March 2015

The dole is a poverty payment. People who rely on the Newstart allowance from Centrelink are living in poverty.

The Poverty Line

A poverty line is a tool for calculating whether a person is or is not living in poverty. Broadly, the two most common ways are to calculate a percentage of average income (a relative measure), or the amount of money required to buy a basket of goods (an absolute measure)¹.

A relative measure of poverty assumes that poverty is tied to income inequality, and that having much less than everyone else is poverty. With this understanding of poverty, the amount of material resources that a person ‘in poverty’ might have access to varies according to the level of wealth in a given society. This can seem counter intuitive to people operating with a ‘common sense’ understanding of poverty, an understanding that sees poverty as a state of absolute material deprivation. The alternative is an ‘absolute’ measure, the most common of these used in Australia is the so-called Henderson poverty line.

The [Henderson] poverty lines are based on a benchmark income of $62.70 for the December quarter 1973 established by the Henderson poverty inquiry. The benchmark income was the disposable income required to support the basic needs of a family of two adults and two dependant children.

Melbourne Institute of Applied Economic Research, 2014, Poverty Lines Australia, September 2014.

There are several weaknesses with an ‘absolute’ approach such as the Henderson poverty line. First, it assumes the level of material goods required to sustain a person or family unit is unchanging and constant. In reality, our material existence under capitalism is constantly being transformed. What would Professor Ronald Henderson have made of ‘one laptop per child’ or the internet as a human right in 1973?

This points to the second major problem, an absolute measure of poverty is grounded in the values and ideas of the person or institution that decides on the associated basket of goods. Is a person ‘in poverty’ if they cannot afford healthcare, education, contraception, and so on? I suspect most Australians would say yes, but I doubt it is a view shared by our government.

I’ve gone off on a tangent.

Whether we calculate an absolute poverty line like Henderson, or a relative poverty line such as ‘less than 50% of median income’, the dole falls well short.

The most recent calculation of the Henderson poverty line estimates that a single person requires at least $342.14 a week ², or $17,791.28 a year, to get by. Assuming they don’t need to pay for housing. It’s crazy, but most calculations of a poverty line bracket out housing³.

The most common relative measure of the poverty line is ‘50% of median income’⁴. The Australian Council of Social Services’ (ACOSS) regular report on Poverty in Australia calculates a poverty line as 50% of median disposable income (that is income after tax, after bracketing out housing)⁵. Using this methodology ACOSS’ 2014 report calculates a poverty line of $400.30 a week for a single adult.

To get an idea of how conservative these measures of poverty are, it’s worth comparing the various poverty line figures to crude average earnings. In November 2014 the average adult weekly full time wage was $1,476.30 a week (before tax), or $76,767.60 a year⁶. Half this amount would be $738.15 a week.

So how does the dole stack up? The current full rate of the Newstart Allowance pays unemployed workers a miserly $257.30 a week, or $13,40.60 a year.

The dole is $84.84 a week below the Henderson poverty line, $143.00 a week below the ACOSS relative measure of poverty and $477.85 a week below 50% average wage. No matter which way you slice the numbers, the dole is well below the poverty line.

The extent to which the dole in Australia is below the poverty line has been progressively increasing in Australia. Superficial increases in the dole are tied to the Consumer Price Index:

“Unemployment payments fell from 46 per cent of median household income in 1996 – a little below a conventional relative poverty line – to 36 per cent in 2009-10, a long way below such a poverty line,”
…
Whereas Newstart and the age, disability and carers pensions were once roughly similar, different methods of indexation adopted in 1997 mean the gap is now more than $200 a fortnight
…
Newstart increases in line with the consumer price index while pension payments increase with average male wages. The Centrelink website says this means Newstart grows “in line with increases to the cost of living” but the cost of living for beneficiaries has been climbing faster than the CPI.

“Since 1998, the special analytical price index for beneficiaries has risen by about 5 per cent more than the CPI, meaning using this measure their real incomes have fallen,” Professor Whiteford says in the report.

The dole is configured to continue sliding deeper and deeper into poverty territory.

Unemployment

The dominant ideas around the dole and unemployment justify welfare poverty on the basis that those on poverty payments have only themselves to blame. The unemployed worker is being punished for failing to “get a job”, something we’re told they could readily achieve if only they tried hard enough.

It is of course, bullshit.

There are at least 11 people seeking every advertised job vacancy in Australia. 782,000 people are officially recognized as unemployed, but the real rate of unemployment is much higher. A further 875,000 people are underemployed, they work at least one hour a week but need more. At least 1.8 million people are applying for the estimated 150,000 job vacancies in Australia at present.

This unemployment and under-employment is no accident. It is created by capitalism, and serves it’s ends:

It is the absolute interest of every capitalist to press a given quantity of labour out of a smaller, rather than a greater number of labourers, if the cost is about the same. … a surplus labouring population is a necessary product of accumulation or of the development of wealth on a capitalist basis, this surplus population becomes … a condition of existence of the capitalist mode of production. It forms a disposable industrial reserve army, that belongs to capital … it creates, for the changing needs of the self-expansion of capital, a mass of human material always ready for exploitation …

The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour-army; during the periods of over-production and paroxysm, it holds its pretensions in check.

Marx, 1867, ‘Progressive Production of a Relative surplus population or Industrial Reserve Army‘, Capital Vol 1.

Capitalism makes use of unemployment to drive down wages and discipline employed workers. You better not play up because there are eleven more where you came from… The dole is necessary in this situation to maintain unemployment, the crude fact is that the ‘reserve army of labour’ would quickly starve to death if there were no form of social support available.

By keeping levels of social support at miserably low levels, capital and the state maintain the coercive power of unemployment. By keeping the unemployed in poverty, unemployed workers can be forced back into whatever work is offered, whenever capital needs it, at whatever wages are on offer.

Even the most ambitious plans to end welfare poverty that are discussed publicly in Australia do not undermine this basic logic. The Greens’ Sarah Hanson-Young is arguing for a $50 per week increase in the dole, a figure that would still leave the dole below the Henderson poverty line, and which would do nothing to solve the indexation trap. To give The Greens some credit, their position is at least significantly better than the government’s plans to drive pensioners into the same CPI trap as dole claimants.

Why I say ‘Double the Dole!’

The Australian Unemployed Workers Union has adopted a demand to increase all welfare payments to the Henderson poverty line, that is to $400 per week. It is one thing to make an argument that no one should live below the poverty line, but there are real reasons we should argue and fight for welfare payments well above poverty levels.

Earlier this month the union movement called a national day of action against the government’s attacks on “our living standards”. I and some friends went along around a banner that read “Double the Dole”, unfortunately many at that rally did not see defending the welfare system as defending “our living standards”. It is unfortunate, because doubling the dole (and indexing welfare payments to wages) would benefit every worker in Australia.

At it’s present poverty levels, the dole systematically undermines the pay and conditions of all workers. When a person can’t make ends meet on a poverty payment, they are left with little option but to take whatever is on offer, even if that is a dangerous cash-in-hand job for $3 an hour. A liveable dole, a dole payment that did not result in a precarious miserable existence, would act as a floor on wages and would limit the ability of bosses to engage in this kind of hyper-exploitation.

A liveable dole would rob bosses of one of their key forms of power. The power to hire and fire is terrifying to workers because unemployment can mean homelessness, hunger, relationship breakdown, and all manner of humiliation and misery. If we fight to remove the misery and humiliation associated with the dole the threat of being fired would be less potent and we would improve the position of every worker.

Demanding an end to poverty level welfare payments should not simply be a moral argument about children in poverty or “the unfortunate”, it should be a passionate argument for justice and solidarity. Unemployment is created by capitalism and benefits the bosses. We can and should demand that capitalism pay, and pay reasonably, for the labour it has caused to stand idle.