Original Poverty Line For Australia example essay topic

Poverty In Australia Before discussing the extent of poverty in Australia, it is first crucial to mention the difference between absolute poverty and relative poverty. Absolute Poverty is a situation where deprivation is extreme because people do not have access to the basic necessities such as food, clothing, and shelter. In contrast Relative Poverty is a situation in which the incidence of poverty is measured relative to things such as average weekly earnings or income per head. Therefore poverty, as talked about in Australia is the state where income is insufficient to meet the minimum needs of the household or individual. The Poverty Line is the level of income below which the income of the household or individual is inadequate to meet the essential needs of the household or individual as determined by society. The Poverty line is determined by a percentage of average weekly earnings.

In 1966, the original poverty line for Australia, was set by Professor Henderson as basic wage plus the child endowment payable for two children. There is a definite lack of recent data on poverty in Australia, therefore we have to look back as far as reports from the 1970's, in order to find any relevant information on poverty in Australia. In 1975 there was a report made on the extent of poverty in Australia by Professor Henderson. It has since been known as the Henderson Report. The Henderson Report found that 8.5 per cent of Australians were living under the poverty line. It also found that: "Most of the poor suffer from one or more of the following disabilities: old age, lack of a male bread-winner, a large number of dependant children, recent migration to Australia, or prolonged illness.

The incidence of poverty was much higher in these categories than among those without any of these disabilities". (Henderson 1975) At the time of this report average weekly earnings in Australia were $165 per week, the poverty line for a single person was set at $49.60 for a single person, and $93.20 for a couple with 2 children. (Jackson, McIver 1998) A report similar to the Henderson report was carried out in 1987, where the poverty line, still using the original method used in 1966, had been raised to $146 per week for a single, and $274 per week for a couple with two children. (Jackson, McIver 1998) Although the poverty line had risen due to economic growth it was still found that 13 per cent of Australians were living under the poverty line. (William, Lawrey 2000) This was significantly higher than the 8.5 percent from only twelve years earlier. Whilst these percentages had changed significantly it was also found that the types of people who were living under the poverty line were still the same.

In this report it was found that 75 percent of those living below the poverty line were not in the workforce, and that the aged made up 41 per cent of all Australians that were living in poverty. (Williams, Lawrey 2000) Therefore it is clear that although the poverty line had risen significantly from 1975 to 1987, there has not been an improvement in the percentage of Australians living under the poverty line, but instead this percentage has increased. Between 1975 and 1996, per person, GDP grew by almost 90%, taxes more than doubled, government transfers went up more than 160%, and average household income net of taxes grew by almost 50%. Income grew significantly.

The proportion of national income directed via government grew far more significantly. Although there has been some problems with the economy during this period such as unemployment which has grown from 4 per cent to 8.5 percent, also the average duration of unemployment grew from 6 weeks to 52 weeks. Unemployment is seen as one of the possible reasons for the increase in poverty rates, despite the increase in welfare payments. Whilst it is likely that this startling increase in unemployment levels is partly responsible for the increase in poverty, it still should not be causing the number of people living under the poverty line to rise as rapidly as estimated. This suggests there is something seriously wrong with either the measures of poverty being used, or the welfare system itself. Professor Henderson's original method of determining the poverty line is the most likely problem in Australia's measurement of poverty.

In fact Professor Henderson's original method has been criticised by many Australian economists, and it has been said that maybe it is the actual year in which our poverty line was set which is the problem. 1966 was a boom year, where GDP per head, and average household income net of taxes both rose by more than 40%, and household saving per head more than doubled. This could mean that the entire method, which is used to determine Australia's poverty line, is incorrect. The Henderson Report also reported that: The urgent need for a national social research and policy institute to insure that a continuous research program over a wide field reveals to the public and to those responsible for policy the problems and needs of those who are poor and deprived. Then the 'hidden people' may be discovered and the 'forgotten people' remembered. (Henderson 1975) Although unlikely, if it is correct that since the Henderson Report in 1975, the percentage of Australians living under the poverty line has continued to rise, then it is true that as noted in the report, most of Australia's poverty is indeed hidden.

The 'hidden' nature of poverty in Australia may be the major contributing factor of why the problem of poverty has not been addressed. If the Australian public were aware of the increasing rates of poverty in Australia then there would definitely be increasing pressure put on the government to alleviate the problem. One aspect, which contributes to poverty and is very difficult to avoid, is discrimination. This occurs when people such as women, migrants, and Aboriginals who have the same abilities, education, training, and experience as other workers, but are not treated as equals with respect to hiring, occupational access, promotion, or wage rates. Aboriginal Australians are a perfect example of a group, which is subjected to employment related discrimination. Aborigines who are employed, typically have poorly paid jobs which can be highlighted by 1994 data which shows that 59 per cent of Aboriginals had an income of less that $12000, whilst only 11 per cent had an income of over $25000.

(Jackson, McIver 1998) Similarly women are also a good example of a group which is subjected to employment related discrimination. Data from 1996 shows that the average weekly income for females in full time employment was only 78.5 percent of the average weekly income for males in full time employment. (Jackson, McIver 1998) Migrants are also exposed to similar discrimination as many migrants can not speak English. Migrants are often first dismissed in a recession, and whilst the speaking of English is essential in employment, migrants are still undoubtedly over represented in the employment group.

Discrimination such as this experienced by these groups, is a major reason why women, migrants, and Aboriginals make up such a large proportion of Australians who are currently living under the poverty line. The Social Security System is used a means of alleviating poverty. These means involve pensions, benefits, and allowances for those people who suffer from the factors that bring about poverty. These include Aged and Invalid pensions, Unemployment benefits, Family Allowances, Supporting Parents benefits, and Medicare benefits. Although it is obvious that the Social Security System does assist in alleviating poverty, many problems arise from such a system. One of the most talked about problems amongst Australians is that of the 'dole bludge r'.

A 'dole bludge r' has no incentive to work, as they know that they will receive their pay cheque every fortnight without fail, and without the hassles of having to go to work every morning. Whilst the Australian Welfare System is not perfect it does without question assist in its main objective which is reducing inequality of incomes, and therefore the level of poverty. Although there is no current data on the amount of Australians living under the poverty line, and it is very difficult to estimate, it appears likely that using Professor Henderson's original method, the increasing inequality in the distribution of household incomes has caused the percentage of Australians living below the poverty line to increased substantially.

Bibliography

Collier, B. 1992.
Introducing Economics. Sydney, New South Wales. Anza rut, D. 1985.
Senior Economics. Melbourne, Victoria. Linsey, R. Langley, P. Mahoney, D. Positive Economics for Australian Students, Sydney, New South Wales. National Coalition against Poverty. 10 September 2001.
URL web Trends in Income Inequality in the 1990's.
15 September 2001.
URL web Pearce, Y. August 20 2001.