Low income earners didn’t break the economy – it’s not up to them to fix it 
Posted By Mirko Bagaric on March 23rd, 2008
The biggest enemy of ‘working families’ is not inflation. It is Kevin Rudd and his offensive suggestion that the working poor and middle Australia should show restraint in wage negotiations. The Rudd government has reportedly even rejected Treasury’s recommendation that the Fair Pay Commission should award a measly $18-a-week pay rise to low-paid workers.
People are not morally obliged to remedy problems not of their doing. Families who are struggling to afford the necessities of modern life have made a zero percent contribution to rising costs and it’s for that reason that they owe nothing to the rest of community when it comes to wage negotiations. Deputy Treasurer Malcolm Turnbull nailed it when he noted that the main causes of growing inflation are increased global costs of fuel and food.
Imposing the same wage disciplines on rich and poor alike is a contemptible case of economic discrimination. Rich are poor come from vastly different starting points regarding their capacity to attain any degree of human flourishing. Even slight reductions in purchasing power are felt far more heavily by those that are already wanting. Being forced to sell the family home tends to ache a lot more than having to think twice before choosing to fly first or business class on the next family vacation.
Kevin Rudd’s decision to not legislate a wage rise for federal politicians recently is a meaningless gesture when it comes to setting the tone for how many other Australians should behave. The financial pressures experienced by politicians with their $100,000 plus annual incomes and brimming superannuation entitlements are negligible compared to those faced by the many Australians now battling to save the roof over their head.
Recent data from the Real Estate Institute of Australia shows that the average Australian family can no longer afford the average home mortgage. Close to half of the average family’s post tax income (or 37.4% of gross median family income – the affordability figure is regarded as 30%)) is now required to pay the mortgage. This is the worst result in the 22 years since the survey commenced.
And for loyal Labor-voting families that are thinking about taking Rudd’s advice and not agitating for a pay increase, unfortunately the news is not much better on the rental market.
Rent costs families an average of 23.9% of gross median income – a 0.6% increase in three months.
There is of course a chance that an above CPI wage increase to lowly paid workers might further drive up inflation. However, this is not a consideration that middle Australia should give a moments consideration to. Any increase in inflation will necessarily be less than their wage increase, so in absolute terms they would still be better off.
But won’t this encourage high income earners to also go hard when it comes to wage negotiations? Not at all. High income earners already do that – always have and always will.
Admittedly, the reaches of our moral and civic duties are not confined to redressing problems of our doing. In some cases individuals are required to step-up to assist another person or to make sacrifices for the good of the entire community even in relation to matters not of their doing.
However, the circumstances in which are required to act with such benevolence are rare. The situations in which we have a responsibility to redress problems caused by others is defined by the maxim of positive duty, which prescribes that we must assist others in serious trouble, when assistance would immensely help them at no or little inconvenience to ourselves.
The principle explains why it is repugnant to refuse to throw a rope to a person drowning near a peer, but we are entitled to resist calls to allow a homeless person to move into our spare bedroom.
It is also explains why developing countries are entitled to refuse to adopt greenhouse targets. Global warning has been caused solely by western nations, which on the back of cheap energy massively increased the prosperity of their people, while at the same time refusing to share the largesse with the largely hungry third world. People in developing nations are no less entitled to improve their lot.
Why should hungry people in the third world care that their use of fossil fuel risks making future people less prosperous? Current destitution bites more harshly than potential future discomfort. If western nations are genuinely concerned by global warning they need to compensate the developing world for fossil fuel restraint. Absent this, their hypocritical environmental concerns will rightly continue to fall on deaf third world ears.
In relation to matters of flourishing on the home front, Middle Australia is in fact the very constituency that is feeling the economic pinch and is already immensely inconvenienced by rising costs. That’s why it is offensive for the PM or any other person to urge middle Australians to show wage restraint. Middle Australians need and are entitled to every last cent that they can secure in the form of wage increases.
Moreover, they should not only be leaning on their employers to improve their lot. The government also needs to step in here. Most Australians will welcome the proposed mid year tax cuts. But their problem – as always – is that they will most benefit the rich.
It is mindless that any Australia living below the poverty line should be required to pay any tax, especially given that they are then subsidised by the welfare system. This is bureaucratic nonsense and socially and economically unjustified. Approximately 10 per cent of Australians are now living below the poverty line (currently at around $700 per week for a family of four). Here’s a question for the 1,000 brainiacs at the Rudd 2020 summit: What is one good reason for not increasing the tax free threshold to the poverty line?
Perhaps they could contemplate this while they took time out from the Canberra bubble and visited the home of one of thousands of Australians battling to hold onto their homes.
A version of this was published in The Age on 15 March 2008.