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May 11, 2011

Possum: a budget so tough, Chuck Norris checks under the bed for it

Regardless of your politics, when politicians put some serious thought into public policy, they should be commended.

Wayne Swan: “This is a tough budget.”
Crowd: “How tough, Wayne?”
Swan: “This budget is so tough, Chuck Norris checks under the bed for it every night before he goes to sleep.”

Now that we’ve got this year’s nonsensical but must-have budget talking point memo out of the way, let’s talk about something interesting.

What is often not recognised by many is that Swan has had a lifetime interest in the complexities of labour market dynamics, particularly in terms of the bottom end of the income spectrum and how the interactions between the tax and welfare systems play out on the ground. As Dennis Atkins reminded us in the Courier Mail today, 32 years ago Swan helped Mick Young write his book on employment policy titled  I Want To Work. Throughout Swan’s time in Opposition, he more than any other member of Parliament, was responsible for the policy debate being regularly steered towards effective marginal tax rates, specifically as they applied to low- and middle-income families and the income traps often involved as earned income reduced government transfer payments by disproportional amounts.

The Prime Minister on the other hand, has based her leadership on one theme more than any other — education.

When we look at this budget — none of us should be surprised by it contents.

The big-ticket generic items such as the National Workforce Development Fund, the restructuring of vocational education and training to be much more adaptive to the needs of industry, right through to the new additions to the nations apprenticeship schemes to attempt to reduce the number of drop-outs, are all solid policy elements in and of themselves. But what flies a little under the radar is the way these big-ticket items seamlessly mesh with a multitude of smaller tax and welfare policies announced in the budget, to create the beginning of a fairly substantial blueprint for labour market development.

The additional policies fall into two rough categories: those designed to increase the level of participation in the labour market, not just the participation rate, and those designed to increase the level of employability of those participants. A quick table of the new announcements tells us the story.

All of the policy additions in the left-hand column will result in either additions to the workforce, an increase in the level of participation of those in the workforce, or both. Those policy additions in the right-hand column  go to increasing the employability of people who are either in the labour market, are marginally attached mature aged workers, or young people that will inevitably enter the labour market over the next few years.

Yet the announcements themselves not only cut across the full spectrum of policy areas — tax, welfare, education, training, industry assistance — but also cut across most of the socio-economic groups that have the largest clusters of non or marginal participation.

The other feature that stands is the interconnectedness, where for any given person that these new announcements apply to, that person will often find several the announcements applying to them.  So single parents, for instance, find tighter eligibility requirements, but expanded take-home income potential from only part-time work, or in the case of the targeted single-parent programs, greater childcare and education assistance. DSP recipients end up with tighter and more frequent assessment, but with many more being able to undertake work without losing their benefit, or, importantly, their benefit type.

While each policy thread taken in isolation only has marginal impact on some relatively small and specific area of labour market development, when taken as a whole, it starts to appear to be a well constructed, meaningful and coherent policy framework that at least starts us down the road to maximising the number of people working and their employability.

When we’re staring down the barrel of unemployment with a 4 in front of it — and a 3 and 2 and even a 1 in some parts of the country as a result of our resources boom — maximising the human resources and human potential we have as a country is not really an optional extra.

One of the policy lessons we should have learnt over the past 20 years is that silver bullets are usually an exercise in delusion. To achieve a desired policy result will nearly always require 100 little things all pushing in the same direction from 100 different places. But modern governments being so large, complicated and not prone to cross-portfolio communication, we rarely see that happen.

Which makes this attempt particularly interesting.

Regardless of your politics, when politicians put some serious thought into public policy, they should be commended.

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4 thoughts on “Possum: a budget so tough, Chuck Norris checks under the bed for it

  1. ianjohnno1

    Thanks, Possum. Good to see someone looking beyond the headlines.

  2. ianjohnno1

    Further, any chance of Crikey doing a study of tax paid against tax benefits received by familys; various income brackets and SI2K and DI2K?

  3. Captain Planet

    SI2K will be paying a whole heap more tax for the same combined income, I can tell you that much.

  4. Just Me

    Thank you, Possum. I agree completely.

    Finally, a government genuinely takes on that appalling tax-welfare nexus, arguably the greatest and most unjust barrier for those on welfare to return to, or increase, workforce participation.

    Full points on that alone.

    Now, if only they can sell it.


    I have not been through the budget in detail, but I hope they have also addressed the substantial disincentives in that nexus to starting a small business while on welfare, some of it is almost punitive in its effect. Not all those on welfare lack entrepreneurial skills or are suited to straight employee roles. Indeed, many may well do much better if they have more control over their working arrangements, via being self employed.