catallaxy files

catallaxy in technical exile

Saunders vs Saunders (or is it Santa vs Scrooge?)

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No, not a divorce, just a difference of opinion about welfare policy. Peter Saunders of the Centre for Independent Studies has reviewed “The Poverty Wars” by Peter Saunders of the Social Policy Research Centre at the Uni of NSW.

The review is in the current edition of Policy and the little elves at CIS have put the whole article on line for the benefit of the poor and unfortunate people who can’t afford a subscription. A strangely munificent gesture in view of the mean and nasty disposition that is attributed to the elves by some of their critics.

The ‘war’ to which the book refers concerns the definition and measurement of poverty. One side in this war believes that poverty is a major problem in Australia, that it is getting worse under this government, and that some serious political intervention is needed if wrongs are to be righted. They want more generous welfare, higher taxes, extensive government job creation schemes and a lot more funding for academic research. According to this book, they are the good guys, and Saunders is one of them.

Against them stand the bad guys. They claim that the poverty statistics have been exaggerated, that the data are unreliable and that rich and poor alike have been gaining from the country’s rising prosperity. Saunders thinks these people are dangerous, and he warns that unless they are defeated, the poor will suffer and the ‘social fabric’ of the country will fray. He is worried that the bad guys are winning, and he offers his book as the start of a fight-back.

The nasty elves and trolls at the CIS are led by “Scrooge” Saunders. The fairies, pixies and other (possibly) well meaning forces of the welfare lobby are represented by “Santa” Saunders. Santa has stolen some lines from the eminent historian Stuart McIntyre; the nasty elves are like the conservative historians, – their arguments are sinister and they fight dirty, they replace reasoned argument with abuse. Etc.

The ‘war’ in question dates back to 2001 when the Smith Family commissioned NATSEM to produce a report on poverty in Australia. The report claimed that poverty was worsening despite economic growth and that more than 1 in 8 Australians was poor. It received extensive media coverage and attracted widespread assent from the academic community, yet its central claims were debatable. In the absence of critical scrutiny from anywhere else, the CIS took it upon itself to examine these claims in detail, and it found weaknesses in both the method of measuring poverty and the reliability of the income data.

The first major problem is that setting the poverty line as a percentage of mean income means that it is perpetually upwardly mobile, thus distorting the prevalence of real as opposed to relative hardship, and incidentally keeping the poverty industry in business for ever.

The second major problem is the dramatic difference between the reported income and spending of low-income households. This phenomenon turned up in the US, where households reporting virtually zero income (of any kind) reported healthy levels of spending and owned cars, telephones, TV plus other mod cons and even the houses they lived in. The same picture emerged in Australia and the nasty elves suggested that this invalidated the major claims of the welfare lobby.

A substantial proportion of these poor households deny they receive any income at all – no wages, no welfare benefits, no dividends or interest or rents or annuities, nothing. Some say they receive ‘negative incomes’ (i.e. they end up each week with less than they started with). And even those who say they get some money often give a figure well below what the welfare state would guarantee them if they bothered to step into any Centrelink office. In short, the reported incomes of those at the lower end of the ABS distribution are in many cases improbably low. Nor do these reported incomes square with what people say they spend. The ABS has found that households in the bottom 10% of reported incomes say they are spending an average of 2.3 times more than they are receiving.

To its credit, the Smith Family did not try to shrug off or shout down the CIS criticisms. Instead, it approached Peter Saunders of the SPRC to prepare a response on its behalf. This he did, denouncing the CIS critique as erroneous and muddled, and reassuring the social policy community that there was nothing demonstrably wrong with the income data they had all been using.

Then the Australian Bureau of Statistics released a statement that the income data at the lower end were so unreliable that the Bureau itself would henceforth be ignoring the responses of the bottom 10% when analysing its own income distribution data. The Bureau went on to express its ‘concerns with the fact that the extremely low incomes (close to nil and sometimes negative) recorded for some households in this group do not accurately reflect their living standards’, and it warned that including data on the lowest 10% of recorded incomes in its analysis would ‘substantially lower the average income values’ and thereby give ‘a misleading impression of the economic wellbeing of the most disadvantaged households’.

That would appear to signal game, set and match to “Scrooge” Saunders and the nasty elves but Santa Saunders has struck back with a book to retrieve the situation. Strangely, in 150 pages he only finds two sentences to say about the problem of the ABS data, which is sort of understandable if the agenda is more important than the evidence that is required to sustain it.

Perhaps the next front in the Poverty Wars will open up when some leaders in the welfare business can be found, like Noel Pearson, who care about the dignity of their people as well as the flow of funds. They will realise that the minimum wage system condemns the slow, the untrained and the inexperienced to lifelong idleness, with all the decay of morale and sense of purpose and social integration that follows, as night follows day. When that time comes the war of words will get really interesting and I hope we all live long enough to see it.


Written by Admin

December 19, 2005 at 3:36 pm

Posted in Uncategorized

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