Monday, January 11, 2016

Intergenerational Equity – How We Are Failing Future Generations

In 2015 the Federal Government released another Intergenerational Report. It was easy to dismiss it as a political stunt. After all the well-known scientist they got to spruik it, Dr Karl Krusenicki, did just that, correctly lambasting it for its failure to talk about climate change. Any discussion about the future which leaves out climate change is farcical.

And these Reports, first commissioned by Peter Costello, are absolutely a Trojan Horse for the right wing agenda of winding back the social contract, dismantling the benefits achieved in Australia with a lot of blood, sweat and tears over many years, in health, education, and retirement incomes, which make Australia one of the best countries in the world to live in. They run a scare campaign about population ageing designed to convince us that our health, education and retirement incomes systems are not sustainable.

This is just not right. Population ageing is not a bad thing at all. Countries with older populations are uniformly healthier, wealthier, have longer life expectancy and fewer problems than countries with younger populations. The group Sustainable Population Australia has produced some great work from the academics Katherine Betts and Jane O'Sullivan about this and I recommend it to anyone with an interest in this issue.  My take home message about population ageing is "Don't worry, be happy!"

But is the issue of Intergenerational Equity important? Bloody oath it is. Do we want to be remembered as a generation that wrecked the planet and passed on an inheritance and legacy of unemployment, mental health problems, drugs, conflict and terrorism to the next generation? Surely we have an obligation to pass on to our children and grandchildren a world in as good a condition as the one our parents and grandparents gave to us. We do not have a right to trash the joint.

So how are we going so far? Well let's look at deficit and debt, the two Ds, a bit like Daz and Dee from The Block. It is true that we need to balance the books. It is true that leaving behind deficit and debt is unfair to future generations, who have to pick up the interest bill.

It is worth noting that countries with large populations and rapid population growth tend to have greater problems of deficit and debt than smaller countries, or countries with stable populations. Rapid population growth leads to overcrowding and pressure on existing infrastructure. Residents and communities naturally object to this, so in order to head off public objection to rapid population growth governments have to build new infrastructure. This new infrastructure is very expensive, and leads to deficit and debt. The Queensland academic Jane O'Sullivan points out that maintaining infrastructure in a population growing at 2 per cent doubles, repeat doubles, the infrastructure cost for governments, who have only two percent extra taxpayers to pay for it.

We have seen a classic example of this in Melbourne, with the former State Government secretly locking Victorians into a contract to build a tunnel through Royal Park that would have cost $8 billion. Seriously $8 billion for a tunnel! I had Professional Engineers in my office giving this as an example of the way the public sector is being stooged by private consortiums. Victorian taxpayers dodged a massive financial bullet as a result of the Victorian Labor Government negotiating an end to this contract. It is remarkable that the Liberal Party and its media and corporate cheer squad had the temerity and audacity to criticise this. To lock Victorians into a multi-billion dollar contract with a secret side note days before an election was the height of contempt for the right of Victorians to democratically decide our future.

Let me return to the two Ds, deficit and debt. During the good times John Howard and Peter Costello introduced measures which damaged the revenue and pushed up deficit and debt. The fiscal time bombs they left behind for subsequent governments included abolishing tax on superannuation income, cutting capital gains tax in half, introducing the Baby Bonus – now thankfully gone – and ramping up Family Payments.

The Abbott Government went down the same path. It reinstated the Howard Governments fringe benefits tax arrangements for privately owned motor vehicles, which Labor had cancelled, at a cost of $500 million a year. It cancelled Labor's 15 per cent tax on superannuation income over $100,000. This reduced revenue by about $600 million a year. They abolished the carbon price, at a cost of $7.6 billion, and overturned the mining tax. One country which runs a whacking great surplus and has no debt is Norway, which years ago introduced a sovereign wealth fund. People say Norway is fortunate because it has lots of natural resources. And we don't?

The legacy of deficit and debt we are handing down to future generations is not unavoidable. For example we have allowed companies to avoid paying tax on their income. In one financial year just 10 companies channelled over $30 billion from Australia to Singapore and avoided paying tax in Australia. In that year, 2011-12, an estimated $60 billion in so-called "related party transactions" went from Australia to tax havens. Energy companies have established "marketing hubs" in Singapore, but their principal purpose appears to be as a destination to shift profits in order to pay less tax. A report by the Tax Justice Network estimated annual tax avoidance by the top 200 companies at over $8.4 billion.

And as for infrastructure spending, the property developers who are the beneficiaries of the increased land value that comes from population growth ought to be the ones to pay for the costs of this growth. I support the Labor Government capping Council rates. Pensioners shouldn't be the ones paying for population growth; the beneficiaries should be.

Let's now look beyond the two Ds. How are we really going? Is there really intergenerational equity?  The opportunities I and my generation had – free tertiary education, lots of job and career opportunities, affordable housing – seem a distant memory for way too many young people. They are now fitted up with an axis of financial evil – job insecurity, housing unaffordability, and student debt.

Job security has declined dramatically. Back in the 1980s well over half a million 15 to 19 year olds had a full time job. By January 2015 the figure was more like 150,000, an all-time low. There has been a dramatic switch from full-time to part-time employment. Back in 1980 just 20 per cent of workers aged between 15 and 19 were part-timers but the figure is now about 75 per cent.

Youth unemployment grew to its highest for 17 years. The number of long-term unemployed has risen dramatically in the last seven years, well over double what it was in 2008.

Well-qualified young workers are finding it difficult to break into high-skill jobs. Many young people have to continue their part-time university jobs after they finish their degree. And those who do have jobs have less secure jobs. In March 2015 the Saturday Age reported a worker who only knew if he had work when he received a text message just 15 minutes before his shift was due to start at a clothing warehouse. As a statement of the bleeding obvious, it is impossible to plan his day or his life around that kind of insecure work. It is a throwback to the work arrangements on the waterfront a hundred years ago, when Dock workers would stand in a line waiting to be picked out for a day's work.

The rise of casual, contract and labour hire jobs, with far fewer protections for workers, is a feature of the last 20 years. More than 2 million workers are now engaged as casuals and more than 1 million are contractors or in labour hire.

The personal and social consequences of unemployment and underemployment are negative and long-lasting. Experts say that young people lose their hope, their health deteriorates, they suffer from depression and anxiety, and they become vulnerable to drugs and crime. Being out of work for long periods can affect physical health, mental health, and future employability. The job market is now also tougher for postgraduates.

Young people are also getting the rough end of the pineapple in relation to housing. Whereas I and my generation had opportunities to buy and live in detached houses, high-rise apartment towers in Central Melbourne are now being built at four times the maximum densities allowed in such crowded cities as New York, Hong Kong and Tokyo. These hyper-dense skyscrapers are being built with little regard to the effect on the residents within, or their impact on the streets below, or on neighbouring properties.

And as if these issues aren't big enough, in April 2015 a prominent Britain-based international mental health commentator, delivering a public lecture for the Queensland Mental Health Commission, suggested the modern rat race could be making us unhinged! Gregor Henderson said that across the world levels of diagnosed depression and anxiety, and the prescribing of drugs to deal with those conditions, are rising alarmingly.  Mr Henderson said there may be a link between the way the modern world is structured and the elements of emotional and psychological distress we are seeing.

He said that if we keep putting such a high value on economic product, this leads to materialism, consumerism and individualism, which are mostly short-term benefits. Our modern style of living is out of synch with our mental and physical wiring.

I certainly think one of the contributors to increasing mental health issues is the loss of our connection with nature. Numerous studies have shown that public open space delivers tangible and important benefits for physical and mental health. Mathew White and colleagues at the University of Exeter Medical School found that people who live in urban areas with more green space tend to report greater wellbeing – less mental distress and higher life satisfaction – than city dwellers who don't have parks, gardens or other green space nearby.

A study from Norway says that health benefits from nature arise from nature's stress reducing effect. Stress, as is well known, contributes to cardiovascular diseases, anxiety disorders and depression. The American biologist E. O. Wilson says that because humans evolved in natural environments and have lived separate from nature only relatively recently in our evolutionary history, we have an innate need to affiliate with other living things.

People aren't just unhappy with their own lives. They're unhappy about the quality of their political leadership as well.

So if we are failing future generations, and I am convinced that we are, what can we do about it? I think employment is the key. We need to get fair dinkum about full employment. Now there are plenty of captains of industry and economists who immediately change the language and the objective of "full employment" to that of "creating jobs". But they are not the same thing at all, even though they may sound similar. The objective of "creating jobs" is used as cover for the desire to reduce workers pay, conditions and rights. It is claimed that reducing these things will increase labour market flexibility and thereby create jobs. It is also used as a battering ram against the environment, with the need to create jobs used to justify all manner of environmental atrocities. We should not agree to surrender pay and conditions or our beautiful and unspoiled environment. This would be the opposite of intergenerational  equity.

So how do we achieve full employment then, given its importance? I think five steps are crucial.

First, we should wind back our migrant worker programs, which have skyrocketed in the past decade. In a stable or slowly growing population, workforce ageing will help solve unemployment. As workers retire unemployed workers or young people entering the labour force get job opportunities. This is how things used to be. But when we are running massive permanent and temporary migrant worker programs, the unemployed and young people entering the market find themselves up against ferocious competition from new arrivals. The size of these programs puts us on a treadmill. No matter how fast we create jobs we still have unemployment above 6 per cent, a totally unacceptable figure, and a recipe for drugs, crime, mental health issues, even terrorism. As recently as 2000 the then Immigration Minister Phillip Ruddock said that net migration may average out at 80,000 per annum. A funny thing must have happened on the way to the Forum, because his government subsequently increased it to over 200,000 per annum, where it still sits.

Second we should focus on education, skills and training. What has happened to technical and further education is a scandal. Back in 2008 political parties promoted the deregulation of vocational education. 'Contestability', that is competition between the public TAFE Colleges and new private training colleges, became the name of the game. They competed for students and for government subsidies. The idea was that competition would lift standards and be good for students. The result has been the opposite.

Private training colleges have been quite unscrupulous. Their interest has not been in the students, it has been in making money. They get students in and churn them through. They have no interest in whether the students get the skills they need to find work afterwards. As long as the students, or taxpayers, pay them, they're alright jack.

Private colleges have cherry-picked the most lucrative courses, leaving TAFE to deliver the balance. The creation of a private market in education led to the appearance of education brokers, signing up people outside Centrelink offices with inducements like free laptops. Consumer protection has been inadequate.

And then there is the change to "competency-based" training. Whatever the virtue of the theory, in practice colleges have put students through courses in a matter of weeks. Quality assurance has been absent. Trainers sign students off as competent, but in practice they are woefully incompetent.

Then there are the universities. Labor Governments introduced student fees and uncapped student places. Now the Liberal Government wants to deregulate student fees. This would be a disaster. When I went to University there were no fees and places were allocated on the basis of academic merit. If fees are deregulated, the system will have been turned on its head. Academic merit and performance will count for nothing. Your capacity to pay large fees, or more commonly your parents capacity to do so, will count for everything. How are academic standards and quality expected to survive such an onslaught?

Education needs to return to being about academic achievement and quality, not making a profit.

Third we need to back science. The 2014-15 Budget cut a staggering $150 million from the science budget, including a $115 million cut to the CSIRO. The CSIRO says these funding cuts will cause the loss of nearly 1400 workers, over 20 per cent of its workforce, including 500 science and research staff. We can't compete with the rest of the world behaving in this short-sighted way. And we should rebuild engineering expertise in government, and insist that companies building infrastructure invest back into the engineering profession, for example through cadetship graduate programs.

Fourth we need to back manufacturing. During the mining boom we acted as if it didn't matter if all our manufacturing went offshore. But to have all our eggs in the mining and agriculture baskets is, once again, foolish and short-sighted. Recent developments around the iron ore price reinforce this. We need a diverse economy, and manufacturing provides good jobs in the middle of society – not rich but not poor. It brings with it research and engineering expertise; the kinds of things that distinguish successful nations from unsuccessful ones. We should be wary of entering into trade agreements that kill off manufacturing and render our economy narrow and vulnerable.

And we should back the home team – Australia. Our personal buying habits, our government buying habits, and our foreign takeover laws should support Australian jobs and Australian industry. It is remarkable that when the Victorian Labor government says it is going to use local steel that we have economic commentators saying you can't do that because it's a breach of our trade agreements! We should have food labelling laws that spell out what food is Australian and what is imported, so consumers can make an informed choice. We should not enter into Trade Agreements that contain Investor State Dispute Settlement clauses or other provisions which act as a barrier to governments carrying out the wishes of the electorate on matters like these.

There is much that we can do which will generate full employment, and it needn't involve trashing the environment. But if we don't do it, then future generations will be deprived of the opportunities that so many of us have had. And the big question for us now is, do we want to be remembered as visionary, intelligent, compassionate and generous, or remembered as greedy, selfish, ignorant and short-sighted?

1 comment:

  1. It's a shame that Jane O'Sullivan doesn't make her work available for linking to.

    The only controversial part as far as I'm concerned is support for manufacturing (except by creating limiting restrictions on us via free trade agreements). There is no ready formula that I am aware of that can be applied. Presumably the government should have an ownership stake in return for its support?