PaTH and intergenerational theft
This was a very good week for Australia’s wealthy.
The start of the new financial year brought a 2 per cent cut in the tax rate for those earning more than $180,000. It also brought the start of the phase-in of reductions in penalty rates for many low-income employees.
Then there was the cut in company tax for small businesses with a turnover of less than $25 million, from 30 to 27.5 per cent.
If that were not enough, Employment Minister Michaelia Cash and Prime Minister Malcolm Turnbull were out and about on Monday offering free workers to Australian employers.
Let’s focus on this last one.
The government’s latest move on the employment front took the usual course. First, there was the leaked story in the Murdoch press, flagging the push to put “youth welfare slackers” to work.
Then came the media release from Cash, formally announcing that the Australian Retailers Association (ARA) had agreed to “partner with the Turnbull government” to deliver up to 10,000 internships for young unemployed people through the government’s PaTH program. The lumpy acronym comes from the words prepare, trial, hire.
In reality, the only new part to the story was the agreement of the ARA to get involved. The PaTH scheme has already been operating in a small way since April.
“We are very excited to be a part of the PaTH program,” said the association’s executive director, Russell Zimmerman, in Cash’s media release.
And why wouldn’t he be? Free workers were on offer. In fact, it was even better than that. In exchange for taking on a person under the age of 25 who had been unemployed for six months or more for an internship of four to 12 weeks, an employer would be given $1000. That is money to the employer, for workers whose wages they do not pay.
If, at the end of that time, they hired the young person, the employer would get – and here we quote from the budget announcement – “a wage subsidy of up to $10,000 for job seekers under 25 years old with barriers to employment and will continue to receive up to $6500 for the most job-ready job seekers”.
Whatever that means, it’s a pretty good deal for the bosses.
As for the unemployed young people keen enough to volunteer to take part in the scheme – the “slackers” in Murdoch-speak – they get $200 fortnightly on top of their welfare benefit paid not by the person for whom they work but the taxpayer. It works out to about $4 an hour.
And at the end of the internship, they maybe get a job. They have a 38 per cent chance, according to figures from Cash’s office. Since April, they say, 620 young unemployed have been “placed” under the PaTH scheme. Of those, 408 are still doing internships. Eighty-two have gained jobs, and 130 are back on welfare.
That’s better than nothing, right?
Actually, it’s worse, according to the Australian Council of Trade Unions, which argues the subsidised positions simply supplant full wage ones. Why would an employer pay for a worker when they can get one free?
“This program will do nothing for young people beyond churning them through short-term, dead-end placements,” said ACTU president Ged Kearney the same day as the ARA “partnership” was announced.
It would, she said, serve only to “entrench the current situation of soaring profits and stagnating wages”. She went on to note that some of the companies the government claimed to have signed up, such as the franchise Bakers Delight, had a history of underpaying their employees.
Oddly, when The Saturday Paper contacted Bakers Delight they said they had been courted by the government but had not yet decided whether to get involved.
A cynic might suggest the PaTH scheme more closely resembles corporate welfare than an employment program. But even allowing the government the best of motives, there is good reason to doubt it will do much to rectify what one social researcher calls the “economic intergenerational gerrymander”.
The word “intergenerational” gets thrown around quite a bit in politics these days, and often in association with the word “theft”. It is used as an excuse for austere policies. The argument goes that unless we cut government debt and deficits, future generations will be saddled with the cost.
There’s just enough truth to it to make it sound plausible. Debt and deficits are a problem, but there is more than one solution. We could, for example, raise revenue instead of cutting spending.
But the greater truth is that the theft they speak of has been a crime in progress for a long time. The point was driven home in one standout statistic from the recent census. A generation ago, in 1991, more than 41 per cent of Australians owned their homes outright. Twenty-five years on, that proportion has dropped dramatically, to 31 per cent. Another 34.5 per cent – up from 27.5 per cent – were paying off a home.
Younger Australians are far more likely these days to be renters. A survey by HSBC a couple of months ago found only 26 per cent were home owners.
The retail sector has always had a higher proportion of part-time workers than most. Even so, 30 years ago most people who worked in retail had full-time jobs.
In 1986, 35 per cent of women and 15 per cent of men worked part-time. By 2016 the proportion in part-time work had roughly doubled, to 62 per cent of women and 47 per cent of men.
In accommodation and food services – the only sector of the economy that attracts lower average wages than retail – part-time work rose from 50 to 67 per cent for women. For men it more than doubled, from 22 to 57 per cent. In healthcare and social assistance, it went from 29 to more than 50 per cent for women and among men it ballooned from less than 9 per cent to almost 41 per cent.
Across the economy as a whole, the share of women working part-time has almost doubled in 30 years, from 24.5 to 47 per cent. Among men it has gone up almost fivefold, from 3.7 to 18.9.
The incidence of insecure work has risen in all age groups, but the increase has been far greater among younger workers. Among those aged 15 to 19 it now stands at almost 80 per cent; for workers aged 20 to 24, it has more than trebled to 42.1 per cent.
Professor Jeff Borland, a labour market specialist in the department of economics at Melbourne University, who culled those figures from Australian Bureau of Statistics data, says that change is not entirely a negative thing.
“Some of it is explained by the increasing number of full-time students, who choose to work part-time,” he says. But much of it is “involuntary”. Deregulation and de-unionisation since the mid-1980s “has allowed employers greater scope to impose the mix of employment types they prefer”.
The consequence of this is underemployment. Until about 15 years ago, unemployment was the main concern in the labour market. But in February 2003, the underemployment rate first exceeded the unemployment rate.
As noted in a report by the Brotherhood of St Laurence, “Generation Stalled”, released in March, it is young workers who have been most damaged by this shift. Almost one-third of Australians under the age of 24 are either unemployed (13.6 per cent) or underemployed (18 per cent).
And on their analysis of the data, the majority of the underemployed are not the children of the middle class, doing casual work for a few years until they get their degrees and a permanent job. They are people stuck indefinitely in the churn of insecure part-time or casual jobs. That’s the reality, and that’s why Ged Kearney rightly questions where the government’s PaTH leads.
Over the past generation, the earnings of the top 10 per cent of Australians have grown three times as fast as those of the bottom 10. The income share of the top 1 per cent has doubled to about 9 per cent.
Over more than a generation, workers have received a decreasing share of the nation’s economic output. Analysis released last month by Dr Jim Stanford, director of the Centre for Future Work, showed total labour compensation, including wages, salaries and super contributions, hit a record low in the March quarter of this year. It accounted for just 46.2 per cent of GDP.
The reason isn’t hard to fathom. Over the previous year company profits increased almost 40 per cent, while wages went up by less than 2 per cent.
“Over the year that ended in the March quarter, Australia’s quarterly GDP grew by $31.7 billion,” wrote Stanford. “But less than one-tenth of that ($3.1 billion) was reflected in higher compensation for Australian workers.”
Never before, said Stanford, had the benefits of growth flowed so unequally. But the economic return to labour has been trending down since the 1970s.
In comparative terms, says John Daley, chief executive of the Grattan Institute, income inequality has not gone up very fast, at least not compared to wealth inequality.
“It’s a global trend,” he says. “The big economic issue is that we tax returns to wealth very lightly.”
Which is why Daley, like just about every other economist worth his or her salt, has argued for years for reform of superannuation, capital gains tax, property taxes and negative gearing. But these arguments have fallen on mostly fallow political ground. The Greens were the first party to get the message about the need for reform as, later, did Labor.
But the conservative parties, whose support base rests heavily on the owners of capital, have been less keen. Even the modest changes made by the Turnbull government to superannuation concessions caused great internal angst. Anyway, wealthy folk keen to avoid tax are moving into the next great shelter, discretionary trusts. The need for reform of that dodge is a story for another day; suffice to say that a government genuinely concerned about intergenerational equity could find a couple of billion in revenue in these trusts.
Inequality in Australia is not as serious as it is in many other countries, although it is rising. Nor should one suggest older Australians are not affected. Plenty of them also find it increasingly tough.
But in general, says Daley, “current 60-year-olds are doing relatively well while 30-year-olds are struggling”.
Rebecca Huntley, director of research for Essential Media – coiner of the phrase “intergenerational gerrymander” – can attest to that, as a result of work she has lately been doing, interviewing multiple generations of families.
“What I find is that even though they remained in the same class socioeconomically, the grandparent was almost always better off than the grandchild,” she says.
She cites one example, a working-class family from Newcastle.
“The grandmother was in her own home, she had been a cleaner all her life, but was basically healthy and okay.
“Her grandson was a butcher with a full-time job, who was sleeping on the floor of his brother’s room in his mother’s house. His partner was sleeping on the floor of his sister’s room with their child, even though she was studying to be a nurse and working part-time. They couldn’t afford to rent a house.”
The middle generation, a single mother working in public service, lacked the means to help them, other than offering space in her home, and some childcare while they worked their odd hours.
The young adults of today, Huntley says, are better educated than their parents were, but generally “not as far along in their lives in terms of being able to buy a house, have children, generally progressing”.
Ironically, this is in part because of their education: instead of buying a house, many are paying off student debts.
“And the lower you get in the economic pecking order, the worse that is,” Huntley says.
“So you’ve got a generation that are really qualified and have mostly done what their parents told them: work hard at school and get a good job.
“But that is not happening for them. The economic returns for their education levels and capacity are not there.”
The combination of employment insecurity, high living costs, particularly housing costs, and “a government retreating more and more from providing help” is sapping their life satisfaction and fostering a growing resentment.
Sooner or later, there will be a political price to pay, Huntley says.
“It’s not as explosive in Australia as in other countries yet,” she says. “But the makings of it are here.”
Consider the Canadian election two years ago, which led to the conservative government being kicked dramatically out of office. There was a 30 per cent swing to Justin Trudeau’s Liberal Party among voters aged 18 to 29, and 31 per cent among 30- to 44-year-olds. The issues those voters said had driven their choice were identified in surveys afterwards as the cost of housing, student debt and “precarious work options”.
Look at the breakdown of last November’s United States presidential election, too. Among voters aged 18 to 29, Donald Trump got just 37 per cent of the vote to Hillary Clinton’s 55 per cent. Among those aged 30 to 44, Trump got 42 per cent.
One wonders what might have happened if Bernie Sanders had been the Democratic candidate. In a country were the mild epithet “liberal” used to be pejorative, young people strongly preferred a self-described socialist.
Even more stark was the result of the recent British election.
“It was the most dramatically age-based election I know of,” says John Daley. “People 40 years and under split very radically for the Labour Party. The gap between them and the over-40s was about 25 percentage points.”
And the younger the voters, the greater the preference for Jeremy Corbyn, another old socialist.
If such a result were replicated here, Daley says, “it would be a bloodbath”.
Predicting elections, especially this far out, is a mug’s game. But this much seems clear: younger Australians are acutely aware of the truth of intergenerational theft. And it’s not the debt and deficit kind the Turnbull government is busy talking about.
This article was first published in the print edition of The Saturday Paper on Jul 8, 2017 as "Intern combustion". Subscribe here.