AFR - Who Cares About Inequality

In today’s AFR, I have a column on why inequality matters.

Take the test, which society do you prefer? Australian Financial Review, 26 September 2012

To see whether you care about inequality, take this simple test. Suppose you had an equal chance of being born into any of the five wealth quintiles in Australia. Would you prefer to be born into a society where the share of wealth held by each of the quintiles was 1%, 6%, 12%, 20% and 62%? Or a society where the shares were 15%, 17%, 20% 24% and 24%?

Actually, I’m cheating, because I already know the answer. The first set of numbers is the actual distribution of wealth in Australia: 1% for the poor and 62% for the rich. But when surveyed about their ideal distribution of wealth, respondents almost universally want a more egalitarian distribution. Indeed, the figures I’ve shown are the wealth distribution preferences of the most affluent, who thought that the poor should have 15% of wealth, and the rich 24%.

So while I enjoyed Christopher Joye’s thoughtful column on inequality (AFR, 25/9), his view that we need a wider gap between rich and poor is definitely a boutique one. Asked to choose between the level of inequality in Australia and the United States, the vast majority of survey respondents opt for the Australian level.

As Treasurer Wayne Swan might put it, being Born in the USA seems appealing for those who get to drive a Pink Cadillac, but things look different for those in the Badlands and Backstreets. There is much to admire in the way that the US fosters great entrepreneurs like Elon Musk, Marissa Mayer and Sergey Brin; but we must remember that the US is also the country that jails two-thirds of black high school dropouts, and where life expectancy for low-educated white women has fallen by five years over the past two decades. Inequality may not cause these bad outcomes, but the fact is the US is a dreadful place to be destitute.

Christopher Joye asks why we have progressive income taxes when we don’t handicap sportspeople. A glib answer is that Australian sport is replete with handicapping, from the different weight saddlebags in the Melbourne Cup to the salary caps that characterise most of our sporting contests. As many English soccer fans can tell you, too much inequality makes for a dull sport.

In the case of progressive income taxes, we ask the rich to pay a higher share of their incomes in taxes because they have more discretionary income than the poor. Put another way, the richer you are, the more capacity you have to fund our schools, army, hospitals, and pensions. And while it is true that higher-income people like Joye and me are lighter users of the income support system, we tend to be heavier users of other public services, including universities, roads and airports.

The flipside of progressive taxes is that government cash payments should be means-tested. I’m agnostic about whether $250,000 classifies you as ‘rich’, but I’m pretty sure that it means you don’t need to be on welfare.  And yet when our government has imposed means-tests on household payments and tax breaks, we heard an outcry from the Opposition (a reminder that they’re the heirs to those who opposed asset-testing the pension in the mid-1980s).

Australia is fortunate to have less inequality than many other nations, and to have seen a small drop in inequality over recent years. But the gap between rich and poor has grown markedly since 1980, with the top 1 percent doubling its share, and the top 0.1 percent tripling its share. And yes, inequality boosts growth, but it trickles down slowly.

Surveys prove that Australians care about inequality, and a plethora of economic experiments have shown that people are willing to pay to narrow the gaps between the rich and the rest. I can understand why Joye disapproves of envy, but as an economist, I’m surprised he would dismiss it as ‘irrational’. What brings us happiness isn’t just our own incomes, but also the wellbeing of others. Some people might find envy distasteful, but it’s no more irrational than altruism.

As ACTU researcher Matt Cowgill has pointed out, we should be sceptical of those who argue that it’s possible to worry about poverty but ignore inequality. What we define as a reasonable standard of living is invariably based on the wellbeing of the typical household. Someone who says they don’t care about inequality isn’t just saying that we shouldn’t worry about those at the front of the pack – they’re also saying that we needn’t worry how far the most disadvantaged have fallen behind.

Andrew Leigh is the federal member for Fraser, and a former professor of economics at the Australian National University. He is currently writing a book about inequality.

National Volunteer Week

My Chronicle column this month is on some of the extraordinary volunteers in the Canberra community.

Volunteers Appreciated, The Chronicle, 1 May 2012

Last year, a friend of mine was in Canberra Hospital for cancer treatment. When I asked him how it was going, his first response was to talk about the Hand and Foot massage volunteers that came to see him. ‘It’s not just that they massage my smelly feet’, he quipped. ‘But they stand there telling jokes too. It makes my treatment more bearable.’

Peter passed away in January, aged just 27. His description of volunteering stays with me. As the federal MP for the northside of Canberra, barely a day goes by when I don’t meet another inspiring group of volunteers.

In my own suburb of Hackett, the Holy Cross church just celebrated the anniversary of their ‘Tuckerbox’, where volunteers now provide discounted groceries to over 300 families every week. Reverend Erica Mathieson described to me how the church community established the Tuckerbox because they saw it as an unmet need in the community; a way of helping others.

In Page, the Vietnam Veterans & Veterans Federation ACT are helping returned veterans with their claims, operating a food van at community events, and even running classes on how to cook healthy food. When I visited for their graduation, 66 year-old Danny Burton told the story of how the classes had given him the self-confidence in the kitchen to take over cooking for his partner, who has fallen ill.

Another organisation that only survives thanks to volunteer efforts is the Girl Guides. At EPIC in Mitchell, the Guides last month held their national jamboree, with more than 550 Guides learning leadership and outdoor skills.  At a morning tea, youth leader Sam Chenney told a group of us that signing her up for the Guides was the best decision her mum ever made. Sam told the story of going on a trip with her boyfriend where they had to rope down 100 metres into a canyon. She said she couldn’t believe it when he said he’d never abseiled before; Sam had been abseiling for years in the Guides.

Volunteers also help with community arts. With Belconnen Arts Centre, I recently produced a map of Canberrans’ favourite northside places. ‘Mapping the Northside’ would not have been possible without the hard work of volunteer Alyssa Hardy, who worked alongside the Centre’s staff to uncover the many hidden gems of north Canberra.

Volunteering isn’t just good for the recipients. As Ralph Waldo Emerson once said, ‘The only reward of virtue is virtue; the only way to have a friend is to be a friend.’ In his book The Meaning of Friendship, philosopher Mark Vernon writes about civic friendship, the notion that democracy works best when we look out for others. By volunteering to help others, we’re building a stronger society.

This year, 14-20 May marks National Volunteer Week, to celebrate our existing volunteers and encourage new recruits. If you’d like to offer a helping hand, go to www.volunteeringact.org.au, where you can find the volunteering opportunity that’s right for you.

Better Together

My Chronicle column this month is on volunteering, telling the tale of a Canberran who got active in her local community.

Volunteering can have a snowball effect, The Chronicle, August 2012

One of my passions in public life is revitalising Australia’s civic culture. Over the past generation, Australians have become more disconnected from one another. We’re less likely to be active members of a community group, and less likely to play an organised sport. Churches, unions and political parties are losing members. Surveys show that we have fewer close friends, and are less likely to know our neighbours.

That’s why it’s great to see individuals and organisations that are bucking the trend, and becoming more engaged. Recently, 27 year-old Julianne Livingston told me the story of how she had become more connected. Growing up in a relatively introverted household, Julianne wasn’t particularly civic-minded as a teenager, but she told me that in her mid-twenties, she had ‘began to long for a stronger sense of genuine connectedness and trust within my community’.

Over the past couple of years, Julianne has undergone her own civic renaissance. She joined the public speaking club Rostrum, has volunteered to help animals, joined her union, and has committed to donating blood regularly. She plans on holding a street party, and writes to MPs that she agrees or disagrees with.  After I gave a speech about building a stronger community, Julianne wrote to me: ‘Thank you for reminding me how important, and easy, it is to strengthen my civic connectedness.’  I expect Julianne’s next message will take issue with something I’ve said in parliament.

Civic activity fits into busy lives. For example, if you volunteer with friends, you can catch up while helping a good cause.

If this sounds overly virtuous, you’re getting the wrong picture. Julianne told me that life is more fun when you’re involved in local organisations. As a university student, she said, ‘I think I was a bit more self-centred’. Now, she said, ‘I feel more empowered. So when there’s an issue that angers me, I feel like I can shape it, rather than complaining about it.’

When Julianne sees something on the news she disagrees with, she fires off an email. What’s more, she encourages others to do the same. Her volunteering has put her in contact with a more diverse range of people, in terms of age, ethnicity and social background. As a result of volunteering, Julianne finds that she is better able to appreciate the different ways that her workmates do their job.

In the last Australian Bureau of Statistics survey that asked volunteers why they gave their time, the number one reason was that someone asked them to volunteer. For every person who volunteers because of an advertisement or a media article (like this one!), seven people volunteer because of a personal request.

Julianne now finds herself encouraging friends and workmates to volunteer – a positive snowballing effect. It’s a great reminder of the fact that a civic renaissance in Australia can’t be driven by government. All of us can be a part of rebuilding community life, and volunteering is a great place to start.

Stimulus, Schools and Skating

Stimulus, Schools and Skating
The Chronicle

The original skateboarders were bored California surfers – they came up with the new sport in the 1940s as a way to kill time when the waves were flat. Opening the new ‘Belco Bowl’ with Chris Bourke MLA earlier this month, I told the audience that its location couldn’t be more apt. As Canberra skaters look out over the calm waters of Lake Ginninderra, they can be reminded of how their sport started.

For anyone who hasn’t yet been to the Belco Bowl, you’re in for a treat. Now the largest skate park in the southern hemisphere, the Belco Bowl offers opportunities for expert skaters to show off their ollies, wheelies and pivots, as well as a space for first-timers to practice. For non-skaters like me, it’s a place where my wife and I can take our 2 year old and 4 year old boys, so they can watch with wide eyes as the BMX riders and skateboarders do their tricks.

The Belco Bowl upgrade was partially funded by the Australian government under the stimulus program. When the Global Financial Crisis struck in 2008, the federal government responded with household payments and infrastructure spending. We chose infrastructure projects that were both necessary and ‘shovel ready’. This included funding to upgrade Canberra’s local roads. Glebe Park also got a makeover, with a new shade sail, seating and event stage.

Every primary school received new facilities as part of the stimulus program. If you have children at school, you’ll have seen how these projects have improved their educational experience. For example, Florey Primary School has new science labs where the kids can follow in the footsteps of Howard Florey, who discovered penicillin. At Amaroo Primary School, teachers can teach in their traditional classroom, or remove the dividing walls between classrooms and teach in teams. At the Forde campus of Burgmann Anglican College, the new multipurpose hall has sharply raked seating, so all children can see the stage.

Across Australia, stimulus spending saved around 200,000 jobs, and our unemployment rate now stands at 5%, well below the jobless rate in Britain (8%) and the US (9%). Long-term unemployment can leave scars that last a lifetime. The stimulus spending not only prevented recession, it also left a valuable legacy: safer roads, better sporting facilities and revamped schools. From the Belco Bowl to Amaroo Primary, we’re investing to ensure Canberra stays the best city in Australia.