Well-paid jobs or welfare? John Menadue

Dec 16, 2013

The Abbott Government’s confusion over Holden’s withdrawal from Australia reflects a much deeper hostility to the car industry. The main reason for this is that the car industry is highly unionised, pays good wages and has a high degree of alignment of interests between labour and capital. The right-wing finds that all quite offensive.

Yet the right-wing supports subsidies in other industries that have little merit. The subsidies to these other industries put the support of the car industry in the shade.

As I mentioned in a recent blog on 12 December, the government provides enormous subsidies to parts of the services sector.

  • We provide $7 billion p.a. for the private health insurance industry – a very high cost and parasitic industry which Labor failed to properly tackle. Warren Buffett described PHI as the tape worm in the US health system. It is the same in Australia and we subsidize it!!
  • We will provide $1.8 billion over four years to the tax-avoidance industry with salary packages for executive cars. The coalition reversed a Labor Government decision to stop this rort.
  • We provide over $30 billion p.a. in subsidies to the superannuation sector. The wealthy receive highly subsidised tax treatment of their superannuation contributions? On top of that they do not pay tax on superannuation repayments from the time they reach 60 years of age.  This subsidy for superannuation holders is in addition to the enormous $20b annual fees that financial advisers extract from policy holders. Both major parties are culpable on this but Labor marginally less so.

What is the sense or decency in decrying the car industry which has a well-paid and efficient workforce but we provide enormous individual and corporate welfare for the rent-seekers in the three areas mentioned above? Holden claim that they were seeking an additional subsidy of $80 m per year for 7 years.

Conservatives decry welfare spending but have supported a major shift in welfare payments over the years. Because of under-investment in human capital like education and physical infrastructure and neglect of steady economic adjustment, conservative governments have spent very strongly on distributive welfare to compensate for inequalities rising from our weakened economic structure. Over the last 50 years, social security assistance has risen from 5% of Australians’ household disposable income to 12%. Examples of this expanded social security assistance are baby bonuses, family allowances and superannuation concessions for the wealthy. The previous Labor governments did move to some degree to wind back some of this middle-class welfare – subsidies to private health insurance and the second baby-bonus – but the justification was more about immediate budgetary management than an expression of the principle that it is better to have a strong and productive economy with good wages. We need to become less reliant on distributive welfare both for individuals and corporations.

The path to growing incomes and fairness is through productivity and well-paid employment rather than government welfare handouts that have risen dramatically because of a failure of all governments in human capital and physical infrastructure development.

As the Scandinavians have shown, well-paid jobs with high levels of skill rather than welfare are the way to long-term prosperity. We need to be more productive and in the process of adjustment our attention should be directed first to the rent-seekers in industries such as private health insurance and superannuation. The motor vehicle industry should be a much lower priority.

The right-wing commentators show their political colours in supporting subsidies to the superannuation sector but are beside themselves in hostility to the well-paid and highly-unionised workers in the car industry. Australia needs more productivity and well-paid jobs and less individual and corporate welfare. We need a well-paid and productive workforce for good economic reasons but more importantly for the dignity that goes with meaningful work.

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