Is poverty increasing, or are we getting wealthier?

Two reports came out a week or so ago that seemed to point in opposite directions. The Australian Council of Social Services (ACOSS) published a report called Poverty in Australia 2014, while the Institute of Public Affairs (IPA) published one called Things are getting better all the time. The ABC told us about the ACOSS study, but was silent, at least when I was listening, about the one from the IPA. No doubt if some had asked why, the answer would have been that ACOSS is a reputable non-government organisation, while the IPA is a right-wing think-tank. In fact, both are non-government organisations, and both are think-tanks, one is to the left and one to the right.

What are they for? ACOSS and our community of supporters share a vision for a fair, just, diverse and sustainable Australia. That’s pretty standard for many organisations, and indeed it is hard to think of anyone who might be for an unfair, unjust and unsustainable Australia. What about the IPA? The IPA supports the free market of ideas, the free flow of capital, a limited and efficient government, evidence-based public policy, the rule of law, and representative democracy. Again, it’s hard to see anyone likely to be opposed to all that.

Is the difference in the sort of evidence they use? ACOSS says that The main data source is the 2011-12 Australian Bureau of Statistics (ABS) Survey of Income and Housing (SIH), supplemented in some cases by the ABS Household Expenditure Survey for 2009-10 and (for the trend analysis) earlier versions of both surveys. IPA gets all its data also from the ABS, the Treasury, the Reserve Bank, the World Bank, and other usually reliable sources. There’s little  difference there.

The real difference is in the scope of analysis. The IPA report is about the welfare of Australians over time, while  ACOSS focusses on the 2011-2012 period, a year when the Gillard Labor Government was in office. Let me give the good news first. As anyone of my  age can attest, things are a lot better than they once were. Australians live longer, are taller, appear to be healthier, are certainly wealthier, are better educated, work in much more diverse range of occupations, are at work in much the same proportions whether they are men or women, and so on. There is nothing about poverty in the report that I could find.

The take-home message is clear: Life has been getting better for most Australians, and it could be even better today if it were not for intrusive government regulations and wasteful spending which makes housing less affordable and contributes to cost of living pressures. Reducing the size and scope of government will be instrumental to securing rising living standards in the future, as this will harness opportunities for enterprising Australians to discover new ways of improving the economic and social circumstances of others.

The ACOSS world is very different. In 2012 one in seven Australians, and one in six children, lived below the poverty line. The poverty line is a widely-employed construct, and here means living below 50 per cent of the median income: $400 a week for a single person and $841 for a couple with two children. And poverty is on the increase — from 13 per cent in 2012 to 13.9 per cent  two years later. As you might expect, the elderly, women, indigenous people, single mothers, the poorly educated and the disabled, were all more likely than other groups to be in poverty.

ACOSS offers no take-home message, but the inference is clear: poverty is bad, and people experiencing it have a less enjoyable life, all things considered, than those who aren’t poor. It is hard not to draw another inference from reading the report, which is that poverty could be fixed if governments paid real attention to it. And it is indeed plain that other countries have a much smaller incidence of poverty, using the some poverty line. In 2010 poverty was at around 6 per cent in Denmark, for example, and it was low in the Netherlands, Finland and Norway, as well. In the OECD set of countries, we are at the high-poverty-level end.

What should be done about it? In my view you can’t ‘fix’ poverty. In Scandinavia very high levels of taxation have allowed a ‘cradle to grave’ social welfare system, yet they still have poverty. A society needs some kind of net for catastrophe, and some kind of culture that gives the young a sense of what life is all about, and what their responsibilities as adults will be. Inside that, we expect people to make their own decisions. Some make bad ones, and go on making bad ones. Some never had a chance. Some were desperately unlucky. Some were foolish. In our society we have a mix of charitable and governmental schemes to help those who need help, and especially to help their children, in the hope that those affected do not repeat the poverty in the next generation.

I’m not sure about ‘the poverty line’, and I wasn’t even when Ron Henderson invented it in 1973 and I talked about it with him. Real poverty, as experienced in any of the basket-case countries of Africa, is virtually unknown in Australia, so ‘poverty’ here, or in Denmark, has to be relative. You are poor, compared to others. And the IPA would certainly point out, as I would, that the poor today are much richer than their counterparts fifty years ago, even ten years ago. What counts as poverty changes year by year. I wouldn’t be at all surprised if those without smart phones aren’t considered ‘poor’, and indeed handicapped in all sorts of ways.

The point about these two reports, coincidentally appearing in the same week, is that they are both correct. Yes, Australia has done remarkably well over the last century, and so have the great majority of Australians. But inside that success there are still ‘victims’, people who need help. We are a generous society, and a lot of money goes from the better-off to the worse-off. And we do have safety nets. No, they don’t catch everybody.

There are those who think the only solution is to make everybody equal, as though it is almost offensive that some have plenty while others do without. I’m not of that persuasion. As I’ve argued before, human ‘equality’ is a fantasy unless it is narrowly defined.

Join the discussion 5 Comments

  • margaret says:

    As Wayne Swan said in his Springsteen-themed John Button oration:

    “You can create wealth by owning a business, but you can also create
    wealth by working for a business. You can create wealth by working on
    the top floor of an office tower, but you also create wealth working
    down a mine, in a factory, in a shop, in a hospital, in a music studio, a
    kindergarten, a school, a TAFE college and a university. We are all
    wealth creators, and the inference that small business owners, union
    members, the low-paid, the poor, the old and the ill have no legitimate
    voice in our economic debates, and have no right to share in our
    national wealth, is one that I’ll fight to my last breath.
    I’ll keep up this fight because I believe with deep conviction that
    you can’t treat the creation and the distribution of wealth as two
    separate matters.”

    If you look from the top of a ferris wheel people look like ants and you can be ‘objective’ about their value to society. I don’t like the way the word victim is used these days to infer that certain people/groups choose a path that makes their ideas or circumstances something that they can and should alter.

    That might not address this post but I’m not encouraged by the take-home message of the IPA report.

    • Don Aitkin says:

      Yes, I generally agree: we all add to the rich mixture that is the wealth of our society. But some take the risk of establishing a business that employs others. If they get it wrong, then the business fails and the workers have no jobs. That is what Hockey would point to, and Swan pass by…

  • Boambee John says:

    Don:

    You allude to the actual poverty “problem” with your reference to the poverty line.

    As long as “poverty” is relative, not absolute, it can only be eliminated by making everyone equal. This is not going to happen.

    If, however, under the precent system, government were to establish a new social security payment to everyone below the poverty line (but no-one above it), the result would be an increase in “poverty”, as the national median income would be increased by the new payment, thus moving the poverty line upwards, leaving all those previously below it still below it, and adding in some m,ore who were previously just above the poverty line.

    A cynical government could decrease “poverty” by reducing the income of its high level employees (senior public servants, employees of taxpayer funded qangos and organisations like the ABC and universities, thus reducing national income and lowering the poverty line, but I’m not sure this would be greeted with acclamation by those affected.

    • Don Aitkin says:

      Boambee John,

      I should have read the comment first! I read my essay three times to try and find the error you referred to …

      Cheers !

      Don

  • Boambee John says:

    That should be “present” system, not “precent”!

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