/power and health”. I’d be surprised if I didn’t at least hear bits of those 1998 programs as I listen to a lot of RN. I had the impression that the phenomenon was identified after controlling for all the usual things like the different diets of the social classes. But I didn’t think they had identified a mechanism.

    So my theory was that it worked through lack of control over your life, the stresses this produces and the effects of these stresses on the immune system.

    John, Michael Duffy on his new program “Counterpoint” had one Peter Saunders in to explain the ins and outs of poverty. Not surprisingly, the problem melted before our eyes, as it were.

    He’s a bit of a worry, young Michael.

  19. Jill Rush
    June 21st, 2004 at 23:44 | #19

    My city never had beggars 10 years ago. Now when I go out at lunchtime I see them every day.

    There may be many who are richer but there are also many who are far poorer.

    Consumerism makes the richness of life far poorer.

    10 years ago I didn’t feel the need for a strong gate at the front, nor that the society was fracturing with great inequality.

    The difference is the Federal government and its belief in individual destiny and the belief in punishing the poor and mentally incompetent, who once had a boarding house to go to until they were razed in the economic boom and replaced with Tuscan dogboxes for the wealthy.

    Before that there were institutions for the mentally incompetent to go to but the left and right aligned to get rid of those supports.Those on the left didn’t like them for the abuse that occasionally occurred and the right were happy to agree as they saw the savings that could be made.

    We never needed to talk about social capital whilst we had it. Now it is in short supply we talk about it but introduce systems which crush it. It is like customer service – we only started to talk about it when it was becoming extinct.

  20. June 22nd, 2004 at 01:14 | #20

    Social capital’s a case of “oops, was that important?”, it seems.

  21. kyan gadac
    June 22nd, 2004 at 02:47 | #21

    Like Jill, I don’t buy the ‘things are getting better’ line one bit. Debt traps are de rigeur for young people. The drop off in first home sales is I reckon pretty permanent without a big carrot from the Government.

    The price of food has risen faster than overall inflation rates over the last 10 years or more.

    Also I think it’s wrong to discount the difference between rich and poor in Oz because Aborigines are the poorest. The historic nature of Aboriginal poverty and it’s relation to dispossession and internment enabled the rest of the country to get fat on their stolen labour and land.

    The gap betweeen rich and poor is widening because the renewable resources of the planet are not being reproduced. We are living on our biological capital and have been doing so for a number of years. The time of reckoning is fast approaching as many people fear.

    Notwithstanding the imbalances in U.S diet(high fat intake) that leads to obesity, hunger is still a reality in that country as it is in Australia.

    Hunger occurs after you cannot find food for a couple of days, it changes the way you think about things. HUnger is also something that can occur every week until you get paid. Food, we need to realize is not something that we invest in and can keep in a bank but something we must grow every year and eat every day. Every country is only 3 meals away from a revolution.

  22. June 22nd, 2004 at 02:55 | #22

    If a family can’t afford blankets, that’s their problem. The Australian welfare system provides them with more than enough money for rent, food, whatever they need as well as blankets.

    If they ran out of money, that suggests one of a few things:

    A:) They can’t be bothered registering at the dole office.

    B:) They spend their money on booze or smokes rather than blankets.

    C:) It’s possible that they gave their money away to extended family members or what have you.

    As for your point regarding sports: What a load of rubbish. A pair of footy shorts costs $10 and a pair of boots can be had for as little as $30. Even if you have to buy a new pair each year for 3 children, that’s $120/year for the whole family to play. Kids don’t have to pay fees to play school sports, and junior non-school sporting clubs are heavily subsidised.

    Not to mention, our poorest families (i.e. aboriginal ones) will have all these costs reimbursed by the government if they ask. Our cricket club routinely sends through these requests on behalf of aboriginal cricketers, who will have the costs of purchasing a full kit (bat, pads, gloves, everything) reimbursed, even though the club provides equipment to all players free of charge.

    Furthermore, the fact that the question of playing organised sport is even relevant just goes to show how retarded the debate on “poverty” has become. Of course, if you define “poverty” as being in the lowest ‘x’ percentage of the population, then by definition “poverty” will never be overcome.

    Someone is always going to be the poorest. In the land of the blind, the one eyed man is king. Conversely, in the land of billionaires, the millionaire feels like a pauper.

    The so called “poor” who face such problems as obesity, alcoholism and gambling addiction are not poor at all. The fact that they have money to buy fast food, booze and lotto suggests that they aren’t really on the bones of their arse like you lefties keep saying they are. They just continue to make poor choices on how to spend their money.

    All the income redistribution in the world will never solve that problem.

    What will help would be to reduce the effective marginal tax rate on people trying to escape the welfare cycle.

    Going from $220 in the hand along with all the other benefits of being on the dole (cheap transport, drugs, discounts on nearly everything else, free training, free access to services that the general public has to pay for, etc, etc) for working 0 hours a week, to $300 in the hand for working 40 hours a week is not a strong incentive to work. It’s not surprising that many people choose to stay on the dole long-term and take the occasional cashie job when faced with that choice.

    In summation, I challenge John’s original assertion that there is absolute deprivation in modern society, at least in Australia. The only way someone can be deprived of food, shelter, health services, and even leisure activites in modern australia is if they choose to withdraw from said society.

    You can quite easily survive on welfare and various handouts and enjoy a good quality of life. Sure, you probably can’t afford to drink or smoke (primarily because of the unbelievably high level of taxation on such “vices”), and you won’t be eating out very often, but you won’t go hungry and won’t be living on the street.

    In fact, the absolute quality of life of someone on the basic level of individual welfare in modern Australian society is better than that of the kings, queens, imperial officers and robber barons of the 19th century. For that we have capitalism to thank, and I’m really tired of all you lefties running it down all the time.

    I’m not envious of John’s income, just as I’m not envious of the income of Triads or The Yakuza or anyone else who makes their money by extorting it from the general public. Also, like the triads, the yakuza, and la cosa nostra, left wing intellectuals once provided a valuable service. Now they’re just a drain on society.

  23. John Quiggin
    June 22nd, 2004 at 06:22 | #23

    Yakuza and triads! I’ll have to practice harder at karate!

  24. John Quiggin
    June 22nd, 2004 at 06:47 | #24

    To be serious, it’s certainly possible to live reasonably well on welfare benefits or low wages in Australia if you’re well-organised and have access to reasonably cheap housing.

    But there isn’t a lot of margin for error and various reforms, such as rigorous breaching for minor violations of unemployment benefit rules, are making the margin narrower.

  25. sp
    June 22nd, 2004 at 10:49 | #25

    I saw a program in the UK where Michael Portillo took the place of a single mother with 3 kids for a week or so, and he found that his opinion about how easy it was to live on a limited income changed quite a bit. The difference between theory-from-a- distance and the in-your-face reality proved quite large. It wasn’t that long afterwards that he resigned as a Tory MP, though I don’t know that the experience had anything to do with it.

  26. Fyodor
    June 22nd, 2004 at 13:24 | #26

    As I understand it, Portillo’s resignation followed a little after his admission of a homosexual affair in his youth. I’m not sure if that was linked to his interest in single-motherhood. Still, at least he can say he’s willing to try anything once…

  27. kyan gadac
    June 23rd, 2004 at 01:17 | #27

    One thing to bear in mind when considering the ‘wealth’ of your average welfare recipient is the consequences of the high cost of food. Cash dependency. When you fall off the band wagon, the cost of a loaf of bread etc. can be difficult if not impossible, depending on your ability to access other networks.

    I’m not saying that these networks don’t exist for most people but they are an unstated assumption.

    Two anecdotes:
    Working in Papunya in 1981, where only 5% of people have jobs and half of those are white. I was struck by the consequence of not having access to a network in emergencies – there were no relatives with jobs – it completely changed the equation in terms of understanding people’s priorities.

    A very old lady in a nursing home in 1990 confiding to me that she thought people were worse off than in the depression because the price of a load of bread was $2 instead of 1/2d.(halfpenny) as it was in the 1930′s. “Everybody had a cow” she reckoned. Of course, not everybody, but enough to ensure that milk was almost free. Her myopia was that of age and seeing the value of a dollar(or 10 shillings) changing through her life. But it also points to the artificiality of a lot of this welfare ‘wealth’.

    The other area where the welfare ‘wealth’ affect can be found is of course with rent subsidies.

  28. June 23rd, 2004 at 17:01 | #28

    I would appreciate feedback on all this.

    Tim Blair does have a point, one which is not spelled out (and one which he may not have brought out even to himself). I myself wouldn’t want to be an academic precisely because I feel it is too remote from anything directly constructive. Yes, it is indirectly constructive by enabling others – but for people with my values and gut feeling, there is nothing to get hold of. It doesn’t satisfy. And, of course (see comments on Yakuza etc.), nothing says that it is necessarily indirectly constructive enough to make up for its hidden costs – there really is something to the direct assessment, which shows things that really are useful (even if not all the things that really are useful). There is no contradiction to being a well off academic and also an academic loser – they are different issues. The “loser” doesn’t mean failing as an academic but failing by being an academic, though I don’t begrudge those who feel differently until they start to drag others down. (I also feel the same about nearly all the internally directed sorts of public servant.)

    There is also a jump between “if there’s a big gap that means that there’s a potential to redistribute income so as to reduce poverty” and “The same aggregate income is consistent with widely different levels of social wellbeing”. While the latter is true, it does not imply the former. Dead weight and transaction costs and such suggest that redistributing income need not reduce poverty – and empirical observation suggests that this is in fact the case. The former is REdistribution, typically a continuing government process, while the latter is consistent with (say) Chesterton-style distributism – ignoring the transition to it for the moment.

    The best concept of poverty I have come across is in Jack London’s work, when he says that you are poor if your circumstances lower your ability to function. Of course that does not give you a measure, but it does let you assess the measures on offer, and it shows how the poor make the rich worse off than the rich otherwise could be. And that’s even before the Vagrancy Costs externality, the problem that having the poor around means we face Jill Rush’s “need for a strong gate at the front” with all that that costs.

    If we did make the institutional changes that promoted people out of poverty, as opposed to supporting them in poverty, the scope of loose ends would become manageable by charity once governments had worked themselves out of that job. Charity has the advantage that it takes place on the spot, where helpers can see what is going on and don’t get trapped by bureaucratic rules of the sort that lead to harsh breaching.

    It is precisely the helpless who cannot organise themselves well enough to cope. I myself was barely able to cope with a bureaucratic mix up with Social Services, just yesterday (22.6.04). I am barely functional from stress from litigation over unjust dismissal, with gaps when I can apply myself to other things like blogs if I am not busy with it and have not got too much reactive depression just then. I had to sort out a screw up requiring me to attend a placement service right in the middle of a second written submission, even though I have all the necessary doctor’s certificates.

    And I am one of the more resilient people in my situation, according to my doctor. People who really are down are also out, and can’t use official systems – they need someone to reach out to them. So much for Yobbo’s diagnosis and prescription. And yes, I am smoking during the bouts of litigation to help keep me functional (I checked with my doctor, and under ten a day will probably not hurt). I wouldn’t be surprised to find other people face similar constraints, and we should always remember Orwell’s comments on the impertinence of telling people not to spend on what look like luxuries.

    I see government provision of Health, Education, and Welfare as a mark of failure, with vested interests in favour of support rather than cure. It is aggravated by the increased involvement in cash rather than subsistence, which Kyan Gadac also brought out; that is an achieved change in the developed world, but it shows up when we do a similar analysis for developing countries. It increases the burdens on others through the tax system, and so brings more battlers down into needing support – the very thing Tim Blair’s second reply hints at, as does some of Fyodor’s stuff. This virtuousness at others’ expense is the problem described in William Graham Sumner’s “The Forgotten Man” at http://www.blupete.com/Literature/Essays/Best/SumnerForgotten.htm:-

    “The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C’s interests, are entirely overlooked. I call C the Forgotten Man.”

    Only, there are different time lags with the costs and benefits of government provision of Health, Education, and Welfare, so it is simplistic just to cut those things; it would leave people in the lurch until things – one day – got better, which is what makes naive rightwingery wrong. However, the same time lags make leftwingery only seem to work, by improving the lot of the poor before the problem of making more poor comes in; but it is actually growing the problem over time, with the same vicious circle logic as congestive heart failure or inflammation driven appendicitis, in which the body’s short term response aggravates the underlying condition until something outside stops it or a death spiral cuts in. In the early stages, there is even a real improvement from these misguided measures; subsidising the needs of the poor by state provision of services has a positive Pigovian effect while the needs are small enough, even though there are all the costs of government inefficiency. But this too only encourages that approach when it doesn’t work any more, which is our current case. It’s also why Kyan Gadac’s subsidising first home buyers will only appear to work, with short term improvements flowing through to aggravate the underlying condition and claw back the problem to its former level for the next round of buyers.

    I have written before on my views on how to start working governments out of those jobs: promote people out of poverty, starting with a Negative Payroll Tax applied to a broad based tax with impact (not incidence) on producers, like GST, though that is a bad tax in other ways. That would be a Pigovian solution with rapid results and no additional costs, and it has been studied by Professor Kim Swales of the University of Strathclyde; some of his work is at http://www.faxfn.org/03_jobs.htm. These insights let us see separately certain other problems that need to be addressed, once we sort out distribution issues from production ones and globalisation ones – but at the moment they are all jumbled together, and just solving or ameliorating poverty keeps us from getting at the others before they too overwhelm us, which at this rate they soon will. I can also see a long term transition from Negative Payroll Tax towards true distributism; even though it might not be attained, the progression would lead to steady incremental improvement across the board, as costs were eliminated and personal responsibility and involvement came back.

    Thoreau (a teacher) commented on how different things would be if the state provided education, which it didn’t in his day; he was comparing that with state provided support of religion which his state then had. The thing is, that state support kept individual people involved, whereas even in countries that kept an established church the “reforms” of the late 19th century detached the clergy from the people by commuting tithes – they just hid the problems. Well, government provision of Health, Education, and Welfare through central systems also hides the problems; we get an externality that way, compounding for the earlier externality of Vagrancy Costs. We need to internalise it, but that doesn’t mean squeeze the poor. That would only be appropriate if the only breakdown was within the poor themselves – which is precisely where it was, in the days of the Speenhamland System, that was reformed by Union Workhouses and the like (though the very idea of Parish Unions foreshadowed the later growth of the Social Security externality driven by consolidated revenue from a wider tax base). Today we need to address the externality at the other end to make employment more practical, and tomorrow we need to move the employees into fuller participation with as much distributism as we can manage.

    Oh, the transition? Implement Negative Payroll Tax by giving people quarterly vouchers to give to their employers. Monetise those by making them anonymous and transferrable. Turn them into the yields of non-transferrable government annuities. Make institutional changes to encourage saving, then make the annuities transferrable, so making everyone into rentiers (Keynes was wrong; there were not enough rentiers – having more would have improved the Keynes effect). Use a sinking fund approach to buy back the government securities, so cutting the size of government while moving people’s portfolios into capital markets – and the Pigovian approach becomes Coasian when everybody becomes a capitalist, which is distributism. Take as much of the transition as you like as slowly as you like, it’s all good and you don’t have to buy a utopian dream sight unseen before you check out that each step really is an improvement.

    Oh, the institutional changes to encourage saving? I think I’ll stop preaching for now, but interested readers will find more at my publications page http://users.netlink.com.au/~peterl/publicns.html – look for the wedge approach to funding an ageing population.

  29. Jill Rush
    June 23rd, 2004 at 21:32 | #29

    yobbo has obviously bought the myth of the wonderful nature of welfare. I wonder if he has ever has to choose whether to buy milk or medicine for a sick child because that is all the money that the family has even after growing vegetables in the garden (something many can’t do) and buying clothes in the op shop.

    Those on welfare with resources to fall back on can live reasonably well – particularly if income is supplemented by some fast footwork.

    However the line between being OK and being in crisis is a thin line indeed and what a single person and a family need are very different creatures,

    I note that yobbo takes the line that the unemployed are to blame for their situation because of their drinking, gambling and smoking – gross generalisations which have no empirical evidence and which have the flavour of a religious belief.

    Frank Hardy gave us some insight into the links between poverty and gambling in his book ” The Four Legged Lottery” where poor people saw that the only way out of their situation was to win on the horses. How much easier it is for people with this view to gamble their money away now.

    Whilst we can like yobbo blame the poor for their poverty I prefer a system that puts less effort into punishing the bad and the mad so that the rest of us can feel safer in our homes and live in a society that still believes in a fair go and a hand up.

  30. Jill Rush
    June 25th, 2004 at 21:07 | #30

    We have the unedifying spectacle of family recipients of the unexpected largesse of the government of $600 per child and totalling several thousand dollars in some cases taking the lot and blowing it on hotel delights.

    The evidence of many parents taking money given and spending it gambling, drinking and so on will no doubt confirm the views of those like yobbo who believe that the poor are to blame for their own situation. They were given a chance and blew it.

    I take another view – that people who are unused to money will not save it or spend it wisely but will seek short term respite from long term despair at their poverty. What ever the truth the money has not gone on the children in many instances.

    With the amount of money there were several alternatives that the government could have taken.
    It could have gone to pay for many school lunches in areas where nutrition is a concern.

    It could have paid for vaccinations.

    It could have provided respite services to the carers of adult disabled dependants.

    It could have provided a range of educational supports for Indigenous children to address their educational disadvantage.

    The decision to pay out large sums has brought smiles to the faces of some, especially the publicans and clubs with pokies – maybe the reason we have just had the domestic violence packs just arrived was because someone realised that all the grog will lead to significant issues of violence.

    However the millions of dollars have done nothing to make sure that no child will live in poverty in 2004.

  31. Anthony
    June 26th, 2004 at 00:56 | #31

    It’s all a matter of choice, like yobbo keeps saying. Children should just choose better parents.

  32. June 28th, 2004 at 18:26 | #32

    I am simply saying that you can live reasonably on a welfare cheque, including plenty of money left over for blankets. You just have to forego expensive non-necessities such as alcohol, tobacco, restaurant food and the like.

    Some people are better at doing this than others. There are plenty of families who live without any “deprivation” on the basic welfare cheque. There are others who can’t make ends meet despite earning much more than “poverty” levels.

    “note that yobbo takes the line that the unemployed are to blame for their situation because of their drinking, gambling and smoking – gross generalisations which have no empirical evidence and which have the flavour of a religious belief.”

    Religion or morality has absolutely nothing to do with it. I’m a libertarian and a heavy drinker and pack a day smoker myself. The fact is that these habits are expensive, there’s no need to read any more into it than that.

    Smoking a pack a day and going to the pub twice a week will cost at least $150 – only $30 short of the full individual weekly dole payment. If you can’t see how this will affect the ability to pay for necessities, then it’s just as well you aren’t a welfare recipient yourself – you’d starve.

  33. sp
    June 28th, 2004 at 19:58 | #33

    so yobbo, if you lost your income tomorrow and to immediately rely on welfare, you’d be able to give up these aspects of your life immediately and without affecting how you felt about yourself.

    Perhaps you could give it a trial run, a sort of “walk in someone’s shoes” -liveon the equivant of the doel for a month. Think of the money you’d save and you never know you might be able to prove your point.

  34. Stephen Ziguras
    July 14th, 2004 at 16:03 | #34

    Some points about definitions of poverty.

    First, whatever measure you use is in some degree relative. Even so-called absolute measures rely on some notion of a minimum acceptable standard of living which varies according to community standards. For example, children sharing a bed was common a century ago, but would today be regarded as inadequate accommodation, same can be said for food, clothing etc.

    The second point is that poverty tends to focus attention on income and expenditure, and less on opportunities and participation. While the European ‘social exclusion’ agenda has some problems, it does at least point to the importance of things like decent employment, affordable housing, freedom from harm, good health and so on. These are ultimately what economic growth is supposed to deliver, are they not? As someone above has pointed out, there is increasing inequality in these types of outcomes as well as income distribution. To my mind, the question is both about hardship (which may be declining in relative terms) and the equitable distribution of opportunities and outcomes (which seems to be be growing).

    It is also not possible to have this discussion without a reference to values. My own position is that increasingly unequal distribution of opportunities is simply unfair, but I accept that others dont share this belief.

    Using ‘poverty’ as shorthand inevitably over-simplifies these issues and is probably not very useful (although I have to confess to working for an organisation which aims to create an ‘Australia free from poverty’!)

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