This year marks the 50th anniversary of the US legislation – Economic Opportunity Act – introduced by Democrat president Lyndon B. Johnson. The law created the so-called local Community Action Agencies, which were directly regulated by the US Federal government. The aims of that legislation were relatively straightforward – “eliminate poverty, expand educational opportunities, increase the safety net for the poor and unemployed, and tend to health and financial needs of the elderly”. The legislation came out of the President’s – State of the Union Address – delivered on January 1964, where he made the famous statement “This administration today, here and now, declares unconditional war on poverty in America. I urge this Congress and all Americans to join with me in that effort”. The Economic Opportunity Act became known as the – War on Poverty. Times have changed. 50 years later, federal administrations around the World have declared a new type of War! The War on Poverty has become the War on the Poor. In Australia, this has manifested in recent weeks as an outright attack on the victims of mass unemployment – the unemployed. The Australian government has introduced what I have described in a number of press interviews with the national media as advanced psychological torture.



The Preliminary “Declaration of Purpose” to the 1964 Economic Opportunity Act said:

Sec. 2. Although the economic well-being and prosperity of the United States have progressed to a level surpassing any achieved in world history, and although these benefits are widely shared throughout the Nation, poverty continues to be the lot of a substantial number of our people. The United States can achieve its full economic and social potential as a nation only if every individual has the opportunity to contribute to the full extent of his capabilities and to participate in the workings of our society. It is, therefore, the policy of the United States to eliminate the paradox of poverty in the midst of plenty in this Nation by opening to everyone the opportunity for education and training, the opportunity to work, and the opportunity to live in decency and dignity. It is the purpose of this Act to strengthen, supplement, and coordinate efforts in furtherance of that policy.

The noble vision of a nation expressive collective will and high ideals.

If you are interested in the history here is an archive of videos, documents etc to mark the 50th Anniversary of the War on Poverty – Civil Rights, Tax Cuts, and the War On Poverty – provided by the LBJ Presidential Library. What a time it was!

Here is LBJs State of the Union Address:

I am researching the War on Poverty as part of a longer term book project, one of many.

You may also like these articles. The first from the Wall Street Journal (January 13, 2014) – How Government Wages War on the Poor – written by one of the more reasonable mainstream economists Alan S. Blinder from Princeton and previously vice chairman of the US Federal Reserve Bank.

He wrote:

Fifty years ago in his first State of the Union address, President Lyndon Johnson declared an “unconditional war on poverty.” Who would have thought, back in 1964, that the government would desert to the other side? If it seems strange to claim that the federal government has become more anti-poor than anti-poverty, consider these recent or current policies … Scaling back unemployment compensation is a highly efficient way to create more poor people. Never has the government terminated such benefits while jobs were so scarce … Starting in the late 1970s, the U.S. labor market began to turn ferociously against workers with low skills and education … Rather than trying to mitigate poverty or inequality, the U.S. government piled on. Had this been a football game, the government would have been flagged for unnecessary roughness …

The War on the Poor was exemplified in US legislation introduced by another Democrat president in the form of Bill Clinton’s – Personal Responsibility and Work Opportunity Act – in 1996 which he famously – announced – would “end welfare as we have come to know it”. Things have got much worse for the poor since.

The neo-liberals had ‘entered the city walls’ and their rampage against the poor hasn’t ended yet!

War on the Poor in Australia

The Australian government this week released the details of its new plan for the unemployed. You might have thought that with the labour market deteriorating by the month and unemployment rates now above the high-point that occurred as the GFC hit, that the new plan would include some job creation.

The announcement on July 28, 2014 by the Minister for Employment and his Assistant – New Employment Services model to drive stronger job outcomes – signifies a national disgrace.

The Federal government has made a artform of human rights abuses with respect to the way we now treat claimants for refugee status including young children. They are now locked up on Pacific Islands in mosquito infested prisons and the privatised security guards that the government has hired to police the prisons oversee the murder of detainees. It is as bad as that. There is clear evidence that the Australian government oversees the psychological torture of these detainees – young children develop mental illnesses while being detained etc.

If that wasn’t a sufficient national shame.

Now we have turned on our own disadvantaged citizens in an unprecedented way.

I last wrote about this topic in this blog – Changes to unemployment benefit entitlements – the work of sociopaths.

Now we have the detail courtesy of the government’s announcement.

The plan now is:

1. “Most job seekers will be required to look for up to 40 jobs per month”.

2. The unemployed will “agree to a Job Plan that will outline what they will do to improve their work readiness and to follow through on these commitments

2. “most job seekers under 50 years of age will be required to participate in Work for the Dole for either 15 or 25 hours per week for six months each year, depending on their age”.

3. “New wage subsidies will encourage employers to hire, train and retain job seekers.”

Among other things.

There is an – Employment Services 2015 Fact Sheet

I have been besieged with media interviews this week after that announcement. Most are not available on-line.

Here is one in the ABC Radio National archives – 40 applications a month ‘unworkable’ for rural unemployed (mp3 audio).

And a related story from a few months ago – Forced mobility ‘not the answer’ to unemployment (mp3 audio).

The first graph shows the relationship between the labour force (the official measure of the willing labour resources) and total employment since 1945. This is an historical series I have put together that goes back to 1861. I won’t go into how I did that – I will leave it for another day.

The difference between the two lines is the official measure of unemployment. This is the period covered by the – White Paper on Full Employment in Australia – which was introduced in 1945 as a grand statement of our national ambitions.

You can read the full White Paper in the Appendix to this paper by H.C. Coombs – From Curtin to Keating : the 1945 and 1994 White Papers on Employment: a better environment for human and economic diversity?” (3.05 mb).

The introduction to the White Paper is illustrative:

Despite the need for more houses, food, equipment and every other type of product, before the war not all those available for work were able to find employment or to feel a sense of security in their future. On the average during the twenty years between 1919 and 1939 more than one-tenth of the men and women desiring work were unemployed. In the worst period of the depression well over 25 per cent were left in unproductive idleness. By contrast, during the war no financial or other obstacles have been allowed to prevent the need for extra production being satisfied to the limit of our resources.

The War effort solved the unemployment from the Great Depression as the government increased its fiscal deficit to create work. It went beyond that because the labour force increased during that period as women came into the workforce to run the manufacturing and other supply industries while the men went to war.

As an aside, productivity rose during that period despite the women being largely unskilled in manufacturing tasks prior to the war. It just goes to show what can be accomplished when there is national endeavour and society is pulling together rather than this fractious, divide-and-conquer state that neo-liberalism has created and refined.

Up until the mid-1970s, the labour force and total employment were closely matched and unemployment was typically well below 2 per cent.

Then Monetarism came along and morphed into what we now call neo-liberalism and successive Australian governments abandoned the idea that unemployment should be a policy target (keeping it low) and instead started using it as a policy tool to keep inflation low.

Ever since, the gap between the two time series has been of varying magnitudes but full employment as a policy aspiration was abandoned.

The point is that there are not enough jobs! No matter how hard the unemployed search there will always be a pool of them who are unable to gain work.

Training and all the rest of the so-called activation programs may shuffle the unemployment queue but they do not create jobs.

The next graph shows a measure of labour demand (total employment plus unfilled vacancies) and labour supply (total employment plus unemployment adjusted for the drop in participation since November 2010) since February 2008, which marked the low-point unemployment rate in the last cycle. The two series are indexed to 100 at February 2008 to aid an understanding of the dynamics since then.

To understand the impact of changing labour force participation rates, please read my blog – The ageing impact on Australian labour force participation rates – for more discussion on this point.

Note that as the GFC hit, the Federal government (previous Labor regime) introduced a massive fiscal stimulus which was extremely effective in putting a ceiling on the rise in unemployment. Labour demand was recovering strongly through 2010 and unemployment was falling again.

Then they became obsessed with the need to push the fiscal balance back into surplus – they were under constant media attack for running a larger deficit (as a consequence of the stimulus packages) and the wheels started falling of after that.

Since the current federal government has been elected (September 2013), the situation has deteriorated even further (see how flat total labour demand is) and unemployment has been rising.

Labour demand equals how many jobs there are.

Labour supply equals how many people want the jobs and are searching for them.

The situation would be much worse if I also included the underemployed in the labour supply measure – that is, added in the extra hours of work they wanted.

At present, there are 13.5 per cent of the total labour force (that is, the official count) who are not working in one way or another (unemployment or underemployment).

Add another 2 per cent for hidden unemployment – those outside the official labour force count.

That sounds like a disaster that need a major job creation strategy.

The points I have been making in the media interviews can be summarised as follows.

The Government already forces the unemployed to live in poverty – The current Newstart Allowance is $510.50 per fortnight for a single person. This is the unemployment benefit. At present, the Poverty line for a single, unemployed person is $A408.44 per week. So the current income support payment is only 62 per cent of the poverty line, which means that the unemployed are living in third-world conditions in one of the richest (and most expensive) nations in the world.

Not to be outdone, the new Work-for-the-Dole scheme will violate the rule of law in Australia. From 1 July 2014, the national federal minimum wage for a full-time employee aged 21 or over is $640.90 per week or $16.87 per hour. The requirement to work 25 hours a week or 50 hours a fortnight in the Work-for-the-Dole scheme means they are paying the person $A10.21 per hour. That is around 60 per cent of the legal minimum wage in Australia. The Federal government is thus forcing people to work below its own Federal minimum wage. They get around it by saying it is ‘community service’ not work despite the title “Work-for-the-Dole”.

At present, depending on how you measure it the Unemployment to Vacancies ratio is between 5 and 7. That is, for every vacancy that is being notified as unfilled in Australia there are around 5 to 7 people unemployed. That is, there is a massive job shortage in the nation. The unemployed cannot search for jobs that are not there.

The government will deprive unemployed people who are under 30 years of age of access to the unemployment benefit for the first 6 months of their unemployment. In that time, they have to apply for at least 40 jobs per month and attend , or face further delays in receiving the benefit.

Unemployment people under 25 now have to accept youth allowance rather than the adult unemployment benefit. There is currencly a discrepancy of around $100 per fortnight in the two payments. The government is treating adults as children.

The requirement to apply for 40 jobs a month is ridiculous. It is not only pernicious in relation to the unemployed but the employers will hate it too.

The 40 jobs per month requirement is particularly nasty and stupid. Already one of the independents in the Federal parliament came out yesterday and said that the changes were “bordering on exploitation” (Source).

It is worse than that. It is psychological torture. Being unemployed is hard enough. The sense of disclocation and alienation grows as the duration of unemployment increases. Self-esteem drops and a person’s sense of worth diminishes. There is a mass of evidence to support that point.

When there is a shortage of jobs, the unemployed often do not receive replies to their job applications. Employers employ simple screening mechanisms (based on what is known as statistical discrimination – to filter out the thousands of job applications they get.

The lack of feedback and recognition that the unemployment receive from this filtering is psychologically damaging to their confidence.

This will compound if they have to send off 40 applications per month. That will further damage their self-esteem. That amounts to torture.

The other angle is that it will become a cynical exercise of going on-line and ticking boxes until the number of 40 applications is reached – which will bombard the employers with paperwork but serve no functional purpose other than to further the political needs of the government.

That amounts to a national disgrace.

It is also clear from the research literature than working in these punishment regimes do nothing to enhance the probability that a person will find work elsewhere once the program is finished.

A Fairfax article (July 29, 2014) – Work for dole schemes no help in finding jobs, says expert – summarises work done on this question.

They quoted one of the researchers from the University of Melbourne who said:

The international evidence is overwhelming … It’s hard to believe that the government couldn’t understand that this isn’t the best way to improve people’s employability. I guess you have to conclude that there are other reasons for wanting to expand the program, and the title of the scheme [work for the dole] suggests it’s being done for political reasons.

It is obvious that this is a political stunt at a time that the Government’s political fortunes are in rapid decline. They know that the general public has been calloused towards the unemployed by years of neo-liberal promotion of the idea that they are lazy, have poor attitudes and do not want to work.

None of the research evidence supports the perception that has been promoted. But the real tragedy of this issue is that a majority of Australians now think that way (until they become unemployed). So the government is waging a vicous and pernicious war on the unemployed to garner some political points.

They are willing to engage in psychological torture of the unemployed for a bit of political leverage.

The Melbourne Age article this morning by Gareth Hutchins – Jobless treated same as offenders – updates the information that is seeping out on this new policy.

We are now told that:

People who are asked to join the Abbott government’s overhauled work-for-the-dole program may end up doing the same work, and working alongside, people completing court-ordered community service for breaking the law.

A government spokesperson said that they “could not ensure people who work for the dole would not end up working alongside …” criminals.

Our punishment regimes merge!

The CEO of Jobs Australia said:

Working off the consequences of a bad deed, which is what a community-service order is in a negative sense, shouldn’t be translated into being punished for being unemployed, which is exactly what they’re doing

Conclusion

This year marks the 50th anniversary on the US War on Poverty.

We now accept and vote for governments that deliberately increase poverty.

But this has been extended in Australia now. We are not content just to have the unemployed living in poverty.

We want to make that poverty existence hell for them. We allow our government to torture them psychologically and punish them as if they are criminals.

When all along the problem is a lack of jobs, created by the government itself.

History won’t treat this era and the people who lived through it very kindly.

That is enough for today!

(c) Copyright 2014 Bill Mitchell. All Rights Reserved.