Policy Monographs
Poverty in Australia: Beyond the Rhetoric
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.
A new report released by The Centre for Independent Studies on Wednesday 27 November shows what is wrong with both these misconceptions.
The report, Poverty in Australia: Beyond the Rhetoric, challenges prevailing definitions and measurements of poverty, and calls for an alternative strategy for poverty alleviation based on American-style welfare reform, lower taxation and job creation.
Authors Peter Saunders and Kayoko Tsumori argue that 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 8%, to 20% (based on the Henderson poverty line), 40% or even higher.
Saunders and Tsumori show that 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% 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 3 to 14% 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.’
Saunders and Tsumori argue 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.
