Welcome to Eureka Street

back to site

Abbott and Australia's new poor

'Australia's new poor' by Chris JohnstonIn a recent interview on ABC radios's AM program Opposition Leader Tony Abbott said 'low and middle income families with kids are Australia's new poor'.

Abbott is half right. He is right in regard to low income families who are dependent on a safety net wage for their standard of living. They are newly poor because of changes that have occurred in the Australian wages system over the past decade or so; a period which should have delivered better outcomes.

One in six Australian workers is paid no more than the prescribed minimum safety net rate of pay set for their work classification. These workers haven't the capacity to bargain for higher rates and are typically non-union members.

From December 2000 to December 2009, safety net wages declined relative to community wages. In that time Average Weekly Ordinary Time Earnings (AWOTE) increased by 53.2 per cent, to $1,223.30 per week, and the Consumer Price Index (CPI) increased by 29.1 per cent.

Yet over the same period safety net workers who are now paid more than $645.00 had real wage cuts and all safety net workers fell behind average wages. Workers on the Federal Minimum Wage (FMW), now at $543.78 per week, received an increase of 35.8 per cent, and those now on $835.00 per week only received 19.3 per cent.

The position of low income safety net-dependent families has declined relative to better paid working families even after taking into account income tax cuts and increases in family payments.

The disposable income of a single breadwinner FMW-dependent family of four (including two children of primary school age) has increased by 47.6 per cent to $742.75 per week, including family payments of $245.58. A similar family which is dependent on a wage of $645.00 per week has had an increase of 44.7 per cent.

However, the AWOTE-dependent family has had an increase of 62.3 per cent in its disposable income and is now at $1,117.78 per week. Family payments have been pushed into the middle income groups. The loss of safety net-dependent families relative to the AWOTE middle income family has varied; for example, $74.22 per week at the FMW and $103.32 at a wage of $645.00 per week. This shows that Abbott's claim is half wrong.

The standard of living of low income families has even fallen behind that of pensioners. Following the recent pension review, the aged couple pension is now $528.50 per week. The costs of children, plus the costs of working, put our FMW-dependent working family on a lower standard of living than pensioners. Parents cannot raise and educate children on $742.75 per week. Family payments fall well short of providing for the needs of dependants.

Abbott may wish to move to a 'single person' wage, with the Commonwealth supporting families through family payments, but the Commonwealth's budgetary position won't permit any significant progress in this direction. Neither side of politics will commit to the further transfer of family costs to the public purse.

In the AM interview Abbott lamented that 'you can't give what you haven't got' and that his priority is to 'get the deficit and the debt under control'. This cannot be an excuse to do nothing at all. We are in this situation because of the failure of wages policies to protect low paid workers and their families.

The heavy lifting for low paid workers and their families has to be done by the wages system. It has to return to a fairer relationship between safety net wages and community wage levels and it must take into account the needs of workers with family responsibilities.

This will require that major players in the wage-setting debate acknowledge that the safety net wages system has failed low income workers and their families. Abbott has to accept that this largely occurred under the Howard Government.

The Rudd Government must do more: its submissions to this year's national wage review failed to address the needs of low income working families and failed to give any sense of direction as to how the new wages system might respond to those needs.

Fair Work Australia's decision last week to award an increase of $26 per week across all classifications from 1 July 2010 was modest given that there was a freeze of safety net wages in 2009. Despite this increase, the real value of safety net wages has declined since the last decision to increase safety net wages, in July 2008.

In July 2010, the National Minimum Wage (the FMW's new name) will have risen by less than the relevant published CPI increases: 4.8 per cent compared to 5.4 per cent. It is worse for those on higher classifications. A worker on $700.00 per week, for example, will only receive a 3.7 per cent increase, which is a real wage cut of $11.80 per week. By comparison, over a similar period AWOTE has increased by 11.9 per cent, well ahead of the CPI and despite the Global Financial Crisis.

We have a systemic failure which ensures that each year brings a widening gap between safety net wages and community wage levels.

If Abbott concentrates on what is demonstrably right in his AM interview and proposes a fairer wages strategy for low income working families, he will have moved beyond the rhetoric about working families and promised some hope for the working families he rightly calls the 'new poor'.

Brian LawrenceBrian Lawrence is Chairman of the Australian Catholic Council for Employment Relations. This article draws on material in the Council's submissions to Fair Work Australia's Annual Wage Review 2010.

Topic tags: Brian Lawrence, Tony Abbott, New Poor, Average Weekly Ordinary Time Earnings, Federal Minimum Wage



submit a comment

Existing comments

The whole financial structure is wrong.The Government has no need to tax people, its wealth lying in the people and the country's resources. Stop all usurious use of money. Bring in Abe Lincoln's "greenback". Stop the practice of using "interest rates" as a weapon to control the economy and let the government use it's ability to print money and issue coinage and we would see a tremendous lift in the standard of living for all people in Australia.

In my own family, we are much worse off now compared to the Howard years of government. We were able to purchase a home during the time of the former government. Now we are struggling to pay the mortgage and to put food on the table for all seven of use, after paying for the utilities we use, car registrations etc. There are many people in our town who are struggling more now than ever before.

Trent | 07 June 2010  

I would not trust anything that comes out of Abbott's mouth. He was a Senior Minister in the Howard government that was hell-bent in destroying workers wages and conditions under their 19th century so-called work choices. Yes! Labor Governments of the 1980s-1990s should be blamed for the reduction in wages for low and middle income wage earners.

Terry Steve | 07 June 2010  

Money used to based on the Gold standard, and actually meant something.

Now, it is based on debt, and is Fiat money - based on nothing.

We need desperately to get our money system under control. And the corporations.

Here are some thoughts about Money: http://www.hourmoney.org/

And 26 Changes in Company Law: http://www.citizenworks.org/issues/latest_news/hinkley.php

Clement Clarke | 07 June 2010  

We provide c 80% care for our 3 Grandsons ages 10,6,& 3.We have done this for 3 years since our daughter their Mother died in a car crash 3 years ago. The boys' Father works, continues to pay his mortgage, pays Catholic school fees, gives my wife and me a small fortnightly sum ($250) to assist our care of the boys etc. As age pensioners with a small monthly combined super income $400 p/mth our money resources are stretched greatly! We have no Government allowances as carers,and the Family Benefit is quite properly received by the boys' father. Costs are rising at a significant rate and it's as much as I can do to maintain our car -now chiefly for the boys' benefit. Is any Government prepared to assist cases like ours and others who have much less?! I've not heard of any intended consideration in this area from either Messrs Rudd or Abbott.This is the FIRST time I've 'aired' my views on this topic. There must be others out there similarly placed or worse!

Fr Warren L Wade | 07 June 2010  

Remark my words, tony abbott will do nothing for this country and its people. Voting for abbott is committing suicide.

Roberto Monterrosa | 07 June 2010  

I agree with Terry Steve (07-Jun-2010). Under Howard and Abbot, especially after the introduction of the dreaded GST, we went backward at a rates of knots that we had never before experienced. We had to drop out of our private health fund, were nervous each time we shopped even for basic needs: never again any “treats” like plain biscuits, certainly no ice cream or cake, even for birthdays; basic clothing well past its used-by date; even denying ourselves heating in winter; bills soaring anyway. I look back with horror. We had never been worse off than under the Howard years.

No. Abbott is still not a man of his word; with no real commitment whatever to social justice - just to the sound of his own voice.

m.stewart | 08 June 2010  

I was employed full time as a parish worker a few years ago in a rural area. Part of the price of working in the position was a drop from approx $86,000 before Tax Salary as a teacher to $47,500 before Tax in that position plus the added cost of paying for my Church owned accomodation. Fortunately my wife, also a teacher was still on a good income but still living in the family home 2.700 km away. Our children were basically self supporting so I could afford the drop in income- at least temporally. It was quite an eye opener as I soon learnt to economise.

I simply do not know how people on a similar income with youg kids and a mortgage or expensive rent could survive on my reduced income as an every day fact of life.

I am back home as the costs of seperation in the name of a 'vocation' were simply far too great!
The answer is not using the Government to cover for the inability of business to pay their work force properly, If a business can not afford to pay their workers a decent wage then they should not be in business!

Gavin O'Brien | 09 June 2010  

I really feel that EStreet is far too soft on Tony Abbott. His record is there for all to see during the Howard years - it just comes to mind now, his response to the mess our dental system got into through the previous govt's changes, and the gross inequities that have come about. Abbot said that if people can't afford a dentist then they should get private health insurance...

Shane Keher | 11 June 2010  

Yes, Australia is still Terra Nullus, the land of nothing, no decent wages, no decent jobs and now no more decent housing!

The apathetic silence of the middle classes in this country is deafening.No one has the guts to admit this country is going the same way of the Philippines and Latin America.

MARTY | 27 June 2010  

Similar Articles

Football racism evokes ugly past

  • Myrna Tonkinson
  • 17 June 2010

Timana Tahu left the NSW State of Origin team after racist comments by assistant coach Andrew Johns. AFL heavyweight Mal Brown described Aboriginal players as cannibals. Why is it an insult to call someone black?


Rudd's great big mining myth

  • John Ralph
  • 14 June 2010

The Government's theoretical model does not stand up to scrutiny in the real world. Collecting higher taxes from the mining industry to disburse for other worthwhile purposes may be perceived as contributing to the 'common good'. In fact, the reverse could be true.