The South Australian Government has just produced a report about the problem of poverty in South Australia. This report was the subject of discussion in our Labor Party sub-branch meeting last night.
I have not read the report. Its an imposing document but I fear that it will go the way of many reports given to governments. There must be a room, perhaps a building in every capital city, where reports get gently put to bed.
My concern with the proposals to deal with the issue of persistent poverty is they try to resolve many of the symptoms that result from disengagement with the labour market. I don’t think that there would be enough resources in the state to try and tackle the problem this way.
Disengagement from the labour market includes chronic reliance on transfer payments (benefits) from the state to provide from basic needs and other personal expenditure; part time casual labour, in the legal or illegal economy (underemployment). There are also a growing number of working poor, the result of the states disengagement from intervention in the labour market.
A social democratic government should be focusing, as its absolute priority, the maximisation of labour market engagement. There is no other issue more important.
I remembered a piece I was reading in one of my UK periodicals, possibly New Left Review or London Review of Books that was written by Robin Blackburn. He made a remark about the relation between unemployment and the cost of labour. It struck me because those on the right of politics usually raised the question of the cost of labour. Here was one of the towering intellectuals of the left discussing the issue.
There are two ways of looking at the cost of labour question. One is to look at the remuneration given to employees, the area the right gets obsessively preoccupied with. The other way is to look at the other associated costs, starting with the various taxation costs, charges, processing costs, and pre wage costs like superannuation. I suspect that if you looked at wages starting from the Accord era in 1983 you would see that the share going to wages in the economy has probably remained fairly stable. It is the other costs that have risen. There are also the growing costs of the shift in the way the states revenue stream is collected. More of the taxation system is focused around the wage system, including the Medicare levy. Furthermore, the effect of the privatisation of state institutions like the Commonwealth Employment Service has shifted greater burdens of hiring labour onto the employer.
The result of the rising cost of employing labour is to make employers become more reluctant to hire new labour. It forces a shift of employer expenditure towards labour saving technology or towards a greater reliance on overtime. The latter will have damaging consequence for family relations if people start working too much overtime.
Social Democratic governments should adopt strategies to lower the cost of labour. The easiest way would be to depress wages, but that would produce too much opposition from organised labour interests, whose members have already sacrificed wage increases for what have been very poor social wage tradeoffs. A better way would be to start finding ways of removing some of the non-wage costs.
This would start with removing some of the taxation costs, many of which were already going to be removed as part of the GST trade-off. Perhaps a reconstruction of the taxation system that would reduce rates of taxation on the low paid.
There are also some wider questions that relate to the costs of labour. As I argued earlier, states have become focused on using the wages system to collect revenue, provide future transfer payments (superannuation), and even place the costs of social services upon employers. I recently heard on the radio about moves in the United States to get employers to provide day care for the parents of employees.
I question whether this is an economically and politically sound strategy. I think that the provision of social services is primarily a responsibility of the state. To transfer the cost of these social goods to employers would be structurally inefficient and would generate major inequities between those who are able to access such services and those who cannot. It would clearly favour large employers.
The paradox of the competitive modern capitalist state is that it requires the partnership with a strong state sector providing services and skilled workers. The privatisation of the state sector fragments its ability to provide services in an efficient and strategic manner.
1:50:59 PM 
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