Why raising Newstart is more important than you think

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As we move into an automated future, it becomes increasingly important to help those affected by job loss (Images via Wikimedia Commons/YouTube)

Factors such as wage stagnation and the automation of the manufacturing sector have given need for a raise in the Newstart allowance, writes Jemma Nott.

THE MOVEMENT to raise the Newstart wage has been growing in popularity over the past few years and, of course, that’s thanks in part to the hardworking and dedicated activists bringing it to the fore. But also in part, because pivotal players in the current economy are foreseeing the dangers of not doing so, like ACOSS and the Business Council of Australia. For workers, whether they agree with raising Newstart or not, the possibility that it might have more far-reaching effects likely rarely crosses their mind.

However, this narrative will become increasingly more popular alongside the changing face of the economy. The first glimpse into this that we received was the announcement last month of a per capita recession, which, if sustained, promises to bring on a general recession. Latest estimates show that the housing market is dropping and household debt is currently at 200% of income and we know that the estimated falls will only continue.

Currently, the official unemployment rate is at 5.0% but if we dig deeper into the numbers we can find a very different story. There are in fact 5.1 million people receiving income support, 821,000 on Disability Pension, 660,000 on Newstart or other payments such as Parenting Payment, Carers Allowance and Youth Allowance. 1.7 million families receive other forms of income support with 3.2 million children receiving family tax benefits as well as 930,000 families with 1.4 million children receiving childcare assistance. What this essentially comes down to is roughly about 44% of the population are either unemployed or underemployed and all rely on welfare to fund some function of their life.

Now, the most common argument in the mainstream at the moment is that we should tackle this by tackling wage stagnation. Of course, only a fool would argue against the ability of the trade union movement to challenge wage stagnation and even the Reserve Bank agrees. Strikes have dropped by about 97% since the '70s and it's no coincidence that they have simultaneously been followed by only very minor rises in the median wage. Inevitably, unemployment will rise alongside the housing crash as household wealth drops drastically. To put it simply, the less people can afford to spend, the less consumption demand experienced by businesses and that is likely to be compounded by businesses seeking to respond by cutting wages further.

This has also been coincided by huge sell-offs of industry at the hands of both the Liberal and Labor Party. What that has meant is that our manufacturing sector is nearly on its deathbed, our agricultural sector is being bought out and leased back to us and the infrastructure boom is about to come to a crashing halt. So, we’ll be plumped up more than ever almost entirely by a service economy much of which relies on Government funding that is being continually slashed by the current Government.

You might be asking what the country functions on then, in the instance that per capita spending is constrained by wage stagnation (yes, that’s right, people aren’t actually buying that many avocadoes) and the main source of economic output is the service economy. Fundamentally, the answer is debt — whether they’d ever admit it or not, the Government wants you to take out that loan to keep buying.

Now, of course, not to maintain this level of dystopic outlook, but it gets even worse. According to a CEDA report, 73% of Australian businesses are likely to experience some form of automation by 2030 and that is across all sectors from transportation, travel, tourism, food and even small businesses. They are currently predicting around 5 million Aussie jobs lost to automation in ten to 15 years and almost 40% of jobs that exist today disappearing. If you’re wondering what that might look like, they are predicting robot porters, wait staff, concierges, robots performing surgeries more widely and, of course, the more popularised driverless cars replacing big chunks of industry. And while “learn to code” has become a meme, the strongest sector to replace these old industries will actually be around data collection and analysis.

People like Andrew Yang in America are working to popularise the idea that Silicon Valley would be lying to you if they said that it would be an easy transition to simply expect unskilled labourers to suddenly retrain and take up jobs in data analysis. His platform aside, ideas like his will really be the tip of the iceberg in the coming years of people screaming for the necessity of a stronger welfare state that, without the existence of which, would lead to very real societal chaos.

Increasingly, people will be looking to university degrees for jobs that will be replaced by automation by the time they graduate, people will be saddled with mountains of debt and very little real capital to throw towards reskilling, that’s even assuming that the booming data analytics industry will be enough to replace all the job losses, which it likely won't.

So, of course, the real toll on human life living below the poverty line, as the fundamentals of things like rent, food and the average household bills continue to rise (rents usually rise during a housing crash) is grinding and severe. However, the average working Australian population would be foolish to think the issue of raising Newstart won’t affect them, too.

Yang may be framing the necessity for social welfare under the term of a UBI called a Freedom Dividend, but Australia is already funding nearly half the population under some form of welfare. The only difference being that if we expanded Newstart extensively so that both working people and the unemployed actually had enough to loosen their wallets slightly and spend more, we’d improve the living conditions for everyone and end the strong potential for chaos that we are currently fast running into. Here in Australia, we already have real-world evidence this works because it's already what Kevin Rudd did on a much smaller scale to avoid the 2007 financial crisis.

Of course, the inevitable question whenever this topic comes up is: “well, how do you pay for it?” The simple answer is progressive taxation. The more complex answer is that both the Liberal and Labor Government’s rhetoric around a deficit is bad economics. Finance or business growth, for example, is completely separate to whether we are experiencing a budget surplus or deficit. Private sector debt, for example, is about 205% at the same time that the Government celebrates a surplus. Fundamentally, their harping on about achieving either is not a measure of a healthy economy and, just to drive that home during the Great Depression when infanticide was its highest ever and most Australians were trying to make a bag of rice last a month, we were in constant Government surplus.

So, what is a measure of a healthy economy? Healthy workers who have money to spend and to put back into the pockets of businesses, businesses who would benefit so much from increased consumption that a progressive tax would make a meagre impact. In fact, small businesses would also thrive under these conditions, but to some degree, the Small Business Council of Australia have made it clear they understand that.

So, even though some financial regulatory bodies have begun to sound the alarms about the need for a raise to Newstart, it's time that workers and the middle classes also began articulating not just the need for a significant raise to Newstart, but also for an expansion or re-think about the role of Newstart. We can’t outrun the future forever and, contrary to Bill Shorten's recent slogan, no Australian deserves to live below the poverty line.

Jemma Nott is a Political Economy post-graduate student at the University of Sydney and a freelance writer. You can follow her @AusJNott

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Why raising Newstart is more important than you think

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