Academic journal article The Economic and Labour Relations Review : ELRR

The Australian Welfare State: Neither Egalitarian Saviour nor Economic Millstone?

Academic journal article The Economic and Labour Relations Review : ELRR

The Australian Welfare State: Neither Egalitarian Saviour nor Economic Millstone?

Article excerpt

Introduction

Peter Saunders' recent book on 'Welfare and Inequality' (1) puts Australia's Welfare State under the microscope and finds it wanting. As suggested by the title, Saunders regards the reduction of inequality as the fundamental aim of the Welfare State (p. 13). Hence, the fact that, during the 1980s, the proportion of income units in poverty increased by over 50 per cent (p.270), becomes a major indictment of the Australian Welfare State.

We shall argue below that this indictment is unjustified. It is made on the basis of certain statistical techniques used by Saunders (and others, such as the Melbourne Institute) to update the Henderson poverty line. It will be argued that these methods of updating the Henderson poverty line are substantially 'out of line with common perceptions of what the poverty standard should be' (p.249). The indictment also ignores what has happened to inequality in Australia when community services, (in particular the introduction of Medicare) are taken into account in a more inclusive framework which goes beyond focussing on money incomes only.

As the Director of the Social Policy Research Centre, Peter Saunders is exceptionally well-positioned to discuss the Australian Welfare State. Saunders and his team have been responsible for a great deal of the research work examining the operation of our welfare arrangements. As befits someone in this position, Saunders has written a wide-ranging book drawing on a large part of the growing literature on the Welfare State; it's purposes, it's major characteristics and how it compares with welfare arrangements elsewhere. Even for those (like the present reviewer) who question some of Saunders' major judgements in the book, 'Welfare and Inequality' will become a very useful source and reference work.

The book is divided into two major sections. The first (chapters 2 to 5) 'attempts to illustrate the important contribution which an economic perspective can provide to the analysis of aspects of the welfare state' (p.7), whilst the rest (i.e. chapters 6 to 9) 'address issues relating to the impact of the welfare state on inequality' (p.9). Since the major theses of the book fall naturally under a number of headings, it will be convenient to discuss them in this format.

The Role of the Welfare State

Back in 1961, the British historian Asa Briggs defined the Welfare State as one where an organised effort is made 'to modify the play of market forces in at least three directions--first by guaranteeing individuals and families a minimum income ...; second by narrowing the extent of insecurity by enabling individuals and families to meet certain 'social contingencies' (for example sickness, old age and unemployment) which lead otherwise to individual and family crises; and third by ensuring that all citizens without distinction of status or class are offered the best standards available in relation to a certain agreed range of social services'.

These three directions can perhaps be briefly designated as the poverty, the insurance and the community services objectives of the Welfare State. (2) While Briggs' definition is more than three decades old, it was quoted with approval as recently as 1987 in the New Palgrave Dictionary of Economics by Ian Gough, one of the leading authorities on the Welfare State.

Writing some three decades after Briggs, when the Welfare State has been under sustained attack, Saunders is concerned that too much stress is placed on the first goal of poverty alleviation or prevention and too little on the insurance aspect of social security systems. While 'no-one would argue against poverty alleviation being an important aspect of social security, there are dangers in placing overriding importance on this aspect' (p.22). Among these dangers are that an undue emphasis on poverty alleviation 'helps sustain the idea that social security spending on those who are not poor . …

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