How to eliminate poverty

For years Australian policy makers have grappled with ways to eliminate poverty. Then the coronavirus came along and they managed, for a short time, to eliminate poverty by accident.

In response to the pandemic, the federal government temporarily doubled the JobSeeker unemployment allowance via the $550 a fortnight Coronavirus Supplement, and this raised the benefit above the poverty line:

However, the Coronavirus Supplement was reduced in late-September and again at the beginning of January, lowering it to just $100 a fortnight currently. This means that JobSeekers now receive a payment of $715.70 a fortnight for a single person with no children, equating to only $51 a day.

Worse, the Coronavirus Supplement is scheduled to be axed completely from 1 April, thus lowering the JobSeeker payment to a paltry $565.70 a fortnight, or just $40 a day. This compares to the Aged Pension rate of $860.60 a fortnight, or $61.50 a day.

In turn, millions of Australians will again be thrown back into poverty.

The solution to poverty is actually very simple and is illustrated clearly in the above chart: bring the JobSeeker payment up to parity with the Aged Pension and the poverty line.

There is simply no reason why people on JobSeeker should be paid a lower rate than those on the Aged Pension – many pensioners of whom are wealthy due to owning their home.

Allowing JobSeeker to fall back to its poverty level of $40 a day would also be economically harmful and self-defeating, as it would dampen domestic demand.

It would ensure a slower economic recovery, higher unemployment than necessary, and increased financial suffering and homelessness.

Permanently lifting JobSeeker to parity with the Aged Pension should be a national economic and social priority.

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. Except for those with an IQ less than about 80 and those requiring a disability pension, everyone should have access to a job on minimum pay through MMT and a job guarantee. There may still be a small overhang of potential workers who cannot be employed and these people should get the JobSeeker payment.
    On minimum pay, there should be minimal competition with the private sector as they should be paying minimum wage anyway. And in boom times the job guarantee can be wound back a little, giving the private sector access to the potential employees.

    Edit: Just to be clear those who don’t have the mental capacity to do normal work can still be employed by organisations like Endeavour who currently provide jobs to mentally handicapped people now.

    • What jobs do you propose?
      Currently they get “access” to work for the dole programs, for no extra money.

      • There is plenty of work to do where I work. Some of it might be “wouldn’t it be nice if we could do that” type work, but it would still be meaningful work and provide people with experience and the ability to work elsewhere. The private sector has too many “bullshit jobs” anyway.

      • What jobs do you propose?

        Planting trees. Fixing roads. Cleaning up rubbish. Assisting teachers.

        Use your imagination.

        • I don’t have to use my imagination where I work. There are plenty of gaps in what we do that could be filled by long term employees.

        • Supervise the people, ensure compliance with safety and building standards, write Safe Work Method Statements.
          Except all those require skills. You know it actually costs more to supervise the work for the dole programs than to pay commercially to have the work they do done.

          • Then why isn’t the private sector employing them. Surely the government would jump at the opportunity to have the job done for less cost.

          • The private sector has a good track record of keeping costs down. Just look at the untrained private security guards for the hotel quarantine system.

          • Because it is make busy work, and the government loves punishing a doley.
            A better question is why was the Commonwealth Employment Service(CES) disbanded to be replaced by Government funded Job seeker networks that are so useless we also have private non government recruiting firms actually ringing and finding people for jobs?

          • Why would you think people are unskilled simply because they are unemployed ?

            A job guarantee is not WFD.

          • I haven’t been unemployed for some time, but I think you’ll find that the “Job seeker networks” are private organisations meant to match the jobless with jobs. The only difference from “private non government recruiting firms”, is that they’re government funded. So much for a tightly run ship.

            The delivery of employment services was tendered out to Job Network organisations whose primary responsibility was to assist people into work.

            https://en.wikipedia.org/wiki/Job_Services_Australia
            Just another case of bs jobs in the private sector paid for by taxpayers.

      • Fruit picking. Provide decent accommodation and working outside with others has many health and mental benefits.

        • Good idea (* see later)

          For every job picking fruit, if done properly, there would be an additional 10 “jobs created” in providing services for the fruit picker. Accomodation could be built in town (jerbs) or the pickers could be driven by bus to work. That would create jerbs driving the bus, servicing the bus. Cleaning the bus, etc.

          * One issue is that we can’t just provide free labour to farms without asking anything in return. Free labour would merely be capitalised into farm land values – as has already happened with cheap foreign labour.

          • +10 For example, go look at the NZ dairy industry.

            Another excellent ponzi scheme that environmental issues are bringing undone. Sadly, cheaper labour cannot beat nature.

            The Chinese are picking up the crumbs.

          • Yep. Agree with all of that.

            Re farmers – city people have no idea how precarious their food (and water) supply is.

            Most farmers (not the multinationals who are ruining the land) have their backs to the wall and work 80 hr weeks, 7 days a week. I’ve just been speaking to an amazing bloke who is designing houses for the burnt out farmers (has donated the first house to one family) He says (and chokes up over the phone) their plight is horrific. No one cares and no one helps 90% of farmers don’t’ qualify for the neat little rules for government assistance, and the banks took all their insurance payouts as most farmers, having had two years of horrific drought were already behind with mortgage payments and now have had no season again, having no fences, no machinery, no house, and on it goes. They’re taking guns away from some farmers…..

            City people have NO idea. Maybe instead of slagging off at farmers they could go out there and help, like the bloke I’ve just been talking to.

    • boomengineeringMEMBER

      Young people should not have to pay part of their tax to support pensions as the pensioners have already paid in advance for it but successive gov’ts have squandered the money on frivolous projects . This tax paid now for pensions could instead go to these wanting unemployment benefits to be lifted and theoretically the pensions should be extracted from the pollies personal bank accounts due to the committed fraud reimbursement. Fat chance of that.
      btw my family did it tough scraping hardened baked on cooking pans found at the dump to use, so at a personal level we could live on less than the dole if forced to, eg abandoned car for shelter.

      • This isn’t how it works though. Pensions are always funded by the future generations paying tax. The failure of the superannuation system to provide retirement income for average income earners will bear proof of this. It is simply a ponzi relying on greater numbers of current tax payers supporting less retired people.

        • boomengineeringMEMBER

          Well they shouldn’t have promised an unmeans tested pension for all when we were paying a lifetime of tax. That is fraud.

          • Who promised you an unmeans tested pension in exchange for taxes paid? As far as I understand it the government has honoured all actual pensions offered in exchange for superannuation contributions to public servants etc, despite the contributions going nowhere near covering the actual pension costs.

        • Are you conflating superannuation pensions with Aged Pension? Superannuation Pensions are stuffed by the choice of a low interest rate environment and by regulations on where pension funds invest. Perhaps you will support Gates Schwab Soros Prince Charles Fauci etc in their solution, transhumanism, no debt, digital:money, rent everything from them, guaranteed universal income, and you will be happy. Great solution for poverty. Great solution for all the complaints of unfairness.

          • I am conflating them because of previous statement, using past taxes to pay for current aged pensions is exactly what superannuation is, except on a populace rather than individual basis.
            And the reality is high inflation environment or flat, an average or below wage earner is not paying enough in superannuation or as part of their tax to provide a reasonable retirement income from investing or otherwise holding that money.

      • Young people should not have to pay part of their tax to support pensions as the pensioners have already paid in advance for it but successive gov’ts have squandered the money on frivolous projects .

        That’s not how it works, and it’s never been how it works.

        btw my family did it tough scraping hardened baked on cooking pans found at the dump to use, so at a personal level we could live on less than the dole if forced to, eg abandoned car for shelter.

        Yeah, great idea. Some people should live in abject poverty just so a handful of other people who have orders of magnitude more wealth and money than anyone could ever need can get even more.

        “People did it hard in the past” is never an excuse for unnecessarily forcing peopel to do it hard now.

    • Re aged pensioners ‘many of whom are wealthy due to owning a home”
      David, you imply job seekers do not own a home, that if they do presumably they too are wealthy.
      Aged pensioners who own a home, pay rates, they do not demand public housing, they do not get rental assistance.
      Aged pensioners bought their homes when money was expensive, I well remember 11.5% interest and to get 9.5% an incredible relief, then the 18% paid to Citicorp when the NAB manager would not lend despite huge security, deposit but sent me pregnant up the street to his mate the mortgage broker, 5 minutes, pay him a grand and an 18% mortgage.

      The aged pension is a pittance, poverty, with the kind Aus Post giving a small book of stamps as a heartwarming gift.
      I have been in homes owned by aged pensioners over the years, as a child, bare boards, sparse, overweight old people sitting drinking tea with sugar, living on sugar and bread and offering we kids sugary biscuits without butter maybe an egg in the recipe.. Then looking at pensioner homes in now expensive areas like Northbridge Sydney, pitiable kitchens, ancient fridge, cold, peeling paint, damp, worn put furnishings, terrible bedrooms, and the ghosts of misery with cold arthritic hands in the terrible bathrooms. Yet the value of the dwelling is increased by population growth…..massively due to immigration, overseas speculation in our homes, speculation by neg geared fascist housing industry government. All parties.

      • +1 owning a home doesn’t make you wealthy if it’s just your primary place of residence. It just means you’re lucky to have been able to manage it, given what’s against you these days. We should not force people to reverse mortgage a house in retirement.

        • boomengineeringMEMBER

          Glo,
          It was the wife who scraped those pots clean, I was too busy in the early 80s recession.
          BTW our interest rate was 20% in the 89-90s recession.

      • “Aged pensioners bought their homes when money was expensive, I well remember 11.5% interest and to get 9.5% an”
        Do you remember the 10%+ wage and cpi inflation that evaporated the debt in a decade as well? I would take that over todays conditions any day of the week after doing the maths.

        • No. I have never speculated in housing, what you are describing is the return on speculation by an investor. If I am paying off a mortgage it does not go down with inflation. If the mortgage is 8% annually the inflation is not running at that rate to give an after tax disposable income increase to pay that mortgage and clear it pro rata. However if you were a bank clerk at 14 years 10 months and retired a bank clerk. you would have borrowed at 3.5% for 90% of home when others paid 10%. I actually knew such a man, he spoke of “motoring” in his car and maintained the loan indefinitely.

          • Your after tax income is increasing at a much greater rate then than now. Both your loan repayments and capital owed on the loan are not increasing at all in nominal terms, and decreasing quite rapidly in real terms. You very rapidly decrease your % of income on mortgage repayments in a high inflation environment.

        • Added to my reply which I could not edit,
          above being said I agree with you. The massive loans preclude repayment of capital, banks have got people over the barrel indefinitely, I agree it was far better before 2000, or 1990 or back further.

  2. It’s a trade-off. Higher benefits = lower poverty, but gives people less work incentive. Lower benefits = higher poverty but greater incentive to work.

    There’s no lack of restaurants etc willing to pay a legal wage who have have a lot of trouble finding casual staff in the past few months. Anecdotally I even know a doctor who has been looking for a part time receptionist and has been having trouble finding one in the last few months.

    What’s the sweet spot for unemployment benefits given these trade offs? Probably nowhere near as high as the age pension, but there’s little doubt that the pre-covid amounts were too low.

    • This is a problem that will fix itself over time. Increasing money paid to unemployed doesn’t increase items available to purchase with that money so rents and costs will drift higher moving them back into the poverty category again.

      • Firstly I thought deflation and a low inflation environment were the current problem.
        Secondly if tax policy were shifted away from giving advantage to property investors and instead favoured homeownership, rent wouldn’t be a problem.

        • Actually if the tax on small businesses was matched to that paid by the large corporations and mutlinationals operating in Aus, ie lowered or completely axed, then there would be jobs like nobodies business. It’s not rocket science, to get the economy going cut taxes, eliminate company taxes, wage taxes. Leave indirect. Let’s cut out of the 100% globalism game, maybe give the planet back superb leather it once had made in Aus. Stop the foreign housing speculation, Scott Morrison and his cronies have made enough. There is ZERO will at any level to actually do something for Australia. Last time there was, the Queen got the Whitlam coup with Sir Garfield Barwick, Sir Anthony Mason, Frazer, and the knighted drunkard Governor General. And the USA aided in the rest. The fake media i persons materialised into our papers, the TV etc. The Palace Papers by Jenny Hocking is a recent great read.

      • If the unemployed were the sole acquirers of such items then that maybe the case where supply is fixed. However they are not.

      • What you say is correct about rental housing where there currently is a severe shortage where supply is unresponsive to price.
        You are correct that giving more money to many people will NOT allow many people to obtain better housing IF the better housing does not already exist and where supply is unresponsive to price. (eg Sydney).

        However what you say is not true of the many goods where supply can be expanded and does respond to higher prices. For example more rice could be grown or imported if we give many poor people more money to buy rice.

        • Define people. Do you include visa workers? If you give money to Aussies but not visa workers, what happens?

  3. Hernando de Soto

    It is not beneficial to society to eliminate poverty: The threat of poverty is what motivates the middle class to work and pay tax.

    • If we want to get all philosophical, then the elimination of poverty, at least as defined in australia and the article is virtually impossible with anything short of communism. It is a relative measure.
      https://en.wikipedia.org/wiki/Poverty_threshold#Relative_poverty
      “A person can be poor in a relative terms but not in absolute terms as the person might be able to meet her/his basic needs, but is not able however to enjoy the same standards of living that other people in the same economy are enjoying.[30] Relative poverty is thus a form of social exclusion that can for example affect peoples access to decent housing, education or job opportunities.[“

      • People like you equate Communism (no private ownership of property) as socialism. Communism is a form of totalitarianism and a lot of people who would classify themselves as socialists don’t want to share their private residence or other property with other people, but want other people to have a similar opportunity as themselves. Even if those other people aren’t quite as comfortable as themselves at least they have equality of opportunity.

        • Did you actually read the quote? The definition of poverty clearly being used here is ” is not able however to enjoy the same standards of living that other people in the same economy are enjoying.” because anyone on even the below poverty line former unemployment benefit can easily meet their basic needs. As long as income is spread along a meaningful distribution then relative poverty MUST exist. The only way to eliminate it is for the majority to earn similar amounts.

          • No I didn’t read it because of this:

            If we want to get all philosophical, then the elimination of poverty, at least as defined in australia and the article is virtually impossible with anything short of communism

            The core doctrine of communism is no private ownership. And I was distinguishing the difference between communism and socialism.
            Having read the quote I agree that Communism also stipulates equality of outcome, but in reality it never delivers it because an elite cabal of rulers who always allocate the treasures to themselves.
            In any case the more generic “socialism” is a better model for arranging society as equality of opportunity is what it should deliver.

          • Equality of opportunity has nothing to do with poverty.
            Poverty is purely an outcome thingy.
            Equality of opportunity is nice if not really a thing anywhere anyway but makes no difference to poverty.
            Someone who is genetically more intelligent, better looking, even taller has an advantage over those that aren’t hence not going to get equal opportunity.

      • Maybe when everyone in the country is being adequately clothed, fed, sheltered and has trivial access to education, healthcare and work, splitting hairs about the definition of poverty will be a worthwhile discussion.

    • It is not beneficial to society to eliminate poverty: The threat of poverty is what motivates the middle class to work and pay tax.

      This is, of course, why generous welfare states have such terrible productivity and employers struggle to find workers.

      • Such an American way of thinking. It’s stupid really, if everyone had a safety net they would take more risks and build new companies/products/services. I know I would if the fear of going broke wasn’t that I’d end up on Skid Row like we see in LA at the moment.

        I work because I want to feel like I have a purpose, am useful, can take care of myself and family. What’s scary about modern day poverty is that you can do all the right things and work hard, yet still end up unable to support yourself due to casualisation of work and 0 hour contracts etc..

        • Funny, much of my working life has felt neither “like I have a purpose,” OR “am useful,” but such is modern life.
          Have you succumbed to the call of crypto yet?

          • My new job feels like it has more meaning than my old, but that is because I’m part of a small company / team and helping it grow etc.. the old job was a big multinational where I just felt like I was a cog in a big money making machine.

            On the crypto side I haven’t bought it yet because my money hasn’t appeared in the exchange yet. Once it does I’ll buy some. I plan to buy small amounts over a long period of time.

            I’ve been learning more about it and I think blockchains and crypto will be used more and more in the future. I do think it will make banks irrelevant to some extent. Which is a good thing IMHO.

        • What’s scary about modern day poverty is that you can do all the right things and work hard, yet still end up unable to support yourself due to casualisation of work and 0 hour contracts etc..

          I know people like that, work hard, quite intelligent, and really into what they do. One person I know, worked for a corporation, attained a high position, highly paid. Went out on his own business, started off going very well, then after the GFC, his clients were telling him, budgets have been cut, you know there are a lot more of you out there now. Never picked up again, couldn’t get a permanent job again, and he really needs one (or two these days).

          Then there’s the bulk of the others I know, still have very well paid jobs, given the debt they’re in, I’d say they’re quite poor, but look very wealthy.

      • Ironic that a Smithyian world view is now putting the same welfare states under enormous stress.

  4. kierans777MEMBER

    But we’ve got to cut expenditure to reduce the debt and deficit disaster and regain the Holy Grail of a budget surplus^^

    (Never mind that pre COVID the Libs doubled/tripled the debt since coming to office)

    • RobotSenseiMEMBER

      I can think of no greater patriotic duty than spending the next 30 years of my working life paying off the national debt incurred by the political party I hate the most.

  5. John HitchensMEMBER

    Except Boomengneering is exactly right; “Young people should not have to pay part of their tax to support pensions as the pensioners have already paid in advance for it but successive gov’ts have squandered the money on frivolous projects ”
    In 1945 an extra personal Income tac and payroll tax was levied to provide for future aged pensions. Subsequent government absorbed it into Consolidated Revenue, then Keating imposed the Burden on Employers (and Ultimately Consumers as cost must be recovered)
    https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/0910/ChronSuperannuation

    • Hernando de Soto

      Governments always steal the tax now. Take a look at the 45c per litre fuel excise meant to pay for roads. It is squandered on other purposes, and motorists need to pay road tolls.

      • Motorists need to pay road tolls because government was too lazy to manage the roads so just sold them off to private companies, same as virtually everything else over the last 40 years. Not much left for government to do at all these days.

      • John HitchensMEMBER

        Yep true, and worse the mongrels keep giving themselves pay rises, extra super benefits, more retirement benefits than we can hope for, and they know while ever there is preference voting we can’t get rid of them. it will take a “we the people demand….”, revolution

    • “There was, however, no direct link between contributions and benefits and the pension. The National Welfare Fund, whilst set up as a means of establishing a base from which a national superannuation fund could be operated, was in practice merely an accounting device until its abolition in 1985.”

      • John HitchensMEMBER

        I am well aware of that, It misses the point that a 7% tax increase was made and the pension was the justification, so it does not excuse or detract from the fact that the government has spent the increase it justified as providing future pensions, on other expenditure.

        • How many tax increases and cuts have happened since then? IT’s a very long bow to try and draw.

  6. Surely a certain proportion of poverty is a feature rather than a bug of Globalist Neoliberal Capitalism?
    What do you expect when the proportion of wealth syphoned to the top 5% most wealthy seems to be increasing.
    A rising tide may lift all boats, but good luck if your boat is a tiny aluminium tinnie with no motor, oars and you have to carry all your worldly possessions with you.

  7. Totes BeWokeMEMBER

    The wokes aspirations for the country is 3rd world, and we’re nowhere near that living standard yet.

    Of course the rich woke won’t be living it. They’re typically wealthy, inner city elites, celebrities and politicians.

    Always, either young and dumb…or…they’re rich.

  8. “Permanently lifting JobSeeker to parity with the Aged Pension should be a national economic and social priority.”

    Well said. LVO. Without that we’re heading down the same path as the US. We should be aiming for Sweden’s. A tax on the uber-wealthy and abolishing franking credits and IPs should easily do it.

    • John HitchensMEMBER

      “A tax on the uber-wealthy and abolishing franking credits and IPs should easily do it.”
      1: Need to define Uber Wealthy, but I agree in Principle.
      2. I don’t think you understand Franking credits. The tax has already been paid by the company.
      3. Someone else mentioned abolishing Negative gearing. I agree with this,.
      4.Also I think another MB article stated we are giving $50,000 to foreigners to buy property in AUS. That has to stop

  9. Abbott & Gillespie

    Making the dole 70% of the minimum wage would make it impossible for any small business to employ someone unskilled for minimum wage. No-one would get out of bed for the extra money. It’s already difficult to find staff to do unskilled jobs for minimum wage which is nearly $25 for a casual.

    • ” It’s already difficult to find staff to do unskilled jobs for minimum wage which is nearly $25 for a casual.”
      I would think that is quite location dependent. If living costs mean no one earning that or less can live in the area, then no-one will do the job for that. Hence the requirement for people willing to live 10 to a unit to work for low wages in sydney/melbourne.

    • If the $25/hr was for 3 or 4 hr shifts and a total of only 10hrs a week then yeah, your going to find it hard to get anyone but school kids taking it up. by the time you add in travel you still need JobSeeker to get by so why bother… I wouldn’t.

      I put myself through university, No AusStudy for the majority of it. It was at a country Uni and right on the tail end of the last true recession. I was getting $17/hr as a casual, with 15hrs a week regular work. Even then I was not able to save any money and didnt have much of a social life. A full 3 course meal at the local RSL could be had for $10, $12.5 with a schooner….rent was $120

      30years later after all the subsequent increase in living expenses and you cant find anyone to work for $25/hr…. not at all surprised.

      • Also consider the effective 60% tax rate those in jobseeker face once they start earning, and they only keep $10 of the $25/hr. This must be reduced such that their government benefits are only reduced by 25-30c for each dollar earned.

      • Abbott & Gillespie

        What do you want to pay someone for unskilled work? $35 per hour? No wonder Australia is so uncompetitive.

        • May be the ridiculous cost of living is the culprit and not the wages…. if the wages dont meet cost of living expenses then who will take those jobs, even unskilled people wont wast their time?

          Cost of living pushes wages up, not the other way around.

          if high wages are reduce competitiveness then ipso facto Cost of living is the reason for the fact we are not competitive.

  10. I agree with article. What will eventuate, is quiet a disproportional split between, a small handful of people who are astronimically, mega rich, and very miserable. Everyone else, quite poor, struggling, and very miserable.

    As Yanis Varoufakis states, what we’re in now, is techno-feudalism, and it’s here for a long while.

    • Yep. The poor are going to get poorer as discretionary spending becomes increasingly unaffordable, leading in turn to many BS service jobs disappearing, which will then spread to other BS white collar jobs jobs, thus ever-widening the gap between the have’s and have-nots in a soon-to-be inflationary environment with rising food and living costs.

      The only solution to avoid civil unrest will be a universal UBI. but overtime we’re all going to have to do with less as the world goes down the slippery slope of resource depletion.

      https://damnthematrix.files.wordpress.com/2021/01/135319698_10224326002766468_185778494342397436_n.jpg