Comment by Allan McDonald
The aftershock of the June-July employment statistics highlights the lack of vision and ideological purpose in the political scene in Australia today.
Social objectives have given way to economic objectives. Economic growth has become the objective without concern as to how people share in this growth.
What is required is a social objective which embraces both financial security and economic compatibility. There must be financial security for all, and there must be compatibility with the changing employment patterns of a technological age, with the operation of a free and competitive labour market and with economic policies driven by growth or by sustainability.
A support income system — a universal system of support incomes, free of tax and free of means test — will help achieve this objective. It will provide income security for all as a process of distribution rather than redistribution, and the disincentives to work and to save and the poverty traps which are features of the present system of means-tested benefits will no longer exist.
This principle of providing a support income to all irrespective of their need or circumstances will no doubt evoke some concern. Why should we move away from the principle of "helping those in need"? Why should we provide an income for the rich? How can we afford it?
First, and foremost, it is only by removing the means test and providing a support income to all that we can ensure the income support will not create any disincentive to work. Research confirms that it is not the level of income support which creates this disincentive, but rather the
withdrawal of income support as private income increases.
Income support creates a disincentive to work only when it is seen as a choice between one income and another. With a universal support income system, there is not a choice of one income or the other, but rather an option to add to the support income through employment.
Second, the basic principle of a support income system — that the support incomes will be provided as replacement for part of existing incomes — will ensure the support incomes will not be provided as additional incomes, whether for the rich or the poor (except for the very poor with no private or transfer income).
Third, a universal support income system, based on the principle of the support incomes replacing part of existing incomes, can be introduced without imposing high rates of personal income tax. A recent study confirms that such a proposal, providing a flat rate of support incomes to all citizens with the adult rate (age 18 and over) equal to the basic pension rate for a single person, is financially viable.
The principle of the support incomes being a replacement for part of existing incomes is unique to this proposal. This principle enables a truly universal system to be introduced without the high marginal tax rates which create poverty traps and disincentives to work.
A universal system will ensure that all people have the financial security of an income sufficient to provide a basic standard of living, with an option to add to this income through personal endeavour. Whether they exercise this option or not will have no bearing on the cost to the community. The existing concern that the unemployed should be actively looking for work, which stems from the cost of their benefit rather than from any so-
called "work ethic", will cease to be relevant. With a universal system, there will be a
strong incentive to work.
There are many reasons why, in this technological age, a support income system should be considered as a replacement for the existing social security system, which is based on targeting and means testing. Some of the most significant reasons relate to employment and unemployment.
Throughout 1970-1990 the only employment growth in real terms was in part-time employment, and this trend is expected to continue. Future growth in full-time employment will be limited, and any overall growth in employment will therefore depend upon the willingness and financial ability of the labour force to accept further part-time employment.
The present system of means-tested unemployment benefits acts as a real disincentive to accept part-time employment. The only political response to the current high level of unemployment open to government must therefore be the creation of full-
time jobs — a scenario that can only be of short-term relief, with limited scope, and at enormous expense.
A universal support income system, on the other hand, will provide the financial security necessary for wider acceptance of part-time employment. It must be accepted that full employment in the traditional sense of full-time employment is no longer achievable. But the objective of "work for all" — i.e. some form of meaningful employment for all who are able and willing to work — is achievable, provided there is some form of income security which will not create any disincentive to work.
Lower wage rates have been suggested as a means of creating more jobs. In rational economic terms this may be so, provided having a job irrespective of income is the objective. Working for a living has been the traditional objective. Without the security of a universal support income system, working for less than a living will, for many, be
the result of a completely deregulated labour market.
Lower wage rates, whether as a result of part-time employment or of wage rates set by the market, appear to be inevitable for a growing number of workers. There is a need for some form of financial security to ensure that all people in employment can enjoy a reasonable standard of living.
There are many other implications which favour the introduction of a support income system — for example, the ability to plan for the future, the ability to plan for periods of training and retraining and the development of special skills, the ability to undertake self-employment activities, the freedom from the stigma and financial controls which are a feature of means-
tested benefits, the freedom from being classified as "unemployed" or "pensioner".
One of the most significant features of a universal support income system is the principle of sharing — sharing national income, and sharing national employment. It is, perhaps, a means of blending the materialistic culture of the nation with the sharing and caring culture of the indigenous people.
The existing system divides; a universal system unifies. The benefits of a universal system are extensive and widespread. What is needed is acceptance that a support income system can be financially viable, thus permitting an objective study of the concept.
[Allan McDonald is convener of OASIS — Australia (Organisation Advocating Support Income Studies).]