The same thinking applies to the introduction of stakeholder pensions and the reform of disability benefits in Britain. Periods of unemployment in an economy without jobs for life must become an opportunity to attain qualifications and foster personal development. Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. New policies to offer unemployed people jobs and training are a social democratic priority -but we also expect everyone to take up the opportunity offered.
But providing people with the skills and abilities to enter the workforce is not enough.
The tax and benefits systems need to make sure it is in people's interests to work. A streamlined and modernised tax and benefits system is a significant component of the left's active supply-side labour market policy.
We must: - Make work pay for individuals and families. The biggest part of the income must remain in the pockets of those who worked for it. We must explore the scope to lower the burden of non-wage labour costs by environmental taxes. Such decisions contain considerable risks for those who dare to make such a step. We must support those people by managing these risks. The left's supply-side agenda will hasten structural change. But it will also make that change easier to live with and manage. Adapting to change is never easy and the speed of change appears faster than ever before, not least under the impact of new technologies.
Change inevitably destroys some jobs, but it creates others. However, there can be lags between job losses in one sector and the creation of new jobs elsewhere. Whatever the longer-term benefits for economies and living standards, particular industries and communities can experience the costs before the gains. Hence we must focus our efforts on easing localised problems of transition. The dislocating effects of change will be greater the longer they are resisted, but it is no good pretending that they can be wished away.
Adjustment will be the easier, the more labour and product markets are working properly. Barriers to employment in relatively low productivity sectors need to be lowered if employees displaced by the productivity gains that are an inherent feature of structural change are to find jobs elsewhere.
The labour market needs a low-wage sector in order to make low-skill jobs available. The tax and benefits system can replenish low incomes from employment and at the same time save on support payments for the unemployed. Targeted tax cuts for working families and the Fair Work initiative, which reinstated the notion of appropriate minimum wage rates on social justice grounds, clearly marked a return to more familiar territory for Australian social policy.
Also it originated under the Liberal—National coalition government led by John Howard — , underscoring its bipartisan appeal. It described the success of the first two waves in reinvigorating a national economy after significant decline in the s. Thus, the first wave opened up the economy in that decade principally through tariff reductions and financial deregulation, while the second focused on microeconomic reform and was driven through the National Competition Policy framework established in While emphasising the ongoing value of these reforms, the report insisted that participation and productivity had now emerged as the critical drivers of future prosperity.
Chairman John Brumby summarised the work after five years in a way which shows the coalescence of economic and social goals. The key social policy areas related to the early years, schooling, the employment participation of youth and at-risk groups; better health services and systems; and closing the gap on indigenous disadvantage.
It is a policy profile which matches broadly that associated with the Social Investment Package in Europe — relating to the early years, youth, activation and health European Commission, The COAG Reform Council's five-year progress review found that the implementation and outcomes had been a mixed success.
The Birth of Social Democracy
While endorsing the overall policy agenda, it noted that there was some loss of reform momentum as a result of the global financial crises, the changing political composition of member governments and the general challenges created to national reform agendas by Australia's federal system of government. Further, many significant areas of reform relating to human capital have subsequently occurred outside of the COAG framework.
However the policy directions which it has set have provided Australia with the base for that transition from a welfare to a social investment state integral to the inclusive growth approach Smyth and Buchanan, Superannuation policy, for instance, in Australia is arguably social investment in financial capital accumulation i. The minimum-income protection floor for pensioners was raised to 28 per cent of average weekly male earnings, following the Harmer Review of the pensions system, and the Superannuation Guarantee rate was set to increase from 9 per cent in to 12 per cent by , following the Cooper Review , benefiting 8.
The Australian health service was also strengthened under Labor, another key social democratic reform, and Labor introduced DisabilityCare Australia to support people with significant and permanent disability. In many ways, the Labor government was an ambitious welfare-state builder but, in other respects, the Australian system of welfare was arguably attempting to catch up with social welfare systems found in many of the other developed economies.
Importantly, Figure 4 does show a notable rise in the level of public expenditure as Labor strengthened health, education, pensions and disability services.
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In this section, we move to consider in more detail the social security policy framework in Australia and some of the distributional impacts and consequences of Labor's social investment and inclusion strategy. We are particularly interested in social protection and out-of-work benefits; and the long-running trends in poverty and inequality, thus placing Australian trends within a comparative context. Proponents of social investment maintain that a secure welfare safety net of minimum income support is an imperative but, with the focus on productive investment and activation in the Australian context, it is far from self-evident that adequate social protection has been secured during the latest round of social democratic reforms.
Most importantly, unemployment risks themselves are not evenly distributed across society, and risk is increasingly concentrated at the bottom of the socio-economic class structure. Low-skilled workers, for example, face a different and altogether higher risk of unemployment than skilled workers and middle-class professionals. There is good evidence now emerging that suggests investment in human capital may have been accompanied by greater constraints imposed on Australia's system of income support. So, while minimum wage schemes and working tax credits helped to ensure that work paid, wage replacement rates fell in real terms by comparison with average earnings.
In , for example, unemployment benefit replacement rates for an adult stood at 33 per cent of average wages compared to just 23 per cent in — a 10 per cent fall against average earnings. Benefit levels in Australia continue to be amongst the lowest in the Western world. Thus, Australians appear to accept the risk of a relatively low standard of living and poverty if they are unable to work or become unemployed.
Benefit replacement rates, paid in the initial phase of unemployment, are low compared to other advanced economies. For an unemployed adult, benefit replacement rates amount to about one-fifth of average wages; only unemployed adults in the UK receive less Figure 5. Labor continued to develop the workfare-orientated strategy that relies on setting very strong work incentives, largely at the expense of income support allowances — already low by international standards. Benefit conditionality increased under Labor and spending on ALMPs, again relatively low by international standards, remained unchanged over the —13 period.
Investment in the social security system for unemployed workers and vulnerable citizens living on out-of-work benefits was not accorded a priority. Liberal welfare states have long assumed that individuals prefer not to work if minimum wages are undermined by decent social security benefits i. During Labor's term in office, social policy scholars e. Labor, however, was essentially content to preserve Australia's system of redistribution and arguably accepted the political limits and constraints imposed by the low-tax approach to social democracy Deeming, b ; Wilson, In Australia, the burden of tax on waged labour is low by international standards, only Switzerland and New Zealand appear to have lower tax rates than Australia.
Indeed, a major independent review of taxation policy in Henry Review, argued that the country's tax and transfer system, which has long favoured market freedom and individual opportunity, had served Australia well, and the Labor government accepted this verdict. These reforms go to the heart of the question of whether growth in the Australian economy has been inclusive. A strong economy and low levels of unemployment have lifted many but not all boats; a small minority of the Australian population has remained jobless.
Most of the gains from economic growth were highly concentrated at the top end of the income distribution, and as a result we find relative poverty and inequality has risen in recent times. Figure 8 , for example, shows widening inequality since the mids, increasing by 1. Income inequality in the advanced economies, mids to the late s Gini coefficients Note: Arrows indicate the change and direction of income inequality. Poverty in Australia has also increased since the mids, by one percentage point. Over a fifth 22 per cent of Australians now live with disposable household income below the 60 per cent poverty threshold.
As shown in Figure 9 , this puts Australia above most of the other advanced economies on this measure of hardship. And while some of the latest evidence on social exclusion in Australia points to a decline in levels of exclusion overall as a result of Labor's policies, nevertheless prospects for some of Australia's most excluded citizens did not improve over the —13 period Saunders, So, while the size of the group in this position appears to have shrunk, its distance from the mainstream has undoubtedly grown.
The Rebirth of Social Democracy
The unemployment rate for people of Aboriginal and Torres Strait Islander origin in Australia, at 20 per cent, is over three times the national average. Indigenous Australians tend to live in areas of socio-economic disadvantage and experience a gap in life expectancy at birth estimated to be Less than one-third of young Indigenous Australians aged between seventeen and eighteen years and only about half of young people from low socio-economic backgrounds obtain the school leaving qualification Whiteford, Youth unemployment continues to be a concern and gender inequalities stubbornly persist in Australian society.
From , working parents were given the right to request flexible work arrangements and working times. State policy clearly matters but state-level provision is shaped in important ways at the organisational level and within the workplace. Part-time work and fixed-term contracts help to explain the inferior labour market position of women, who are disproportionately responsible for care work Craig and Mullan, The re-engineering of welfare policy in the name of social investment by the Labor government arguably struggled to tackle some of the deeply entrenched gender, cultural and ethnic inequalities.
Persistent poverty, multiple and entrenched social disadvantage and growing social inequality continue to trouble Australian society Leigh, In the European context, social policy scholars warn that the shifting emphasis of social policy towards social investment in human capital policies and labour market integration may well come at the expense of social protection and inclusion for all. Certainly there is growing evidence for this in Europe Cantillon and Van Lancker, ; Van Kersbergen and Hemerijck, , and this must be the concern within the Australian context.
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Social security against the adverse effects of the labour market is still of value to society and the citizens who are protected by social policy. Even after allowing for difficulties in harmonising different accounting systems, the conclusion is inevitable that Australia stands near the bottom of the list of relative social expenditures Australian Government, : 81, emphasis added. Even after allowing for difficulties in harmonising international data, as the government suggests, it is clear Australia's social investment strategy looks different from many other comparable European countries in a number of important respects.
Investment in ALMPs remains low, as do social expenditure levels more generally, although health and education have benefited from additional investment. Out-of-work benefits, already low by international standards, lost value against earnings. In this context, Labor's legacy appears to have been the recognition that greater investment was needed, but the accompanying revenue-raising strategy was out of reach.
In a number of important respects, however, the Australian approach and that of other liberal market economies differs from the social investment strategies being pursed in some European contexts Morel et al. Under Labor, social investment was orientated towards meeting their needs and protecting their living standards — although greater efforts are required to tackle gender inequalities in the labour market and caring roles in the home. Here we might also wish to draw attention to the continued role of politics in the policy process, determining social policy outcomes.
Under the Labor government, social protection lost ground to rising living standards in the working population, and social inequality has in many respects become more visible. At the same time, we also find the Nordic welfare states in the midst of transformation Kananen, We thank the Scientific Committee for their invitation and insightful comments on our work. We are also grateful to the JSP Editors and two reviewers for their critical comments; the usual caveats apply.
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Out-of-work benefits help to support livelihoods and aid workers in their search for new employment. National Center for Biotechnology Information , U. Journal of Social Policy. Cambridge University Press. J Soc Policy. Author information Copyright and License information Disclaimer. Open in a separate window. Figure 1. Australia's re turn to social investment If the oil crises of the s helped to usher in the neoliberal chapter in Australian politics, then the global financial crisis helped to instigate a return to social investment Saunders and Deeming, Figure 2.
TABLE 1. Figure 3. Figure 4. Social investment and equality In this section, we move to consider in more detail the social security policy framework in Australia and some of the distributional impacts and consequences of Labor's social investment and inclusion strategy. Figure 5. Figure 6. Figure 7. Figure 8. Figure 9. Belchamber G. Blaxland M. Bonoli G. Brumby J. Burke G.
Cantillon B. Craig L. Deeming C. Esping-Andersen G. Giddens A. Hall P. Hemerijck A. Jenson J. Kananen J. Kvist J.