Opinion & Commentary
Poverty - flawed figures, gloomy estimates
Poverty is a harsh word for harsh conditions. It conjures up images of people sleeping rough and of children going hungry and nobody wants that. Most Australians are therefore happy to support policies which promise to reduce or eradicate poverty. Given that it is such a powerfully emotive term, it is important that the claims that academics, politicians and policy advocates make about poverty should be critically examined. This is a field which all too easily lends itself to exaggerated assertions and inflated estimates. If we want effective policies, we need to be cautious about the hyperbole and rhetoric commonly encountered in public debates about poverty.
Australia's social policy community keeps repeating two mistakes. First, it thinks poverty in this country is a much bigger problem than it really is. Secondly, it thinks the best way to tackle poverty is to increase taxes and redistribute even more of people's incomes. Social policy researchers regularly mix up 'poverty'-whether people have enough to live on-with the very different issue of income inequality-whether some have more money than others. Research on poverty in Australia has become hopelessly entangled with debates over inequality. Helping the poor escape poverty has become synonymous with increasing taxes on higher income earners to close the income gap.
Not only is the definition of poverty flawed, so too is its measurement. Researchers' estimates of the number of Australians in poverty range from around eight per cent, to 20 per cent (based on the Henderson poverty line), 40 per cent or even higher. Even the lowest of these estimates is far too gloomy. Most people whose incomes fall below the poverty line do not stay in that situation for long. It is a mistake to treat poverty as if it were static when people's incomes fluctuate as they go through life.
Moreover, the income statistics themselves are flawed. Even the ABS now admits that the data on the bottom 10 per cent of reported incomes are hugely inaccurate and misleading.
Many of those who suffer long term poverty do so because they do not work. Traditionally, the answer has been to give them income support. Welfare spending has multiplied five-fold since the 1960s, and reliance on welfare support as the principal source of income has increased from three to 14 per cent of working-age adults. If giving people money were the solution to poverty, poverty should have disappeared by now, yet the number of people requiring support has been growing, not shrinking. Over the last 40 years, the tax burden on ordinary people has grown alarmingly, and this is partly due to the increase in social welfare programmes. Since 1960 income tax as a percentage of total gross household income has increased from 6.9 per cent to 14.7 per cent. Over the same period, the percentage of gross household incomes made up of social benefits has grown from 4.9 per cent to 9.2 per cent. It is time for a rethink.
We should abandon the failed redistribution strategy in favour of a self help strategy. An alternative strategy to more welfare spending is to promote self reliance by requiring able-bodied people of working age to take employment, much as the Americans have done. This strategy would break the vicious spiral of increased tax and increased welfare, which has pushed increasing numbers of previously self-reliant households towards the poverty line. A self-help strategy has two advantages over a redistribution strategy. It solves the problems of the poor without confiscating other people's money (a 'fairer' and more 'just' solution) and avoids creating a relationship of dependency between recipients and donors.
Peter Saunders is Director of Social Policy Programmes at The Centre for Independent Studies.
Poverty in Australia: Beyond the Rhetoric by Peter Saunders and Kayoko Tsumori is published by the Centre for Independent Studies (www.cis.org.au).
