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Jan 3, 2013

From the vault: what is poverty, and who is 'poor'?

Families Minister Jenny Macklin, who has shifted some single parents on to the dole, is being panned for saying she could live on Newstart. In this piece from October, Crikey looks at how to define the breadline in Australia -- and who is living beneath it.

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It was an easy headline, especially given the report was released on a Sunday. “One in eight Australians live in poverty,” said the ABC. “More than two million Australians in poverty,” ran the AAP copy. Fairfax ran some profiles of people struggling to make ends meet off the back of the Australian Council of Social Services’ new report on the extent of poverty in Australia.

Few bothered to look into the basis for ACOSS’s numbers, beyond that it was an internationally-accepted poverty benchmark. ACOSS used the OECD’s poverty definition, which is 50% of median disposable income. It also provided data for another, less austere benchmark, 60% of median disposable income. On the basis of the lower OECD definition, which ACOSS prefers, 2.265 million Australians are living in poverty. Using the 60% definition, 3.7 million Australians are.

Fifty per cent of median disposable income is $358 a week for a single adult and $752 for a couple with two children.

Neither sum is easy to live on. But they’re the product of an arbitrary benchmark: there will always be a substantial proportion of the population identified as “living in poverty” if you define poverty in relation to median income.

But deprivation-based measures of poverty allow us to move away from arbitrary benchmarks and consider how many people are actually in financial circumstances where they’re unable to afford basics most of us consider essential. And some high-quality work on this has already been done, including by ACOSS.

Earlier this year ACOSS published a report, “Who is missing out? Material deprivation and income support payments“, based on a study by Professor Peter Saunders and Melissa Wong of UNSW. The study, which used data from the 2010 “Poverty and exclusion in modern Australia” (PEMA) survey, looked at how many households displayed “deprivation indicators” based on a range of indicators widely agreed to be “essential” for households.

For example, 99% — or more — of people agreed warm clothes and bedding, medical treatment, ability to afford prescription medicines, and a substantial meal at least once a day were essential. Over 90% agreed up-to-date schoolbooks, the ability for kids to participate in school activities and outings, a decent and secure home, and regular social contact were essential. The only survey indicator that appears to have been widely disputed as “essential” was “a week’s holiday away from home”, which was identified as essential by 54%.

“The most at-risk group for lacking ‘essential’ items is, unsurprisingly, Newstart-recipient households … this returns us to the debate over whether to increase the level of Newstart assistance.”

Using median income as a measure of poverty allows us to capture the sense of “relative poverty”, which is important in a prosperous Western country. But the PEMA approach also enables a comparative element. For example, 72% of PEMA respondents agree computer skills are “essential”, even if they would not fit into any meaningful definition of absolute poverty.

Using the PEMA data, Saunders and Wong provided us with an alternative take on poverty in Australia. But the result isn’t one to fill us with complacency: 15.3% of households reported lacking at least 3 of the “essential” indicators.

This included 18.5% who couldn’t afford a week’s holiday; indicators at the other end of the scale are much lower: inability to buy prescribed medicines was 2.9%; inability to afford children’s participation in school activities 2.6%. But 20.7% reported not having $500 in emergency savings; nearly 12% reported being unable to pay a utility bill at least once a year.

The most at-risk group for lacking “essential” items is, unsurprisingly, Newstart-recipient households; 61% reported lacking at least three indicators, although the sample size is too small to provide reliable figures. Households reliant on the disability support pension or parenting payments also featured strongly in households reporting deprivation indicators; age pension recipient households featured much less prominently; indeed, had a lower rate of lacking at least three essential indicators than the community as a whole; it was age pension recipients who didn’t own their own homes who were overrepresented.

This returns us to the debate over whether to increase the level of Newstart assistance. In August, even the Centre for Independent Studies, a serial participant in the “poverty wars”, argued there may be a case for an increase in Newstart for the long-term unemployed, provided it came with stronger requirements for recipients to search for work. This would be cheaper than an across-the-board rise that would simply represent a windfall for the majority of Newstart recipients who only receive it temporarily while between jobs.

And however arbitrary, the weekend report from ACOSS does put a human face on poverty. It’s worth examining to see who else is overrepresented: people in poverty are more likely to be female, more likely to be kids or older people, more likely to be single or lone parents, more likely to be from a non-English speaking country. But the difference between metropolitan and regional/rural poverty is quite low: 12.6% of people in cities and 13.1% of people in regional areas.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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38 thoughts on “From the vault: what is poverty, and who is ‘poor’?

  1. Apollo

    Hmmmm, this is a little complex when I think about it. I remember the government paid support for my my grand niece when their parents went back to university. Now, I’m assuming that parents being pushed onto Newstart won’t get any support payment for each child between 8-16 years old, that will be very tough for them if they don’t get a few hours of work each week to make up for the short fall. If they don’t have a job, they’ll need at least $25 per child per week from the government. But the government’s idea is to get parents into the workforce and be more independent. This is where the government, the Greens and welfare groups all have it wrong in their policy approach.

    In my past life as a manager of a small super market, I’ve met many single mothers (and very few single dads). A tiny number want to work a little, just so they can meet people and ‘men’, they wanted cash in hand so it would not affect their centrelink payment. About 80% of the single mums I met were working. 20% were happy to live on centrelink payments and had no desire to get a job.

    A good number of single mums are discouraged from working by centrelink reducing their payment too much too quickly when the get part time work. They want to work to earn more money but centrelink reduce too much of their payments, so they asked for cash in hand or refused the job if it required more hours which greatly affect their welfare payment. One great problem was that the mums who wanted to work part time had to put their kids into childcare, it costed a lot while Centrelink also reduced their payment so much that many of them felt that it was not worth it to get the part time job.

    Ok, I have to make my tortilla and sauerkraut first. To be continued….

  2. Apollo

    Speaking of being wasteful, Australians wasted $8 billions of food last year. Wastefulness goes across the board, it does not matter whether you are rich or poor. Some people are always poor because they are always wasteful, some people actually build up wealth because they are good savers so not all rich people are wasteful and not all poor people learn the value of savings.

    $8 billions could have helped resettle so many refugees or build affordable housings, if the money was in the government hands, but Australians cry poor and b*tch and moan hysterically about boat people. They could build high rises in an area of a park and house 10,000 people easily, which will be cheaper for the construction budget. Or the money could go to expanding special need childcare centres, this wonderful program in Melbourne is helping troubled parents or troubled children costing only $36 more per day, but in the long run you’ll have stable children who won’t be caught in the legal system and will contribute to society.

    Australians really need to be more appreciative of what they’ve got, low skilled workers here earn much more than those in Germany. My nephew and his friends from Germany loved travelling and working in Australia after they finished high school. They were able to earn good money and even able to save up to a trip to Asia. I know that some Australians fall into unfortunate circumstances, but the amount of whining in Australia make Australians look like a very weak race.

    Don’t have money to spend and feel depressed? Go meditate, get back in touch with your inner self and try to denounce consumerism, it’ll make you much more happy and fulfilled. $50 dollars more is insane.

  3. Tim nash

    This is worth a listen: <a href="http://www.abc.net.au/radionational/programs/rearvision/australia27s-welfare-state/4379252&quot;

    Economically speaking raising social security could help the economy. By raising it 50 dollars it may create a kind of small economic stimulus.

    The Keynesian multiplier would be in effect.

    It would be beneficial if people in jobs paid into a government funded scheme so that would assist them when they where unemployed like they do in Europe.

    These accounts also benefit the economy, like super by creating millions in savings that add to the economy of country.

  4. G Rogers

    I should probably go look at a report first before I comment, but admitting this flaw I’m going to comment anyway. I’m not a single mum/parent, I am a woman & I work full time. I’m in no way disadvantaged. I’m old enough to remember what a dole queue looked like, to go to the old fashioned centre & to feel as if being unemployed was to be in the dregs of society, because it wasn’t part of my family ethos. The depressing aspect of being in one of those centres was enough to drive you out to find a job, any job. I also recall what it was like to work various jobs on a marginal tax rate that taxed you if you worked too many jobs. I live in an area divided between the ‘haves’ & the ‘have nots’. And, occasionally I see & speak to single mums, single dads, the people who are not doing so well for one reason or another, who happened to end up, unguided, misguided in this situation. They’ve got kids who they love, they feel trapped in a sort of cycle that is difficult to get out of once there. They make bad decisions sometimes. Sometimes, they have no access to opportunities that will help them advance in life: maybe they were born into families with problems, with disadvantage. Maybe they weren’t lucky like me, to have parents who worked hard, saved money & sent their kids to school or had the intelligence to get a tertiary education & from there it’s pretty easy to keep progressing onwards & upwards in our society. Blind luck. While the basic premise that reducing welfare payments will incentivise people to find work, there’s a lot to be questioned about this premise. Are there jobs for these people to go to? Are these people ready & able to return to work? Who pays, fundamentally, for the loss of a parent from looking after a child at home & being the carer of that child’s mental & physical wellbeing? I’ve known mothers who worked full time on ‘decent’ salaries who spent the majority of that salary on child care & had to take weekend jobs to make ends meet. They felt like bad mothers & they weren’t making a profit. This whole policy seems wrong footed to me. It rests on a series of assumptions that need to be tested. In particular, it seems to discriminate against sole parents who are responsible for the NEXT generation of Australians. Now, what kind of lessons are these kids going to learn, except that our society lacks the compassion to encourage their parents into a work force that will give them a decent pay, a decent amount of ‘social’ interaction & sense of self esteem & independence? Macklin’s comment that she could live on Newstart does not ring true: everytime I go to the supermarket checkout to buy my essential goods, I walk out with the majority of $50 spent & I’m not a spendthrift. Rent is expensive in Australia. Finding a job takes time, application, constant hope, networks. I think this policy will do more to punish the least able in our society than it will achieve in financial savings & I think we will rue the effects it may have on the marginalised. Entrenched, cyclical, intergenerational poverty is not something that Australia wants more of, but less of.

  5. Hamis Hill

    In the political economy the inescapable and iron law of supply and demand rules.
    The call for increased dole payments by a conservative think tank merely reflects their view that payments are now so low that a substantial supply of potential employees cannot muster for potential employment.
    Malcolm Fraser let the cat out of the bag in the 1970’s when he described “the pool of unemployed” who, by competing for employemrt would bid down the price for which they were willing to work exactly in the same manner in which those selling goods or services would reduce prices to get sales.
    What the conservatives fail to expound upon is the effect, of low wages and a subsequent low level of savings, on the amount of money in banks and the interest rates which then can be charged for such scarce (undersupplied) finance.
    All people on welfare payments are deemed to be living below the poverty level and finance companies of any sort except the shysters are forbidden from taking them on for loans since they are legally incapable of paying back a loan and any such loan would be unenforceable.
    So, the main impediment to employment, a lack of reliable private transport, locks great swathes of people out of joining the pool of unemployed competing for work and so moderating wage “inflation”.
    These people, by definition are financially incapable of a “New start”, they are financially incapable of using the bolster of credit cards or cheap car loans to ever start to present themselves anywhere for employment.
    So if, in such a Limbo their behaviour starts to degenerate
    into despaerate and self-destuctive behaviour then your so-called wonderful, all conquering Freemarket of unfettered supply and demand will not sort it out, now will it?
    Heaven help Australia if all the pontificators above were called upon to assemble an army for the defence of the realm.
    Under their moral guidance the miserables and desperadoes would be expected to present themselves for battle armed with sticks and stones and clods of earth.
    They cannot be expected to present themselves for gainful employment under such conditions either.
    Now this is the political economy, as espoused by Adam Smith, not the dismal slough in which Bernard received his training, more’s the pity.
    We might expect more insight and rational action than we otherwise get from this “Politicised” economics of blame the victim.
    A British Prime Minister upon meeting Adam Smith,a professor of Moral Philosophy as well as celebrity author of The Wealth of Nations, speeakinf on behalf of all his fellow parliamentarians said “Sir, we are all your students”.
    Not anything that can be said of very many economists and politicians today, parisan as they are to the views of only one side of the economic debate.
    Luckily responsible citizens can side-step this monopoly presentation of wisdom economic and, via the internet, do as people did in the Ages of Enlightenment and become “students” of Adam Smith for themselves.
    Or they could continue be the intellectueal equivalents of lazy and good for nothing dole bluger layabouts who cannot get out of their own way to present themselves for involvement in the defence of democratic values of civic responsibility armed with a reasonable understanding. A “new start”, indeed.

  6. Hamis Hill

    Those chronically unemployed under the Swiss system were revealed to be afflicted,( drug addiction and other disabilities) to the point of being unemployable.
    1.7 % on my outdated recollection.
    Yet labour shortages and subsequent rises in labour costs are nothing new, and as the Father of Economics pointed out, high wages, in turn, create a demand for labour saving devices.
    Ancient Rome found no inflationary shortages of slave labour and, like the slave owning Greeks before them, very few applications of labour saving devices.
    Two hundred-odd years ago The Dutch were the richest people in Europe and no-one could “live of the interest on their investments” (as retirees aspire to do now in Australia) for the interest which could be charged on loans was as low as 0.5%.
    Instead the Dutch of two centuries ago “laboured” to produce manufactured goods in workshops their own homes as the way to gain wealth.
    So there are reasonable alternatives to the “Pool of Unemployed” cynically maintained to impede rising wage levels and provide an example of abject poverty which makes the burdens of high personal debt seem quite reasonable by comparison.
    “The poor will always be with us” it seems, except in Switzerland?
    Inshort the ultimate function of the poor is to create a demand for credit.
    Are the sufferings of the “Idle Poor” the source of income for the equally “Idle Rich” who live off the interst on their “Investments”?
    Seems like we really need Moral Philosophers rather than economists to consider this problem of poverty and employment.
    Didn’t someone describe those Dutch and Swiss examples as the “Protestant Work Ethic”, whereas now, in Australia, the B A Santamaria proteges seem on the cusp of re-imposing the Roman economic paradigm, don’t they?
    The Lee Kwan Yu’s of the Asian Century look on with “amusement” as Australians trash their “protestant” cultural heritage under the domination of the medieval superstitions of a minority foreign relgious sect of dubious “christian” pretensions (as their actions show us).
    That would be part of a “poverty” of understanding then, brought on by the notoriuos underfunding of education under the former political regime, also noted, no doubt by our near neighbours?
    Do not seek for whom the Poverty-Bell tolls, Aussies, it tolls for thee.

  7. claire edwards

    Its easy to quibble about where to place the ‘poverty line’, who is ‘deserving’ of benefits, or whether Jenny Macklin or Julia Gillard (has anyone asked a male politician yet?) could live on $35 a day. These are distractions from the real issue: namely the inadequacy of the Newstart allowance for all recipients. The Henry tax review, the OECD, and the Business Council of Australia, all argue that the current Newstart allowance rate is too low. A recent ABC News poll found that 71% of people agreed with them. In 2008, the OECD found that the benefits available to single unemployed people in Australia were ranked lowest of the 30 nations they examined.

    The recent Senate enquiry, into the adequacy of Australian welfare payments, published on 29.11.12, stated that submissions from stakeholders were overwhelmingly critical of Newstart, calling it: ‘the most significant barrier to assisting long-term unemployed people return to meaningful employment’, and ‘a pathway to poverty instead of to employment’. The Senate report recommended that initial payments to job seekers be increased, to improve their ability to find work in a timely manner, which seems to contradict current Government rhetoric, that decreasing sole parents benefits will increase their incentives to find work. As Eva Cox argues, some sole parents are prepared to ‘suffer poverty and spend more time with their kids’, rather than return to the workforce. The Australian Council of Social Services is campaigning for Newstart for single people to be increased by $50 per week, a claim that is supported by many welfare agencies.

    Sadly, this is the context within which Single Parent Payments have been phased out for many parents, and as a result, the 84,000 mainly female recipients, who have children aged 8-16, have been transferred to Newstart Allowance, as of 1st January 2013. For many single parents, this will involve a drop in income of at least $130 per fortnight.

    This seems particularly harsh, falling as it does in the middle of the long summer school holidays, arguably the most expensive time of year for parents; just after Christmas, when parents are already struggling financially, and when they are trying to budget for buying new uniforms, school books and other items for the coming school year.

    The original rationale for this transition of sole parents to Newstart, with a paltry saving of $700 million, was to get the budget back in surplus. Now this goal has been abandoned, surely its time to revise Newstart levels upwards, as the spurious end no longer exists, to justify the spurious means.

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