OECD endorses Bill Shorten’s class war

This is nicely timed for Labor. From the OECD today:

Governments need to do more to support middle-class households who are struggling to maintain their economic weight and lifestyles as their stagnating incomes fail to keep up with the rising costs of housing and education, according to a new OECD report.

Under Pressure: The Squeezed Middle Class says that the middle class has shrunk in most OECD countries as it has become more difficult for younger generations to make it to the middle class, defined as earning between 75% and 200% of the median national income. While almost 70% of baby boomers were part of middle-income households in their twenties, only 60% of millennials are today.

The economic influence of the middle class has also dropped sharply. Across the OECD area, except for a few countries, middle incomes are barely higher today than they were ten years ago, increasing by just 0.3% per year, a third less than the average income of the richest 10%.

“Today the middle class looks increasingly like a boat in rocky waters,” said OECD Secretary-General Angel Gurría, launching the report in New York with Luis Felipe Lopéz-Calva, Assistant Secretary General, Latin America and the Caribbean, United Nations Development Programme. “Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive inclusive and sustainable growth and create a more cohesive and stable social fabric.”

Gabriela Ramos, OECD Chief of Staff and Sherpa overseeing the Organisation’s work on Inclusive Growth, presented in more details the main findings of the report, saying “our analysis delivers a bleak picture and a call for action. The middle class is at the core of a cohesive, thriving society. We need to address their concerns regarding living costs, fairness and uncertainty.”

The cost of a middle class lifestyle has increased faster than inflation. Housing, for example, makes up the largest single spending item for middle-income households, at around one third of disposable income, up from a quarter in the 1990s. House prices have been growing three times faster than household median income over the last two decades.

More than one in five middle-income households spend more than they earn and over-indebtedness is higher for them than for both low-income and high-income households. In addition, labour market prospects have become increasingly uncertain: one in six middle-income workers are in jobs that are at high risk of automation, compared to one in five low-income and one in ten high-income workers.

To help the middle class, a comprehensive action plan is needed, according to the OECD. Governments should improve access to high-quality public services and ensure better social protection coverage. To tackle cost of living issues, policies should encourage the supply of affordable housing. Targeted grants, financial support for loans and tax relief for home buyers would help lower middle-income households. In countries with acute levels of housing-related debt, mortgage relief would help overburdened households get back on track.

As temporary or unstable jobs – often offering lower wages and job security – increasingly replace traditional middle-class jobs, more investment is needed in vocational education and training systems. Social insurance and collective bargaining coverage for non-standard workers, such as part-time or temporary employees or self-employed, should be extended.

Finally, to foster fairness of the socio-economic system, policies need to consider shifting the tax burden from labour income to income from capital and capital gains, property and inheritance, as well as making income taxes more progressive and fair.

All good suggestions. Add “cut immigration” in Australia’s case to boost wages and productivity plus lower house prices long term and end the crush-loading.

Comments

      • Tassie TomMEMBER

        Only 1/3 of the high income are rich (whether you define both high income and rich as “top 10%”, “top 2%”, whatever), which means even more importantly that only 1/3 of the rich are high income.

        The misappropriation of the terms “rich” or “wealthy” to those that are high income is a deliberate ploy by the 2/3 of the rich that are NOT high income so that they can continue to lift far less than their fair share of the burden of taxation.

      • Professor DemographyMEMBER

        It is a fair and important point. There are young people who we now class as wealthy because they have good income for a few years. They need it to have any chance of catching up on the wealth they need to buy a house. We should look at it over a broader period because they are not wealthy yet.

      • mild colonialMEMBER

        i certainly do. for 25 years I have supposedly had a decent income and have wondered how everyone around me can afford the shiny and flashy and this and that.

      • I side with TT. I cannot afford to buy a home as a single income family but it is reasonable for me to have subsided several property investors to get ahead? I would guess that more than half of what I have paid in taxes has been somehow funneled into property.

      • Tassie TomMEMBER

        Let me guess. You’re a millionaire, receive the age pension, and expect everything for free.

  1. This goes with our experience since we stopped working……….the cost of living is survivable, but the costs of having a middle class lifestyle slowly get away from you every year. The rates, house insurance, health insurance, health expenditures, house repairs, updating cars, transport costs and now energy costs. Doesn’t help selling the house as the rent in all places close enough to major hospitals make for a worse outcome. Food, clothes etc. don’t cause near as much angst.

  2. St JacquesMEMBER

    Well the Business Clowns of Australia have just discovered that there’s a wages problem only eight years late ! Apparently their “solution” is more gwoth. Eight years of gwoth and “record” number of new jobs (of which most went to migrants and visa workers) and low unemployment says otherwise, but hey, there’s an election on and all that matters is getting that vote for their preferred parliamentary tools.

    The BCA don’t seem to understand that the ponzi that they helped engineer the last couple of decades is dying under its own immense weight and nothing can save it now – there ain’t no once in a 1000 year mining boom ready to come to the rescue a second time. That source of luck has finally run dry. Suffa Bad ! https://www.youtube.com/watch?v=LQiOA7euaYA

    • The only wages problem for them is that wages are still to high.
      Remember Abetz warning of a wages explosion in 2014?
      They’ve spent the last 6 years stacking fair work with business types, having royal commissions into unions and cutting penalty rates.
      Believe me, if the wage share was 20% of GDP wages would still be too high for these people.

      • St JacquesMEMBER

        For the Business Clowns of Australia and their allies and tools, those African wages are the final goal, but first, there’s East European, Russian, Asian and Latin American Wages on that sweet road to nowhere.

        There’s just one problem with that theory, wages pay for debts including mortgages; keep pressuring them and the whole financial system blows up.

      • The Traveling Wilbur

        @StJ Indeed. Shame that calculus is too advanced for their tiny minds.

        @Sweeper Gravatar gone the way of Reusa’s or am I mixing things/members up?

  3. The good news is house prices only need to fall by 35% to go back to the 1995 level and save the middle class from the squeeze.

    The bad news is the vast majority of the middle class don’t want to be saved.

    • Perhaps nationally, but in Sydney a 35% drop will only (approximately) wipe out the 70% gain in prices since 2013. Price falls need to be much greater in Sydney to get Sydney prices back to 1995 prices. Fingers crossed!

      • Ahhhhhh, yes. I just realized that the first graph was for the OECD average.

        Too bad or Strayan “middle class”.

        Even worse for Sydneysider “middle class”.

    • ErmingtonPlumbingMEMBER

      A Big percentage of the self identitying “Middle Class” arnt middle class at all.
      Doesn’t matter what degree you hold or how fancy ya job is, if your living week to week, can’t afford to buy a home for yourself or can’t take 12 months off work without going broke,…then guess what!,…your Working class buddy!
      Learn to suck it up and own it with Pride.
      There are better ways to spend you time than posturing and pretending to be a “higher class” of person.
      https://youtu.be/VrwGWCxeKiw

      • Indeed. The term “middle class” is just a convenient illusion for those who want to believe in the concept.

      • The Traveling Wilbur

        Youse can’t lump me in with all youse working class rabble youse bogans. Some of us have (Australian) Standards and wouldn’t be seen dead with youse lots.

        What’s next, getting me to join a union, vote Labor, and support local manufacturers? Oh, wait…

        OK, I guess we’re there already. But could you all at least shower *before* you come down the bowls club? It makes serving your drinks way less painful.

        Ta.

      • I disagree, middle class are those with a comfortable lifestyle who are neither rich nor poor. It used to be that both white and blue collar working classes would be middle class. However the debt merchants have turned the working class into the working poor. Your job status is no longer linked to your wealth status.

      • Can’t take 12 months off work without going broke means you’re working class? Mate, you’ve a very broad definition of working class, depending on what you mean by “broke” I guess…

      • ErmingtonPlumbingMEMBER

        It means if you HAVE to work,…your Working class.
        All you posers only think your middle class because of the life time of Consumerism focused marketing and Advertising you have been drenched in.
        That you can afford that holiday flight to Thailand every so many years to be waited hand and foot on by the local pesantry is because of technology and differences in currency valuations,….not because you’ve risen out of the “working class”
        Our indoctrination away from Community Solidarity into vacous individual consumers runs very deep.
        https://youtu.be/AnrBQEAM3rE

  4. “…. policies need to consider shifting the tax burden from labour income to income from capital and capital gains, property and inheritance, as well as making income taxes more progressive and fair.”

    What a complicated proposal. This just encourages the advent of more innovative tax evasion strategies and artificially shifts capital between asset classes thereby further distorting an already distorted capital allocation landscape. Classic ‘cat chasing its tail’ stuff.

    There is a much neater, simpler solution: flush the existing monetary system down the toilet (where it belongs) and introduce a sound money system. This has the effect of taking money creation out of the hands of both State and private banking system and prevents the wealth inequality expansion we are currently witnessing. As long as the fiat money system remains in situ the middle class will continue to be gutted in favour of the filthy rich and the recipients of transfer payments.

    The solution to most of our problems (including many of the social issues) lies in ‘money’. If you can’t print money out of thin air then anyone who wants it has to work for it and no one can get rich via inflation of asset prices.

    • Maybe, but it’s not going to happen.

      So higher taxes on assets and wealth and lower taxes on incomes are a good enough alternative. (Not going to happen in a serious way eiher in Australia, mind)

    • ErmingtonPlumbingMEMBER

      What happens to the people who can’t “work for it”?
      My step sister has MS, electric wheel chair, has to have a carer get her in and out of bed every day and her condition is getting worse now its affecting her arms.
      She is financially supported by the State, has a nice housing Commission flat in the city to.
      Are you suggesting she be “cut off” from state support?

      What does your “Sound monetary system” even mean?

      Once we “flush out the current system” is everyone going to be Zeroed with all assets and wealth forgone so as to start again from a level playing field?
      Please expand on what you are actually advocating for.

      • Course it is Ermo. My brother is Autistic and when talking about services for the disabled the number of times people say things like “but it has to be paid somehow”. I simply ask if they “want the disabled cared for?” they shut up quick becuase they know their next response makes them sound like the uncaring pr1ck they are. I “care” about the disabled as long as I don’t have to pay for them……apparently we don’t need to ask about “how we pay” for negative gearing and tax lurks for the rich though.

      • Ermo, I have always said I support a safety net. What I am ideologically opposed to is cradle to grave assistance for anyone physically capable of working — a lifestyle for whole families, whole generations these days. Before the advent of the welfare state, responsibility for people who needed assistance fell on direct family (not unreasonable IMO) and when they were unable to assist, it fell to charities — a good solution as people who wanted to assist a particular cause were able to do so in a direct fashion.

        A sound money system prevents Govts from living beyond their means — it imposes fiscal discipline which is not a bad thing given that when something is scarce it is more carefully and more effectively deployed. Currently, nearly 50% of all Australians receive some kind of Govt assistance — a staggering number. This would simply not be possible under a sound money system. Nor would fighting expensive wars and funding large, well-equipped armies.

        The thing is this: the fiat money system, which currently supports the gargantuan welfare system will end as it is structurally unsustainable, at which point no one will receive any assistance from Govt, including the more needy cases like your sister. I would argue for a system in which the most needy are assisted on a long-term sustainable basis rather than one in which the cash is sprayed around to all and sundry but will end at some indeterminate point.

        Now, those that believe that you can simply create all the money you need to pay all your bills (without any negative consequences) will disagree with my position, for obvious reasons. However, I firmly believe that the end of the morally bankrupt fiat money system is actually closer than most imagine and if I am correct the social consequences don’t bear thinking about.

      • drsmithyMEMBER

        What does your “Sound monetary system” even mean?

        It means the wealthy get to make all the rules by deliberate design.

        Control the money, control the rules.

        This is one of the ways Libertarianism shows its fundamentally anti-democratic core.

    • It’s astonishing that just mentioning it is akin to calling for a white nationalist genocide. It’s no longer a lever to be pulled like IR or spending, it’s a human right.

      • mild colonialMEMBER

        there was that moment about a year ago when it looked like we might move past that but alas. Still waiting to get a single like for any of my reduce-immigration tweets from my left wing followers. maybe an occasional MBer gives me a like.

  5. St JacquesMEMBER

    Doesn’t matter which group pf clowns are in charge of the the Big Top on The Hill, the Oztrayan Ekonomie is nothing more than a hollowed out Ponzi slowly collapsing under its own immense and ever growing weight. Slash immigration and it will collapse with a bang, don’t slash immigration and it will continue to slowly suffocate under its endlessly growing weight and probably will finally implode in the end anyway. Catch 22. Time for honesty, Oz is well and truly rooted.

  6. the only income numbers used in Australia are “taxable income” numbers which are so meaningless in a country that has so many loopholes for the rich to reduce their taxable income to next to nothing.

    Harry Highrise taxable income is probably lower than mine, a bit higher than yours so there is no inequality issue in Australia – we are all the same class (me, you and Mr Triguboff)

  7. Nothing new here. Manufacturing left town. Non-farming economy entirely based on real estate prices supported by booming immigration with no thought for infrastructure.

    And now we’re [email protected]@@@d. What a surprise. Mind you, when the mining boom finally closes you’ll really see something cos that’s how Straya’s economy is spelt: D I R T.

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