
Issue No 74		20 October 2000

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Review

Health, Wealth and Mutual Obligations

By Neale Towart

Mutual obligation for the poor only, increasing income inequality and a widening health gap. Welcome to the 21st century -or is it the 19th?

Recent research shows that the health gap in Australia has widened in the past two decades. This gap is between high and low income earners, where research also shows an increase in inequality. With mutual obligation for social security recipients becoming a clarion call from government and commentators, the pressures on low-income earners is increasing, and their income levels and health status look like declining.

Agnes Walker from the National Centre for Social and Economic Modelling (NATSEM) has produced a discussion paper aimed at working out the methodologies in measuring the health gap between low-income earners and other Australians. She emphasises the methodological difficulties involved and questions the traditional approaches to analysing this question used by health economists.

She asks if the gap has widened and if the gap reflects shifts in income inequality. The gap is related to relative income levels, not absolute income levels and can be observed in developing countries as well as in developed countries such as Australia.

The study broke family income groups into five ranging from most disadvantaged to least disadvantaged. The incomes were looked at 4 different points across time between 1977 and 1995 to assess how the incomes related to health care use at different points in a lifetime. The overall results support previous studies that show visits to doctors were higher for low-income people. The study shows the biggest health gap between the two lowest income groups and the next group up the income range. The study found that 40% (the two lowest income groups in the study) had similar, quite poor health. Some may find this figure too high but around 30% or Australian families depend on government benefits as the principal source of income, and these families tend to be the largest and the oldest.

The health status worsened over two decades for low -income people. The number of serious short-term conditions experienced increased by 62% for the low-income groups. The gap in the number of serious short-term conditions reported by low-income groups compared to high income Australians increased from 29% in 1983 to 45% in 1995. Part of this may be due to the increased knowledge of health issues and a greater willingness and ability to seek treatment because of increased health education and the advent of Medicare in that time.

The rise in income inequality since the end of the period in Walkers' study might lead to an even greater health gap. In their annual Social Trends publication, the Australian Bureau of Statistics (ABS) chart trends in income inequality of wage and salary earners since 1985. The earnings of full time employees at the lower income levels rose by far less than those in the middle and top end. The earnings at the top rose more than the income of those in the middle. Harding and Richardson from NATSEM in an earlier study found that the social welfare system had acted to prevent an increase in inequality between 1982 and 1993-4. The ABS article (contributed by Peter Saunders from the Social Policy Research Centre at UNSW) looks only at wage and salary earnings.

The story for low-income earners in the private sector is worse, with income for those in the lowest earnings category dropping in real terms between 1985 and 1998. Those in the top earnings category enjoyed an average 20% increase. In the public sector the differential was far smaller, with those at the bottom end receiving a real increase of 8%, and those at the top 6.5%.

The apparent boom in salaries for corporate executives is also reflected in the comparative public private sector earnings. In 1985 in the 99th decile earnings range (ie the very top) public sector salaries were 8% higher than the private sector. In 1998 this was reversed and the private sector earnings were 9% ahead.

The differential between male and female earnings increased over the period as well. The increase in female employment in casual and part time lower paid work was reflected in the decline in the differential between low paid male and female workers.

These statistics show that the poor are getting poorer, relative to "the big end of town" who reward themselves with salary increases and share allocations with each decline in staff levels and company profits. The government refuses to criticise corporate greed, but loudly calls for the poor, who depend on the social security system to maintain their lives, to accept that they have no rights to support unless also accept that they have obligations to work for that welfare. The attacks on welfare recipient sin the cause of budgetary savings are likely to impact directly on income inequality and the health gap.

Pamela Kinnear, in a paper for The Australia Institute (TAI), questions the morality and ethics of Mutual Obligation policies. Here argument is based around the idea of a social contract.

John Rawls, a theorist of justice, argues that individuals have obligations only when two conditions apply - society's institutions must be just, and individuals must have freely accepted the benefits provided by society.

Kinnear questions whether the circumstances that give rise to unemployment and welfare dependency just (no they are not). She also questions whether those who accept benefits have a choice. There are no meaningful alternatives for many of those on benefits such as the profoundly disabled and the aged. The imposition of mutual obligation requirements on the unemployed assumes they have exercised a degree of control over their situation. In a modern economy with massive changes occurring in its structure, there is no real alternative for those who are unemployed.

Kinnear begins by outlining how the mutual obligation trend was begun by the Hawke-Keating governments and the Social Security Review. The Working Nation policy of 1994 was the start of the use of the term reciprocal obligation, with the Jobs Compact at its core. The difference for the ALP was that reciprocal obligation put the onus on the government to provide guaranteed employment.

Whilst the ALP was guilty of seeking headlines by "cracking down on welfare cheats", the Coalition has tightened the noose for the unemployed, chiefly in the same cause, budgetary savings, not to help the needy find work. This appeal to the taxpayer (you have rights as a citizen only if you pay tax it seems, or if you make enough money to be able to afford to avoid tax) to help crack down on "cheats" so your money is not wasted is seen as a vote winner. Hence the ALP in opposition remains quiet about the trends in welfare.

Kinnear argues that other concerns also motivate taxpayers, such as the belief that their should be jobs available for those that want them, and that welfare shouldn't create the poverty traps that it was introduced to avoid. Noel Pearson, much misrepresented, was making this point in his criticism of the welfare system. Kinnear sets out some guidelines for approaching mutual obligation with the principle that policies are based on the ethic of support and compassion. The approach at the moment requires recipients to prove they are not guilty of "bludging". The data on health and income outlined above shows that life on low incomes is not the comfortable free ride that Tony Abbott, the comfortably well off Minister, seems to think it is. The guidelines are:

Policies should assume that income support recipients are honest and deserving citizens, even if a few (as in society generally) abuse the system;
Policies should explicitly acknowledge that the need for support arises from the failure of society generally to provide opportunities for all, rather than the personal failings of the recipients
Policies should acknowledge that those in work have benefited from the disadvantaged situation of the unemployed
Mutuality should be balanced. Governments have an obligation to undertake, on behalf of society, programs and policies designed to overcome structural disadvantage
Consent to any "contract" between income support recipients and the Government can only be assumed where realistic alternatives to income support are widely available and accessible.
Systems of monitoring income support recipients should focus on non-punitive methods of compliance management, and penalties should be an option of last resort.
Certain vulnerable groups should not be singled out for compulsory obligations. Similar standards should be applied to other groups in receipt of government funds and accountability measures should be consistently applied to all those considered to have obligations.

Certainly the last of these could potentially have the biggest impact and cause the biggest outcry from those who support crackdowns on the unemployed, the extent of public support for business welfare being what it is.

One example of a recommendation of the extension of the mutual obligation concept beyond welfare comes from Toyne and Farley in their work on Landcare. The funding for landholders should be conditional it being used for sustainable land use and be independently verifiable. How would the many investment subsidies, tax write-offs, research and development tax concessions far with similar criteria?

Kinnear's paper was published before the McClure Report, the latest review of the welfare system, was finalised, but she was aware of the direction being taken. John Hinkson, in Suffer Those Who Are Surplus, sees it as another plank in the economic rationalisation of all public institutions, and the conversion of all aspects of society to market based solutions.

Hinkson notes that with the cry for those on welfare to have mutual obligations, in most areas of society such obligations are declining. The tax revolt of the rich over the past twenty years is perhaps the great example here.

Social participation should occur, but the McClure report is not asking why people are not participating or why it has become so difficult to do so. Welfare reformers demand that people participate, but they don't connect this to Kinnear's guidelines of requiring the government and society itself to provide the conditions where people can do so.

That people do socially participate and are aware of obligations was illustrated strongly in a previous ABS study on work in Selected Cultural/Leisure Activities 1998-99 (see Workers Online no. 48 http://workers.labor.net.au/48/c_historicalfeature_free.html for a discussion of this). This illustrated the huge amounts of volunteer work that goes on to sustain communities and cultural institutions. The Olympic volunteer effort, as pointed out by the editor a couple of weeks ago, also illustrated this sense of society. Participation is by people who are able to participate because of a surety of their place in the community. The obligations are internalised, not bureaucratically imposed. Mutuality and participation are what make op the social fabric, whilst the blame the individual approach of welfare reformers and other budgetary hawks actively seek to tear that fabric apart.

Material referred to in this article:

Agnes Walker: Measuring the Health Gap between Low Income and Other Australians, 1977 to 1995: Methodological Issues. NATSEM discussion paper no. 50, August 2000 http://www.natsem.canberra.edu.au/

Peter Saunders: Trends in Earnings Distribution; in, Australian Bureau of Statistics: Australian Social Trends 2000, ABS catalogue no. 4102.0

Sue Richardson and Ann Harding: Low Wages and the Distribution of Family Income in Australia. NATSEM discussion paper no. 33, September 1998

Pamela Kinnear: Mutual Obligation: Ethical and Social Implications. The Australia Institute discussion paper no. 32, August 2000 http://www.tai.org.au/

John Hinkson: Suffer Those Who Are Surplus. Arena magazine; no. 49, October/November 2000) http://home.vicnet.net.au/~arena/

Australian Bureau of Statistics (ABS): Work in Selected Cultural/Leisure Activities 1998-1999

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Issue 74 contents

Interview: Politics Italian Style
Italian journalist's union official Rodolfo Falvo talks to Peter Lewis about Italy's Rupert Murdoch and why Italian politics is so crazy.

Unions: A Partnership That Works
Students at Williamstown High in Victoria are benefiting from a creative partnership with TAFE and the Electrical Trades Union. Kevin Peoples reports.

International: Fiji Paymasters Fill Their Own Pockets
The Interim Administration imposed on the people of Fiji, as a result of the coup-makers, have voted themselves a hefty pay increase at the same time as they demand public sector workers take a twelve per cent pay cut.

Politics: USA Campaign 2000 - On the Road
Michael Gadiel reports on the thrills, spills, highs and lows of the US Presidential Election.

Women: Party Girl
'You can take the girl out of the Port, but you can't take the Port out of the girl' - Stephanie Key recounts her life as a feminist in a male bastion, the Transport Workers Union.

Satire: Telstra to issue $50,000 Reith Phonecard
CANBERRA, Monday: Telstra have announced Peter Reith-themed phonecard. The phonecard allows friends and family to make $50,000 worth of phone calls on it before you receive a bill. Plus, you only have to pay the bill in total if there is sufficient public outrage, otherwise the card costs just $950.

Review: Health, Wealth and Mutual Obligations
Mutual obligation for the poor only, increasing income inequality and a widening health gap. Welcome to the 21st century -or is it the 19th?

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