Australia’s poverty disgrace

Two reports published in October make clear the widening gulf between rich and poor: luxury at the one end, barely getting by at the other. 

Investment bank Credit Suisse’s latest global wealth report revealed that there are nearly 3,000 super rich in Australia – those with wealth of more than US$50 million. Australia now has the 10th highest number of such fat cats. So welcoming is the country’s tax and regulatory environment for the wealthy that it is now the number one destination for millionaires on the move. Last year, 10,000 US dollar millionaires from overseas took up residence in Australia, one in nine of the total worldwide.

At the other end of the scale, millions are in dire straits. The Australian Council of Social Services (ACOSS) estimates that 3 million Australians live in poverty. Three quarters of a million children under the age of 15 – one in six – live in poverty. The Credit Suisse report said that Australia has the highest median wealth in the world, but Australia’s poverty rate is the 14th highest among 34 OECD countries.

Government policy is responsible. More than half of those living in poverty depend on social security as their main source of income. Between half and two-thirds of those on Youth Allowance, Newstart and the Parenting Payment, and more than one-third of those on the Disability Support Pension, live in poverty. Newstart has not risen in real terms since 1994; more and more of those dependent on this miserly allowance are sinking deeper into poverty. 

Single parents are doing it especially tough: one-third are living in poverty. Among unemployed sole parents, the situation is worse. In the two years following the Gillard Labor government’s decision to push 80,000 unemployed sole parents off parenting allowances onto Newstart, the proportion in poverty rose from 35 percent to 59 percent.

Politicians love to say that the best solution to poverty is to get a job. But 38 percent of those under the poverty line have jobs and rely on wages as the main source of income. You can work and still be trapped in poverty. 

After rising for two decades, real wages and household incomes have flat-lined since 2012. We know why. Bosses are capitalising on weak trade unions and under-resourced government wages inspectors to squeeze workers however they can. 

The ACTU’s Change the Rules campaign has highlighted the many ways workers are robbed of their wages: sham contracts that employers use to avoid paying employee entitlements, the refusal to pay penalty rates, the endless rolling short-term contracts, the cash in hand jobs in hospitality, retail or cleaning paying $10 an hour, for example. 

The Fair Work Commission employs just 200 inspectors to enforce workplace laws for more than 12 million workers. And even when underpaying bosses are pinged by these inspectors, more than one in three are still doing it when they receive a follow-up review. That’s hardly surprising: only a tiny fraction are ever prosecuted for cheating their staff.

But it’s not just dodgy employers doing their bit to hold wages down. Wages are going nowhere even for those workers being paid the legal rate. Enterprise agreements, which usually give workers better wages than the threadbare system of industrial awards, now cover half a million fewer workers than they did just three years ago.

The Reserve Bank may be calling on businesses to hike wages to stimulate the economy, but a survey by law firm Freehills this year found that more than half of major employers want to freeze wages or offer below-inflation pay rises.

Overall, the figures show wage increases running close to or just behind the consumer price index since 2013. But that disguises that the cost of living for many workers is rising much faster than CPI. In the last five years, wages have gone up by around 11 percent before inflation. Yet childcare costs are up 42 percent, medical services 32 percent, electricity 18 percent, gas 22 percent and council rates 28 percent. 

The income-poor working class is disproportionately hit by these increases: the poorest fifth of households spend four times as much of their income on energy as the top fifth.

A ReachTEL poll commissioned by the ACTU revealed in August that just under half of the 2,500 respondents had received no pay rise in the previous 12 months, and another third had a pay rise but not enough to cover the cost of living. 

The Coalition government and Fair Work Commission have done their bit too, with cuts to penalty rates costing workers thousands of dollars a year. Wage caps and obstruction by bloody-minded departmental heads and government ministers, along with outsourcing of work and massive recruitment of labour hire workers, mean public sector workers are doing it tough.

Housing costs are taking a bigger bite out of workers’ wage packets. In real terms, adjusted for inflation, housing costs for a median family of four are now up by $3,500 a year compared to the turn of the century. Home ownership for those in their late 20s to mid-30s has now fallen substantially compared to the 1980s.

Households may be maintaining spending, but this is only because they are dipping into their savings, which now stand at their lowest level in a decade.

The Morrison government boasts that unemployment has fallen to about 5 percent, but underemployment – those in the workforce, usually young and part time workers, who want to work more hours – steadily increases and is more than 8 percent, close to its highest ever.

Haves and have nots

CEOs of Australia’s top 100 public companies now “earn” 75 times the average full time wage, according to the Australian Council of Superannuation Investors. Put it another way: by the time they clock off on 5 January each year, these CEOs have garnered more in income than the average full time worker earns all year. And they’re pulling ahead of the rest of us year after year.

ACOSS in July found that the average wealth of a household in the top 20 percent is 100 times that of the bottom 20 percent. And the top 20 percent hold two-thirds of all wealth. 

Most important, the top 20 percent own 80 percent of all wealth in investment properties and shares and 60 percent of all superannuation assets. Unlike the family home, the only significant form of wealth for the majority of the population, these can generate still more wealth.

And while those on welfare are subjected to demeaning Centrelink tests, snooping into their private lives, menacing letters demanding repayment of fake debt, drug testing and welfare quarantining, those with money are coddled. 

Tax concessions to the wealthiest fifth of households draw more from the national budget than the four main welfare payments – the age pension, family assistance payments, disability payments and Newstart – combined. So-called self-funded retirees cost the government more, in tax concessions to super, than those dependent on the age pension.

The government makes much of its incentives to “mum and dad investors”. But 80 percent of the benefits from capital gains tax concessions go to the top 10 percent of income earners. And with the government’s income tax changes rolling through in coming years, the top 10 percent are grabbing more than half the total benefit, while the bottom half get nothing.

And then there are the corporations. Company profits are up by 28 percent in the past two years. One in five of the country’s biggest companies – including Virgin, Qantas, Energy Australia, Goldman Sachs, American Express, NewsCorp, Broadspectrum, Bluescope Steel, Lend Lease and CSR – have paid no tax for at least three years. 

Big multinationals operating in Australia funnel $16 billion in profits to tax havens every year. The resources companies are exempted from paying excise tax on diesel, saving them 40 cents a litre on the millions of litres they use each year. No such exemptions for commuters. The $2.5 billion hit to the budget is two to three times more than the federal government spends on the environment.

They’re rich because we’re poor

It’s tempting to say that bosses and workers live in different worlds. But the rich don’t get their money by separating themselves from the working class. Their wealth is based on employing workers and paying them less than the fruits of their labour. Wages in the private sector account for on average only 55 percent of what workers produce in additional value. The remaining 45 percent is surplus value stolen by the capitalists and distributed in the form of profit, rents, taxes and interest. 

The bosses want to keep driving down the workers’ share of the wealth produced. As Karl Marx wrote in Capital: “Accumulation of wealth at one pole is … at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e. on the side of the class that produces its own product in the form of capital”.

That drive by the bosses to push down the workers’ share of what they produce is the basis of inequality under capitalism. And, right now, they’re doing very well. Between 2002 and 2018, productivity rose by 20 percent, real wages by 9 percent. The result is that employees’ share of national income is at its lowest for more than 50 years, representing a shift of tens of billions of dollars from those who work to those who own and control capital. If you take out the high-flying managers and professionals, the share of national income in workers’ hands is even lower.

We need a political alternative

The Coalition government has pursued a single-minded agenda to make life easier for the bosses and tougher for the workers. Whether it’s their industrial relations laws, their tax changes and spending priorities or their employment practices for their own workforce, the Coalition parties have been proud to champion the interests of the affluent. 

Bill Shorten’s Labor Party is trying to tap into resentment at this blatant favouritism towards the rich, promising to wind back some of the benefits to the Coalition’s middle class supporters. But, aside from blocking the corporate tax cuts for big business, the ALP has signalled that it is keen to work with business. 

Like the Coalition, the ALP is committed to the needs of the big corporations in the name of making Australia more “competitive”. Neither party can be trusted to look after the interests of the working class. For that we need a socialist party willing to fight for workers’ rights and against all the privileges of the capitalists.