Social Policy Association 2010 Conference. Social Policy in Times of Change. Between Worlds: Australian Social Policy and Welfare Reform

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1 Social Policy Association 2010 Conference Social Policy in Times of Change University of Lincoln 5-7th July 2010 Chris Deeming University of New South Wales, Sydney Between Worlds: Australian Social Policy and Welfare Reform Abstract Francis Castles has described Australia s model of social welfare as a radical wage earners welfare state, at least this was his view of the Australian social welfare system as it operated throughout the twentieth century. Critics have questioned his claim that there is something particularly distinctive about the Australian welfare model that sets it apart from those that emerged in Northern Europe, as well as his reading of Australian history which presupposes a mobilization of working-class action to deliver what he refers to as social protection by other means. However, if we accept the general thrust of the Castles thesis, that a pathway for social policy in Australia was firmly established in 1907 with a national minimum wage judgement, and that the policy path has remained relatively stable ever since, despite a long spell of neoliberalism, then to what extent is it possible to interpret current reforms as an attempt by the Rudd Labor government to help get the Australian elephant the workers welfare state back on the move? 1

2 Introduction Earlier this year an article appeared in The Australian, one of Australia s national newspapers, 1 which announced with a degree of pride that Australia spends less on welfare than almost any other advanced country but yet manages to provide better protection against poverty, particularly for families (Uren 2010). The journalist, David Uren, business and economics lead writer, was trumpeting the Australian model of welfare; referring to recent OECD findings which reported that Australia has relatively high minimum wage levels (Immervoll 2010). For those with an interest in comparative social policy, the message may sound somewhat familiar, for it broadly reflects Francis Castles view that a wage earners welfare state operated in Australia throughout much of the last century. Recent developments, such as the return to power of the Australian Labor Party after a long spell of neoliberal rule, make it timely to revisit the Castles thesis. This article does not necessarily seek to defend or refute the workers welfare thesis per se, rather, it simply takes the position that if Castles was broadly correct with his diagnosis, and if we hold his theoretical framework up as a lens for understanding the development of social policy within Australia, then what might this tell us about the direction of current reforms? The article is analytical rather than historical, drawing upon comparative OECD trend data relating to social welfare in Australia. Others are better placed to judge history, and have done so as we shall see. Francis Castles and workers welfare In recent years the idea of path dependency has gained currency in social policy, particularly in the comparative literature. At one level, the theory is relatively straightforward; once initiated, certain courses of welfare development are hard to reverse. 2

3 Welfare states create vested interests and economic incentives that militate against path departing processes. Policymakers tend to be locked-in by existing commitments; bound by the weight of history and structure. Francis Castles is one such advocate of this thinking; he suggests that welfare states are rather like elephants on the move, in that they are rarely thrown off course by particular events, their sheer size supplies momentum and institutional routines provide a thick skin which is largely impervious to reform (Castles 2008). In the Australian context however, it will be arguments about forging a social policy pathway lacking in commitment to the welfare state (as conventionally defined) that primarily interests us. We return to ideas of path dependency below but first we consider Castles thesis. The story of the wage earners welfare state begins with Francis Castles, then Professor of Political Science at the Open University in the United Kingdom, taking up academic residence as Visiting Professor of Politics at the University of Adelaide in the early-1980s. Castles had already completed research looking at the development of state welfare in Scandinavia (Castles 1978). The commitment to welfare in the social democratic countries of Denmark, Norway and Sweden was unlike that seen anywhere else and could be explained by a well organised working-class movement which had sought to humanize industrial capitalist society from the 1930s. Here universalist social policies were designed to promote equality as a citizen s right. Now as an outsider in Australia, Castles sought to show the distinctiveness of Australian social policy as a whole with reference to the welfare states of Northern Europe (Castles 1985). He was also interested in the development of the welfare state in New Zealand, although this is covered to a lesser degree. Indeed, Castles attempted to show how social policy in the Antipodean countries had diverged from the models of welfare found in Europe. For over two decades, he has maintained a keen interest in the development of social policy in Australia and it is this aspect of his work that interests us here. 3

4 According to Castles, Australia has a distinctive, radical model of social welfare, what he describes as the wage earners welfare state. Castles has outlined and defended his account of wage earning welfare on a number of occasions over the years (e.g. Castles 1985; 1989, 1992; 1994b, 1997a, 2001). The basic premise is that Australia s welfare state has developed along a rather different pathway from that taken by Britain and other Northern European countries; a position on which he elaborated in an essay discussing the institutional design of the Australian system (Castles 1997b). In Australia, Castles maintains that social democratic efforts were directed at securing acceptable conditions of work, including decent wages. His belief about the distinctiveness of Australia s welfare state was reaffirmed with further comparative analysis relating to the finance and provision of welfare in other OECD countries (Castles and Mitchell 1990, 1993). Comparative public policy researchers generally seek to understand why politics and policies are shaped along particular pathways in the way they often are; in the comparative tradition they believe that historical developments have lasting effects. Indeed, contemporary policy decisions may be incomprehensible if they are not contextualised in the particularity of their historical context as Castles (1993) argues. The basis of his claim for a formative pathway in Australian social policy relates to decisions taken at the turn of the 19th century to introduce a national system of industrial regulation. In 1894, landmark industrial arbitration legislation was passed in South Australia which became a national norm with the establishment of the Court of Arbitration in 1901 (see Table 1). The basis for a minimum wage system in Australia soon followed. In November 1907, Justice H.B. Higgins, the first Chief Justice of the Court of Arbitration, announced his basic wage judgement; which gave courts the power to determine appropriate wage rates for workers on social justice grounds (Higgins 1922). Because the distinctive focus of social policy 4

5 Australian-style was via regulation of the wage relationship, Castle s coined the idea of the wage earners welfare state. As he has written: The historic compromise between the classes did not centre around a modification of the reward structure of capitalism through the distributive mechanisms at the command of the state, as in the European countries, but focused directly on the primary distribution of income generated by the capitalist market mechanism (1985: 87). It was Titmuss (1958) who first emphasised that an account of the welfare state based on public expenditure alone was insufficient. People may benefit from fiscal welfare and social services but they may also benefit from occupational welfare he observed, covering the different benefits provided by their employers (Mann 2009 provides a recent review). Titmuss was pointing to the need to take into account a range of welfare mechanisms within society but as Castles argues, that point becomes more pertinent if we are seeking to characterise the distinctive nature of welfare states. According to Castles (1992), social policy in Australia was orientated towards occupational welfare; employers here were constituted to provide workers with a range of employment related benefits including sickness pay, occupational pensions and minimum wage prescriptions defined by the state; while early immigration policy attempted to control the supply of labor (see Table 1 at the end of the paper). 2 The relatively high minimum wage margins in Australia during the last century help to bear this out. If we turn to the data on minimum wages for 18 comparable OECD countries, as shown in Figure 1 unfortunately we only have good comparable Australian data for the closing decades of the last century we can see evidence to substantiate Castles premise. In 1985, around the time of his original work on wage earning welfare, Australia had one of the highest minimum wage rates in the OECD; only the Netherlands had a higher 5

6 rate. The minimum wage rates shown in Figure 1 are the hourly rates expressed in US Purchasing Power Parities (PPP) for private consumption expenditure (this is an economic technique which equalizes purchasing power between countries). Not only have minimum wage rates been higher but the dispersion of incomes and wages has been more equal in Australia compared with other advanced economies. Figure 2 shows minimum wages relative to median earnings in OECD countries (this is the same group of 18 OECD nations that feature in Esping-Andersen s study into the different worlds of welfare, a line of inquiry which Castles also pursues, as we shall see below). In 1985, the Australian federal minimum wage was approximately 60 per cent of full-time median weekly earnings, compared with 40 per cent in New Zealand and 34 per cent in the United States. For Castles (1994c, 1994b), wages policy had substituted for social policy in Australia: The welfare state was simply not allowed to flourish here along European lines. Castles observed a number of weaknesses in Australia s commitment to social welfare. Firstly, the share of national income devoted to welfare in Australia has been relatively low. OECD trend data relating to public spending over the last 30 years would appear to support Castles observation. Total public expenditure on welfare in 1980 was roughly 10 per cent of GDP; the lowest in the OECD reference group alongside Japan (see Figure 3). Australia s total spend was not much more than half the OECD group average; a fact which helped to explain Australia s reputation for being a welfare laggard. The second weakness Castles observed was the lack of universalist health services. Many commentators in this field have long regarded a national health service as an important pillar of the modern welfare state (Oakley and Barker 2004). Until the Whitlam Labor government introduced a national (universal) health insurance scheme (Medibank) in 1975, Australia was one of the very few advanced industrial societies without a national health service. Between 1975 and 1983 the Medibank 6

7 system of health insurance was gradually phased out by the Fraser Liberal government, only to be strengthened once again by the Hawke Labor government in As Castles (2001) observed, Australia became the first and only country in the western world to dismantle this most popular bedrock of the social service state. Public expenditure on health care in Australia doubled between 1960 and 1980, from 2 to 4 per cent of GDP, but it still trailed all other modern OECD economies except the United States where spending was on a par (see Figure 4). For Castles, the evidence was clear enough; in Australia wage earning welfare had substituted for state welfare. The system of arbitration had, for Castles (1989), delivered welfare by other means in Australia because it meant that workers were able to maintain a decent life for themselves and their families. The system of regulation prevented waged poverty and delivered a more equal dispersion of income from wages compared with other industrial societies. In the workers welfare state, private saving outweighed collective saving for social welfare. Australia rapidly became a home owning society; helping workers to combine present consumption with an effective form of social insurance in later life. In the early 1900s, the home ownership rate was almost 50 per cent, increasing from 1960 to its current rate of 70 per cent (Yates and Bradbury 2010). By contrast, life for those without work was very different. Because wage control was the means for securing needs based welfare there was no appetite for social insurance or an expanded tax burden. 3 Income maintenance was precisely targeted in order to keep public spending down. As a result overall levels of poverty within Australia during the second part of the 20th century were probably a little higher than levels seen in other modern economies, particularly among women, children and older people not supported by a male breadwinner. Unfortunately, it is not possible to disaggregate levels of in- and out-of-work poverty from the OECD data shown in Figure 5. 7

8 In many ways Australian social policy appeared intrinsically different to Francis Castles: even its means-tested system of social security appeared distinctive in design. In Australia means-tested Age Pensions had been designed to exclude the well-off rather than target the poor. For Castles, this represented an explicit rejection of the 19th century European Poor Law tradition. As he observed, if the principle of means-testing refers to benefits focused exclusively on the poor and at the administrative discretion of the state, then Australia s system of social security was not means-tested in the same sense as it is usually understood in social policy. Indeed, the apparent uniqueness of the system, which focused its redistributive effort through instruments rather than expenditure, appeared to place Australia in a distinctive categorical model of welfare beyond the three-worlds typology proposed by Esping- Anderson. In The Three Worlds of Welfare Capitalism, Esping-Andersen (1990) argues that welfare regimes can be broken down into three ideal types liberal, conservative and social democratic based upon the principles of decommodification (the degree to which a person can maintain their livelihood without reliance upon the market), social stratification (which welfare states can help breakdown) and the public-private mix (referring to the relative roles of the state, third sector, market and family in welfare provision). Australia was seen to represent the residual-liberal tradition of welfare provision (see Table 2), characterised by minimal state welfare and a highly means-tested benefits system. The characteristics of the social democratic model of welfare have already been noted, while the conservative regime is often represented by earnings-related benefits; redistribution within society tends to be minimal and the role of the family is often emphasised. Unsurprisingly perhaps, Esping- Andersen s original work on the three worlds of welfare capitalism has sparked considerable debate within the social policy literature since it first appeared in The inquiry by 8

9 Francis Castles (Castles and Mitchell 1990, 1993) was one of the earliest to challenge at least in part Esping-Andersen s welfare typology. Today, there are now many others debating and contesting the worlds of welfare thesis (Arts and Gelissen 2002 provide a recent review). In their inquiry, Castles and Mitchell attempt to classify the same 18 OECD countries using social expenditure data and information relating to degrees of benefit equality. On the basis of their analysis (also shown in Table 2), they argue that Esping- Anderson misclassified Australia, along with the United Kingdom and New Zealand. These three nations apparently conform to a fourth, radical model where social policies are pursued through redistributive instruments rather than by high levels of public expenditure on traditional welfare services. These findings are entirely consistent with the overall Castles thesis about the nature of social policy within Australia. Is the Australian elephant once again back on the move? If the notion of stability is at the heart of path dependency, then how do we explain change? How does change occur, if history matters so much? If path dependent policy processes preserve the form of the past, how is it possible to break free from them? According to the theory, substantial change is often only possible at critical junctures. A sudden crisis can affect the character of social policy and welfare state development, what Castles (2008) refers to as the black swans of war, financial crises and depression. It was the oil shock in the 1970s which helped to usher in neoliberal reforms in the closing decades of the twentieth century and it appears that another crisis the global financial crises has helped to shift the political climate once more, towards bigger, more compassionate government, along the lines advocated by social democrats. 9

10 Australia experienced marked changes in economic, social security and labour market policies during the 1980s and 90s, similar to those experienced in many other OECD countries (Glennerster and Midgely 1991). The Australian system of social security already had a reputation for being one of the most selective amongst OECD countries however, social security spending became even more targeted during this period as successive governments attempted to keep control of the purse strings in the face of recessionary pressure (Saunders 1991, 1999). Extensive tax subsidies on private health insurance threatened the national system of public health provision, whilst a series of industrial relations reforms undermined the system of arbitration. Deregulatory legislation, such as Work Choices, removed employment laws relating to unfair dismissals. In a globalized economy, the Australian government was looking to increase national economic performance, and following standard neoliberal philosophy, it firmly believed that a more flexible labor market was necessary to achieve this. Critics maintained that the laws stripped away basic employee rights and were fundamentally unfair. Certainly the principal thrust of the Work Choices reforms was to individualize employment relations with the effect of marginalizing trade unions and industrial tribunals. As deregulation in Australia proceeded, inequality appears to have increased. In Figure 2 we see a trend in the decline of minimum wages relative to full-time median earnings. For Castles (1994a, 2001), the neoliberal reforms were clearly undermining Australia s radical model of welfare by other means. However, if we accept the idea of path dependent policy and the general thrust of the Castles thesis, then how should we interpret the latest set of social policy reforms in Australia? The Rudd Labor government was elected to power in November 2007 and immediately found itself grappling with the global financial downturn. The Labor government, like many others around the world, reverted to Keynesian policies in order to stimulate their economies in the 10

11 face of recession, and thus far the Nation Building Economic Stimulus Plan appears to have helped to keep Australia out of recession. Arguably, the crises is a crises in neoliberal government itself, as Rudd (2009) suggests. Even before taking office, Rudd (2006) had attacked the neoliberalism of the Howard government, arguing that John Howard had abandoned the basic principles of social justice that had been embraced by the centre Right liberals and conservatives in Australia over much of the last century. Kevin Rudd clearly set himself apart from New Right ideology, arguing for social democratic beliefs and principles, as articulated by social thinkers such as Anthony Giddens (e.g. 1998) and Prime Ministers Blair and Schröder (e.g. 2000) in Europe. Here social democratic political philosophy appeared to offer a new way between the state and the market, between individual rights and social responsibilities. Australian s Labor government is attempting to respond to a broader political constellation of interests, organised labor is just one political force among others demanding gender, ethnic and disability rights. The Rudd government has set out its own social inclusion agenda and rejected labour market deregulation and other neoliberal policies of its predecessor (Commonwealth of Australia 2009a). During 2008, the Rudd government gave a commitment to major welfare reform across taxation, pensions and health care, commissioning a series of independent reviews (Harmer Review 2009; Henry Review 2009; National Health and Hospitals Reform Commission 2009). Although there was no shortage of recommendations for change on offer, the government response was to preserve the status quo. Unsurprisingly perhaps, there was to be little change to the welfare system, with the possible exception of health. A radical overhaul of the tax system was never likely, at least if we consider the historical context and follow the logic of path dependent policy. Australians have long been adverse to social security and consumption taxes as Castles (1994c) observes; the country still has one of the lowest rates of 11

12 direct taxation in the OECD. The corollary of this, as we have seen, is the acceptance of relatively low levels of public expenditure on welfare. The latest available evidence suggests spending levels at 17 per cent of GDP (see Figure 3), about three-quarters of the OECD reference group average. Admittedly, spending on welfare has been steadily increasing over the years; from about half the OECD average in Nonetheless, people in Australia appear to accept the risk of a relatively low standard of living if they become unemployed; compared to other advanced economies the typical worker and the average two earner family in Australia face a larger drop in income if they become unemployed (OECD 2007). The current set of reforms are therefore unlikely to alter Australia s long held reputation for having one of the most selective and highly targeted systems of social security in the Western world. Although heralded by the Labor government as the single largest reform of the Age Pension in its hundred year history (Commonwealth of Australia 2009b), there appears to be little intention to alter the overall design of the current system. The qualifying age for the Age Pension will be progressively increased to 67 years, following the recommendations of the Henry Review, and there was an increase to the Age Pension rates (since 20 September 2009 single pensioners have received $32.49 more each week and couples $10.14). Within health care, things may be different. Here the Labor government is committed to major reform and intends to make substantial investment in Australia s flagging national health service, which has been historically fragmented across state lines. Prime Minister Kevin Rudd has described this as the biggest single reform of the Australian health care system since the introduction of Medicare (Rudd 2010). However, like President Obama in the United States, the Rudd government is struggling to generate the necessary support for investment in the universal health care system. Under the Rudd government s plan, the Commonwealth government will 12

13 become the majority funder of public hospitals and will take responsibility for community health services, including General Practitioner services. If the Labor government can drive home this reform, public expenditure on health care will surely rise in the near future. We saw in Figure 4 that public expenditure on health care in Australia has been historically low; even today Australia maintains one of the lowest levels of public health spending in the OECD. The latest data shown in Figure 4 suggests around 6 per cent of GDP is given to public health care, or about two-fifths of the OECD reference group average. A particular low point was 1980, when total public expenditure stood at two-thirds of the OECD average; this was the time when the Medibank system of health care was being dismantled by the Liberal government as we saw above. Early on, the Labor government set about reviving Australia s flagging industrial relations system. The government claimed to be seeking a fair and balanced system for employees, the unions and employers. In particular, it wished to restore to Australian workers the legal right to appeal against harsh or unfair dismissals from their place of work; a right that had been taken away by Work Choices. The new Fair Work Act provides workers with a safetynet of employment conditions (Commonwealth of Australia 2009). Once again, wages should take into account the relative living standards and the needs of the low paid ; collective bargaining is encouraged and Australian workers now have the legal right to appeal against harsh or unfair dismissals from their place of work (as they do against unequal pay for work of equal or comparable value). The Australian labor market is very different today compared to the situation of 1907 however: Very few women worked at the turn of the 19th century; today, the labour force participation rate for women stands at 58 per cent, meaning almost 4.8 million women are in some form of paid employment (Australian Government 2008a). If the Labor government is looking to strengthen the wage earners welfare state, and 13

14 build an inclusive society, it also faces particular challenges tackling Indigenous disadvantage. Recent data suggests a high rate of unemployment amongst the Indigenous population, at 20 per cent, it is 3.4 times greater than the rate in the national population (Kryger 2005). Australia still maintains a high minimum wage, second only to France according to the statistics for 2008 (see Figure 1). The decline in minimum wages relative to median earnings has already been noted, but it is evident that Australia still compares favourably on this index of equality, trailing just behind France and New Zealand (see Figure 2). Successive Labor budgets and reform of the tax system following the Henry Review have been mildly progressive, intent on improving the living standards of hard working families, principally by offering tax relief to low income households and child care tax rebates (Commonwealth of Australia 2008, 2010). Targeted tax cuts and the Fair Work Australia initiative, which reinstates the notion of appropriate minimum wage rates for workers on social justice grounds could, if we accept the idea of a policy pathway, be seen to mark a return to more familiar territory for Australia but only if we accept the original idea of wage earning welfare. Towards an assessment A number of taxing questions and issues remain: If a radical wage earners welfare state operated in Australia throughout much of the twentieth century, is there any evidence to suggest that the pathway continues today? Does the Australian approach to social policy which Castles describes add up to a distinctly radical model of social welfare? Or, is the idea of welfare by other means no longer tenable in Australia? Was Castles correct to suggest that there is something particularly distinctive about the Australian system of welfare, which 14

15 sets it apart from other models of welfare state regime? Are relatively low levels of public expenditure and relatively high minimum wage rates, once again backed by strong industrial relations legislation framework, sufficient to suggest that Australian social policy remains wedded to the familiar path of wage earning welfare? Unsurprisingly, the Castles thesis has attracted criticisms. The theory has come under fire from social scientists and historians alike in Australia over the years. Social scientists such as Cass and Freeland (1994) have observed the gendered nature of the account of wage earning welfare; the family wage being defined according to the usual white, male breadwinner model so, a man as head of household supporting a wife and child. 4 This accusation Castles does not deny, reflecting the gendered nature of Australian society throughout much of the last century (Castles 1994c). The Court of Arbitration adopted the equal pay for equal work principle only relatively recently (see Table 1), at least giving women equal pay in theory but the empirical evidence continues to indicate that women still do not enjoy pay parity in practice (Australian Government 2009). 5 The theory of the workers welfare state has also come under fire from historians such as Garton and McCallum (1996) and Watts (1997), who argue that his account of working-class action at the turn of the nineteenth century was overstated. Watts suggests the wage earners welfare state was in fact the outcome of Francis Castles trying to reconcile his own belief about the relationship between working-class mobilization and the extensive provision of social services in Scandinavian countries. In other words, the system of welfare which Castles encountered when he first took up academic residence in Australia from the United Kingdom in the early 1980s posed a challenge to him, which the idea of the wage earners model of welfare helped to resolve. Castles account of history may indeed be overstated; he is no historian, as he himself admits but his account belongs to a long tradition which seeks to explain working-class political action and welfare 15

16 provision (e.g. Jones 1974; Korpi 1978). 6 Turning next his observations on comparative welfare states, to what extent does the Australian way represent a model of welfare distinct from the usual characteristics associated with liberal regimes? Opinion on this has been divided. Korpi and Palme (1998), for example, tended to agree with Castles. They also see a distinct (fourth) world of welfare capitalism operating in Australia. Observing the stark trade-off between targeted means-tested income protection for pensions, sickness and unemployment benefits and social insurance models protecting against risk. There have been dissenters however, such as Leibfried (1993) and Siaroff (1994) who have argued that the Australian system is characteristically liberal, similar in design to welfare systems in other Protestant, Anglo Saxon countries such as the United Kingdom, United States, New Zealand and Canada. In their work on The Real Words of Welfare Capitalism, Goodin et al. (1999) also appear to reject the Castles thesis; instead they suggest that the Australian system is a labor-market-orientated version of the social democratic form originally identified by Esping-Andersen. And what of Esping-Andersen himself? Initially he appeared to react positively to Castles proposal to add a fourth radical model to his typology of welfare regimes, seemingly accepting that the Australian system of welfare may well be a potentially deviant case. 7 He acknowledged that a highly means-tested system of welfare is only one side of the coin and a highly institutionalized set of welfare guarantees could represent another (Esping-Andersen 1997). More recently however, Esping-Andersen (1999) has argued that the Australian welfare system has been moving towards a prototypical liberal world of welfare capitalism as a result of the reforms ushered in under the Howard administration in the 1990s (thereby essentially reconfirming his original position). Evidently the business of welfare modelling is by no means straightforward as Abrahamson (1999) observes, and arguably, any assessment of the situation at the height of a neoliberal era of 16

17 free market reform may cast a dark shadow over his account. Undoubtedly, the long spell of neoliberalism in Australia did undermine important aspects of the welfare tradition, but it is also true that the Right under John Howard was more successful in the realm of economic policy compared with welfare policy, as Castles (2008) suggests. Even the radical welfare reforms under Margaret Thatcher in Britain during the 1980s can be viewed in an incremental rather than revolutionary light; despite a decade of neoliberalism the British welfare state was largely left intact as Glennerster (2009) argues. With the return to power of the Australian Labor Party workers are once again supported by a strong industrial relations legislation framework; the trend for relatively high minimum wage rates continues, along with low levels of overall public expenditure on social welfare. If the wage earners welfare state did exist during the twentieth century, the evidence today surely suggests that social policy in Australia is still following in that path. Conclusion In The Social Democratic Image of Society, Castles had sought to show how social democracy in Scandinavia, by way of working-class mobilisation during the 20th century, had humanised the development of capitalism in these societies. This was not because the basic reward structure of capitalism had been modified but because the unions had instead secured a strong commitment to welfare from the state (Castles 1978). In Australia however, he found the reverse was true. The early labor movement succeeded in securing wage controls, which meant decent minimum wages rates for workers on social justice grounds (Castles 1985). At the turn of the 19th century, Australia was clearly ahead of Europe in implementing radical social policy reforms, yet later, the labor movement was less successful 17

18 in securing further extensions into the traditional areas of state welfare. The Australian Labor Party was kept out of office for much of second half of the twentieth century and centre Right liberal ideas prevailed. Today, we might conclude that Australian social policy is caught between the two worlds of welfare; the policy path of wage-earning welfare remains strong and continues to influence if not constrain current social policy. On the one hand, the Rudd Labor government has reversed some of the unpopular neoliberal labor market polices of the Howard era. It has strengthened, if not restored, the principle mechanisms underpinning the wage earners welfare state. On the other hand, the Labor government also appears committed to strengthening citizenship welfare entitlements, with increased commitments in social security, pensions and health care. Herein lies the rub, as raising tax levels continues to be politically difficult where there exists a fundamental belief that wage earners are bound to look after themselves. Endnotes 1 The Australian is a conservative broadsheet newspaper owned by Rupert Murdoch and News Corporation. It is the biggest-selling national newspaper in Australia. 2 It is not always easy to make a clear cut distinction between those countries with a statutory or national minimum wage and those without. We cannot simply say that Australia has a national minimum wage for example. Although the Industrial Relations Commission introduced a new Federal Minimum Wage in April 1997 which applied to employees working under Federal awards (around 40 per cent of all employees), and although subsequent wage case decisions in all States except for Tasmania applied the Federal Minimum Wage to workers under State awards; nevertheless, there is no automatic link 18

19 between the Federal Minimum Wage and wages set under State awards. The picture is rather different in say the UK, which has a national minimum wage; a flagship policy of the British New Labour party during the 1997 election campaign that came into effect in April The Lyons government tried to bring in a comprehensive welfare insurance scheme in 1938 covering health and better pensions but with the collapse of the conservative government the scheme was not implemented. Contributory insurance was opposed by Labor, and other vested interests such as doctors and charities, because it did not cover unemployment benefits and because it was to be funded from contributions rather than consolidated tax revenue. 4 The family wage was an objective adopted by male trade unionists at the turn of the 19th century in their fight for improved wages. It is based on the argument that a wage should be sufficient to maintain a wife and children. 5 In 2009, women earned 83 cents for every dollar males earned, up from 65 cents in The leading British economic historian Gareth Steadman Jones, for instance, claims that the agenda of the working class in Britain was not to seize power but to achieve welfare. 7 Esping-Anderson also identified the Japanese system of welfare as another potential deviant case to his typology. References Abrahamson, P. (1999) The Welfare Modelling Business, Social Policy and Administration 33(4):

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25 Table 1. The path of the wage earners welfare state World s first Labor government elected in Queensland Commonwealth Constitution Act passed in Britain New South Wales and Victoria Age Pension Acts -Immigration Restriction Act establishes White Australia policy (first legislation passed by the new federal Parliament) -Arbitration and Conciliation Act 1904 Chris Watson Labor government Andrew Fisher Labor government Commonwealth Age Pension Act (with both income and assets tests) -Justice H.B. Higgins of the Arbitration Court announces his basic wage judgment Invalid Pension commences Billy Hughes Labor government Unemployment Insurance scheme introduced in Queensland James Scullin Labor government Menzies Liberal government introduces Child Endowment benefit John Curtin Labor government Uniform Income Tax Act passed, income taxes apply to all but the lowest paid workers Widows Pension Act passed Introduces unemployment and sickness benefits Ben Chifley Labor government Menzies Liberal government introduces new voluntary national health insurance scheme Arbitration Court adopts the equal pay for equal work principle Edward Gough Whitlam Labor government Introduction of universal health care system Medibank Fraser Liberal government reform begins to dismantle Medibank Fraser government abolish Medibank tax levy Arbitration Commission grants maternity leave for up to 12 month Arbitration court ends automatic wage indexation for one national wage hearing a year Arbitration Commission imposes a wage freeze requested by the Liberal government Robert James Lee Bob Hawke Labor government Reform strengthens the universal health care system Medicare Bob Hawke Labor government Paul Keating Labor government Assets test on Age Pension introduced Howard Conservative government introduces Industrial Relations (Workplace Relations) Act to deregulate the labor market, Work for the Dole and Centrelink to administer social security payments Howard government introduces GST (Goods and Services Tax) Howard government unsuccessfully attempts to pass further industrial relations legislation, enabling workers to be dismissed more easily by employers and prohibiting compulsory union fees Howard government introduces Workplace Relations Amendment (Work Choices) Bill -Disability Support Pension eligibility tightened Kevin Rudd Labor government Rudd government announces Australia s Future Tax System Review, Pensions Review and the National Health and Hospitals Reform Commission review Fair Work Australia initiative and Fair Work Act means minimum wages should consider the needs of the low paid and workers have the legal right to appeal against unfair dismissal 25

26 Table 2. Classification of OECD countries according to welfare state regime* I Liberal II Conservative III Social- Democratic (IV Radical) Esping- Anderson (1990) Australia Canada Ireland New Zealand United Kingdom United States Finland France Germany (West) Italy Japan Switzerland Austria Belgium Denmark Netherlands Norway Sweden Castles & Mitchell (1990) # Ireland Japan Switzerland United States Germany (West) Italy Netherlands Belgium Denmark Norway Sweden Australia New Zealand United Kingdom *Where a country is underlined this indicates that welfare regime is prototypical. # The four countries of Austria, Canada, Finland and France did not easily fit within the four worlds of welfare capitalism that Castles and Mitchell had set out. 26

27 Figure 1. Comparisons of statutory minimum wage rates in OECD countries Source: OECD.Stat, using the earliest and latest reported year where there is comparable data for Australia. 27

28 Figure 2. Minimum wages relative to the median earnings of full-time workers in OECD countries Source: OECD.Stat, using the earliest and latest reported year where there is comparable data for Australia. 28

29 Figure 3. Gross public social expenditure in OECD countries (as a percentage of GDP) Source: OECD Social Expenditure Database (SOCX), using the earliest and latest reported year where there is comparable data for Australia. 29

30 Figure 4. Gross public expenditure on health care in OECD countries (as a percentage of GDP)* Source: OECD Health Data 2009, using the earliest and latest reported year where there is comparable data for Australia. *Note that the figures reported here are for public expenditure on health and, importantly, they do not include private expenditure. 30

31 Figure 5. Poverty in OECD countries (60 per cent of the current median income) Source: OECD.Stat, using the earliest and latest reported year where there is comparable data for Australia. 31