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We Must Address Inequality To Avoid The Rise Of Populism

Across Australia, people are feeling squeezed by stagnant wages and insecure work.

31/01/2017 7:01 AM AEDT | Updated 31/01/2017 7:05 AM AEDT
NICHOLAS KAMM via Getty Images
"If Australia is to avoid the rise of divisive and populist political movements, we must address inequality."

Imagine working in a job where you don't know how many hours you will work each day. For an increasing number of Australians, this isn't hard to imagine. It's the reality of insecure work.

Take the example of a removalist I met recently. Each day at around 3pm, his employer sends him a text message informing him how many jobs and how many hours he will work the next day. On busy days he might work 10 hours and earn a decent wage, but on others he might have one small job or none at all. Needless to say, such job insecurity makes it very difficult to budget for weekly expenses.

To put it another way: it's not easy to feed your family part-time, it's not easy to pay your bills part-time and it's certainly not easy to pay your mortgage part-time.

The latest jobs figures show that one in three Australians are employed on a part-time or casual basis. Thirty years ago it was just one in six.

What's that got to do with Australia avoiding our own version of Trump or Brexit?

Across Australia, people are feeling squeezed by stagnant wages and insecure work. Wages growth has collapsed to a record low of 1.9 percent.

More than one million Australians are underemployed and an increasing number of Australians are employed in insecure jobs where you don't know how many hours of work you will have tomorrow, let alone next month.

Increasingly, underemployment, insecure work and low wages growth is making it harder for families to build stable lives.

Too many Australians feel their relative standard of living has declined. They feel left behind by globalisation and technological change. Above all, their economic security has been undermined by the trend to part-time and casual work.

The head of the International Monetary Fund, Christine Lagarde, recently called for urgent action to tackle a "middle-class crisis" hitting working people. She has warned that inequality and a lack of hope were fuelling growing populism. Tackling inequality must therefore be a top priority.

When inequality rises, economic growth falls. That's because greater wealth concentration is bad for growth. It means less is spent by low and middle income workers in the real economy. In a consumer-based economy like ours, less money spent by ordinary workers is bad for economic growth.

We need a new model of economic growth that is inclusive and that ensures that all Australians benefit from economic growth.

What should be the response of policy-makers? We need a new model of economic growth that is inclusive and that ensures that all Australians benefit from economic growth.

What does this mean in practical terms? It means we need to invest in employment-centred industries, because we know that good jobs are the best way to improve living standards.

It means investing in schools, TAFEs and universities because we know that a good education is a prerequisite for ensuring our children are equipped for the jobs of the future.

It means investing in support for families by helping them balance the competing pressures of work, care and family life.

It means making sure that our tax system is fair by reforming unfair and distortionary tax policies such as negative gearing and capital gains tax concessions.

Importantly, we must make sure that our industrial relations settings provide people with a decent minimum wage, as well as strong protections from employer exploitation and unsafe working conditions.

If Australia is to avoid the rise of divisive and populist political movements, we must address inequality and that means ensuring we have a model of economic growth that is fair and inclusive.

As many Australians wait anxiously to see what a Trump Presidency means, it's worth remembering the words of another American President, Franklin Roosevelt: "The test of our progress is not if we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

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