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Inconvenient advice for a business-friendly prime minister


One of Kevin Rudd's key points of difference with Julia Gillard lies in his determination to project a business-friendly image for himself and the ALP, which may have something to do with his decision to dump former parliamentary secretary Andrew Leigh from the front bench. Although Leigh was a Gillard backer, he is a former ANU economist who is regarded as Australia's leading inequality expert and unsympathetic to the demands of big business on government.

Coincidentally he has just published a book targeting income inequality, Battlers and Billionaires: The Story of Inequality in Australia. In media interviews during the week, he pointed out that since the 1970s, 'we've seen the top 1 per cent double, we've seen about $400 billion shifted from the bottom 99 per cent to the top 1 per cent. CEO salaries have gone from an average of $1 million to $3 million in the top hundred firms, and we've seen stratospheric increase in consumption in the things the super-rich enjoy, like waterfront homes, Porches, Maseratis, even cocaine.'

When John Howard introduced WorkChoices in 2005, he argued that a prosperous business sector would produce more jobs and benefits for ordinary Australians. Leigh says that while inequality does boost economic growth and the nation's GDP, the increased wealth does not trickle down to those at the bottom to any significant extent. His view is that inequality is socially divisive and demands serious policy attention. 

Increasingly it is recognised as a public health issue, and that it demands a political response. Epidemiologist Robert Douglas ponders the political implications of our comparatively high levels of mental disorder, suicide, lack of trust, mortality, communal violence and teenage pregnancy. 'Could the preoccupation of the Coalition with deregulation of labour markets and market solutions make matters worse? And could the Australian Labor Party, with its traditional concern for equity and redistribution, make things better?'

Other epidemiologists have contributed to the debate, most notably Richard Wilkinson and Kate Pickett in their controversial 2009 popular academic work The Spirit Level: Why More Equal Societies Almost Always Do Better, which was based on a study of the top and bottom 20 per cent of income earners in 21 rich developed market economies. They found that 'bigger income differences lead to bigger social distances up and down the status hierarchy, increasing feelings of superiority and inferiority and adding to status competition and insecurity. Some of the causal links are known: the effects of chronic stress on the immune and cardiovascular system.'

While Leigh has some doubts about such arguments, he is certain 'we need a government that has means-tested social security, that invests disproportionately in improving the education of the most disadvantaged, and which rigorously tests social programs ... using randomised trials, rather than just say-so and ideology'.

Possibly inconvenient advice for a business-friendly prime minister.

Michael MullinsMichael Mullins is editor of Eureka Street.


Topic tags: Michael Mullins, business, inequality, Andrew Lee, WorkChoices, Kevin Rudd



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Existing comments

Andrew Leigh is too precious for words. While bemoaning the inequities in society he feeds off the public purse while actively discriminating against ex-Servicemen through his support of the gross inequality between Service and Parliamentary pensions. I'll listen to him when he does it tough.

Leo Farrelly | 08 July 2013  

It is welcome and overdue to see a public identification by Mr Leigh of the need for means-tested social security. In Australia. We have staring us in the face the most poignant example of why this need for means testing is so necessary. In the post war years Australia was universally recognised as having the best health care delivery system in the world. In all states except Q'land hospital care was means tested. There was a glaring difference in standards of facilities in Q'land compared with the other states and in the length of waiting times for treatment in public hospitals. The implementation of Medibank (now Medicare) abolished means testing which allowed the rich entitlement to free hospital care while subsidising free care to all and sundry, rich and poor, through government paid bulk billing of "private" medical fees. Now the poor are denied access, hospitals with nursing and medical student education are appallingly down-graded. while the private sector grows richer. The rich can access care virtually on demand in private hospitals while the poor suffer on public hospital waiting lists and can't afford to pay for some life saving pharmacuetical treatments. Means testing is essential to restoring equitable healty care in this country and likely to redirect all social benefits towards those who genuinely need it -- not to the employed rich kids who expect government to meet their responsibilities to such things as child care , health etc.

john frawley | 08 July 2013  

Your excellent article should be read in concert with "Rein rakes it in from U.K. Tories" subtitled "Hard-nosed business is nice work for a Labor Prime Minister's wife" by Kevin Morgan in the Commentary section p. 10 of today's Australian (8/07/2013). There seems to be a certain ambiguity in our Labor PM's wife having, quite legitimately business wise, initially made her fortune from the privatisation of the former Commonwealth Employment Service's role in placing unemployed job seekers and then exporting these techniques, which are not immune to criticism and contract performance evaluation, to the UK, where the government is actually doing just that: evaluating their effectiveness against contract targets. Yes, Ms Rein is an independent woman and the PM has no role in the Ingeus group's activities here or abroad, but it does raise questions as to commitment to what many in the Labor Party might consider essential public services.

Edward F | 08 July 2013  

This article, purportedly about whether or not a government is "business-friendly", proceeds to a discussion of pay inequality. If that is how the issue is framed in policy circles, no wonder we're getting nowhere. In return for large cuts in company tax rates, here are a few reforms that should be implemented. 1) Post-secondary education and training to be funded, not from HECS and general revenue, but from qualification-dependent payroll taxes. To prevent companies simply importing their trained personnel from overseas, qualifications obtained overseas are included in the payroll tax. 2) Entire immigration and unemployment benefit budgets to be funded from turnover taxes. This will reaffirm the link between Australian wages and Australian consumption. 3) If any company pays an individual (eg its CEO) more than 10, say, times the average of all the salaries that company pays, then it pays that CEO alary out of after-tax profit ie out of profit-share with shareholders. While we're at it, here's another reform that would increase public confidence in our elected leaders: Abolish independent renumeration tribunals for MPs, and have their salaries and entitlements determined by Fair Work Australia.

David Arthur | 12 July 2013  

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