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How we got to Macklin

January 3rd, 2013

Jenny Macklin is still dealing with the response to her terse answer “I could” to the question of whether she could live on unemployment benefit. But the policy shift that led her in front of the cameras is the product of a complicated history that might be worth explanation. I’m going to go from memory, and invite commenters to supply links or corrections for my recollecitons.

The story starts in the 1960s, at a time when unemployment was very low, and spells of unemployment very short. Whether in fact or reality, the archetypal single parent was a widow. The vast majority of income support took the form of age pensions, which were means-tested and set at a very low level. Around this time Ronald Henderson estimated a poverty line at 25 per cent of average weekly earnings (AWE), well above the basic pension.

Over the late 1960s and early 1970s, pensions were increased to approximately the Henderson poverty line. In combination with some additional concessions and the introduction of Medicare, these changes virtually eliminated poverty among the old.

The changes to the value of the old age pension, relative to weekly earnings have been sustained.[1] Initially, unemployment benefits and supporting parents benefits (which replaced the former widows pension, IIRC) rose in line with the old age pension. Both were indexed to the CPI, but ad hoc adjustments kept them broadly in line with AWE. But the Howard government replaced CPI adjustment with AWE adjustment for pensions, while retaining indexation to the CPI for unemployment benefits. The result has been that the value of UB (now Newstart or some similarly Orwellian name) has fallen relative to both pensions and incomes generally.

Around 2006, the Howard government turned its attention to supporting parents, introducing a rule that recipients would go on to UB when their youngest child turned 8. At the time, the measure was strongly attacked by Labor. Here’s Penny Wong. Existing recipients were exempted (the term “grandfathered” does not seem apposite here), with the implicit promise that they would remain under the old rules. In the search for a surplus, the Gillard government decided to abandon that promise and push existing recipients with children over 8 onto UB. The question that got Macklin into trouble was about that decision.

There is a defensible case for setting the old age pension higher than UB, particularly if the government pursues active labour market policies to help the long-term unemployed find jobs. The pension needs to be enough to live on for decades, over which time household goods have to be replaced, and other long-term expenses addressed. Most spells of unemployment last only a few months, so various kinds of expenditure can be deferred. But the gap that has emerged over the past 15 years is much larger than can be justified in this way, particularly in the case of supporting parents, who are more likely to spend long periods out of employment. Instead of completing the Howard agenda, the Gillard government ought to be looking at increasing the real value of benefits, allowing the unemployed to share in some of the growth in incomes for the community as a whole.

fn1. In other respect, showever, the generosity of the pension system peaked around 1980. Means tests, which were eliminated in the 1970s, were reintroduced in the 1980s, and the pension age has gradually increased.

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  1. January 6th, 2013 at 11:04 | #1

    @Ikon,

    I’m also a bit puzzled on the proposed ban of lawyers.

    Parliaments do only one thing – pass laws. Lawyers specialise in only one thing – law.

    Otherwise I agree we need vastly better elected representatives.

  2. Fran Barlow
    January 6th, 2013 at 11:16 | #2

    @Megan

    One might add that there are rather better ways of ensuring that thos who exercise executive and legislative power more closely approximate the heterogenity in aspirations and social location of the governed, and likewise, that the governed better grasp the possibility and constraints on legislative and executive action and are effectively included in the lag times between governance selection events.

  3. Ootz
    January 6th, 2013 at 16:00 | #3

    Yes Fran, Senor Mujica is certainly a peculiar political figure, by his personal and political background, as well as his adopted political pragmatism and folksy attraction.

    However, there is more to the story that might be of relevance here. First, the Uruguayan electorate, which directly elected Mujica, are just as peculiar. According to Wikipedia they see him as a ” … roly-poly former guerrilla who grows flowers on a small farm and swears by vegetarianism”. His charismatic leadership, as in:”it is a mistake to think that power comes from above, when it comes from within the hearts of the masses (…) it has taken me a lifetime to learn this”, is a reflection of the people that voted for him. Uruguay was once called the “Switzerland of America”, mainly for its banking sector and stability. Other main economic activity are centered around agriculture, tourism, technology, particularly IT and consultancy, antipodes to India. With a population of 3.3 million, it has become Latin America’s outsourcing hub. Further, Uruguay has resisted the trend of privatization in Utilities and state owned enterprises in the region, and there is a strong national debate about their role, and future. No doubt, the Civic-military dictatorship of Uruguay(1973-1985) would have shaped their National psyche profoundly. Mujica acknowledges the early mistakes made by the armed revolutionaries and he ‘desires’ a more flexible political left, which can think outside the box. In this context, Presidente Mujica and his political ‘attractiveness’ makes more sense to us in this discussion.

    Second, there is another interesting aspect to his thinking. The point that many miss is that he says it cost so much to have all that stuff, to maintain and support stuff and so on. To the extent that one has to pay progressively more to posses more stuff. We can assume he is unashamedly questioning the capitalist end game. However, he is not just talking the talk, he is actually walking the walk! This is a rare political commodity, which perhaps only has currency in a non-News limited & Assoc. dominated and spin-doctored infotainment prostituting for relevant debate in the public domain … you know what I mean.

  4. Fran Barlow
    January 6th, 2013 at 16:07 | #4

    @Ootz

    I think I’d like him for a father, or uncle or perhaps a grandfather. Gosh, what a charmer! ;-) A kind of Peter Cundle only even more so. Maybe after he stops being President — he calls more than one term “monarchy” — he could come here and share the love.

    I suspect there would be a long queue. I’d wait in line.

  5. Ootz
    January 6th, 2013 at 19:32 | #5

    Fran, while you’re swoon for that avuncular Uruguayan plebeian monarch and envisaging “a long queue” awaiting him here in Oz, you are missing my point. My argument is that a Mujica character would have Buckley’s here. Our relaxed and confortable phalanx of ‘battlers’, feed on a daily drip of fear and loathing from the Murdoch LNP conglomerate and the hords of working mums and dads aspiring to ‘move forward’, have no truck with a ‘cave dwelling’ ex communist.

  6. Fran Barlow
    January 6th, 2013 at 23:08 | #6

    @Ootz

    Perhaps, although, he’d be a pretty hard target. He ticks a lot of authenticity boxes. Can you imagine him on QANDA? Ok … not sure he speaks English, but anyhoo, Big Ideas then with a translator.

  7. Lyn Gain
    January 17th, 2013 at 08:25 | #7

    Re was the Morgan poll and outlier or the start of a trend? Did everyone notice the first Newspoll of the year has narrowed the gap between Labor and the Coalition by six points to two points?

  8. Lyn Gain
    January 17th, 2013 at 08:27 | #8

    Oops, sorry, wrong thread. Will put it on the right one now.

  9. Lyn Gain
    January 17th, 2013 at 08:39 | #9

    Oh well, just as wellI I put it here or it wouldn’t have been shown anywhere – comments are closed on ‘Poll Blackout’

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