![]()
Part 1
The rise of the Australian welfare state
![]()
1 The wage earners’ welfare state and the rediscovery of poverty
Australia possesses one of the most selective income security systems in the western industrialized world. Financial assistance is provided on a flat rate basis, funded from general taxation revenue rather than via contributions from workers. In contrast to many European states, Australia did not introduce social insurance schemes whereby those who experience unemployment or sickness are protected by income replacement packages. Rather, our welfare programmes are mostly means tested, targeted to the poor, and low in monetary value (Whiteford 2010).
Early historians regularly depicted Australia as a ‘workingman’s paradise’ in which disparities of wealth were far less prevalent than in the old world. Yet, pre-Federation Australia was hardly immune to the effects of severe poverty. Research by Jill Roe (1975) suggests that 10 per cent of the Australian population lived in permanent poverty during the nineteenth and early twentieth centuries, whilst a similar proportion resided in temporary poverty. Particularly vulnerable groups included struggling farmers, unemployed labourers, the aged, and deserted and widowed mothers. There was frequent evidence of disease epidemics and high mortality rates in the inner-city slums (Garton 1990).
The Australian states responded to these social needs with a combination of private charity and government poor relief. Private benevolence was minimal in order to discourage idleness and directed only to those judged to be deserving. However, the 1890s recession and associated social and political tensions placed increasing pressure on governments to intervene. There was increasing acceptance of the notion that poverty reflected social and economic conditions, rather than individual behaviour (Garton 1990; O’Connor, Wilson and Setterlund 1999).
Governments principally reacted in two ways. Firstly, they introduced measures to protect the rights and conditions of workers including women and juveniles. Secondly, they began to introduce direct payments for non-working poor groups such as the aged and infirm in preference to charity. These two developments earned Australia international renown as the alleged ‘social laboratory’ of the world (Butlin, Barnard and Pincus 1982; Garton 1990).
Following the establishment of the Commonwealth Federation in 1901, the objective of decent wage levels for the working man was institutionalized via a creative class compromise between urban manufacturing interests, represented by Alfred Deakin’s Liberal protectionists, and the emergent labour movement.
The three components of this alliance were Compulsory Arbitration, Protection, and White Australia. Arbitration was enshrined in Higgins’ 1907 Harvester judgment, which defined ‘a fair and reasonable wage’ for adult males supporting a wife and children as seven shillings a day. Protection enabled the manufacturer to pay ‘fair and reasonable wages without impairing the maintenance and extension of his industry, or its capacity to supply the local market’. The White Australia policy was justified as a defence of white workers from cheap non-white labour (Castles 1985).
Thus in Australia a unique welfare state model was developed, a model which concerned itself primarily with the protection of wage levels (at least for white male breadwinners), rather than the provision of supplementary welfare benefits. Castles calls this model a ‘wage earners’ welfare state’ and contrasts it with both the residual model of welfare (because Australia has a minimum living wage) and the institutional model of welfare (because full inclusion in the system depends on one’s status as a wage earner rather than one’s status as a citizen) (Castles 1985: 102–103). Some commentators have criticized Castles’ analysis for allegedly diverting attention away from the failure of the Australian system to actually provide support for those unable to access paid work (Bessant et al. 2006).
In addition to wages, the Commonwealth Government introduced old age pensions in 1908 and invalid pensions in 1910. However, payments were only provided to applicants judged to be of ‘good character’. Asians, Aborigines other than half-castes, alcoholics, past prisoners, and recent immigrants were not eligible. The Commonwealth also introduced a maternity allowance in order to promote a higher birth rate, but once again excluded Aborigines and most Asians and Pacific Islanders. Both the pensions and the maternity allowance were funded from general revenue, rather than through contributory insurance schemes as tended to be the case in Europe. This method of financing the system through progressive taxation was viewed as uniquely redistributive (Garton 1990; Bryson 2001; Murphy 2011; 2013).
Nevertheless, both the wages model and the benefits system had significant flaws. The living wage granted by the Harvester judgment provided an income closer to a subsistence level than one of reasonable comfort. It also failed to address the needs of large families given that the system was based on an assumption of three children, and made no formal provision for women workers. Nor was any recognition given to women’s role in unpaid caring work. Overall, the model assumed that men would act as breadwinners and women as dependants (Garton 1990; Bryson 2000).
No further income security payments were introduced by the Commonwealth Government until the 1940s. Able-bodied men were expected by the state to support themselves via paid work. Working men themselves preferred work to welfare, which was regarded as demeaning. Some states introduced limited new schemes. For example, the Queensland Government provided relief to assist seasonal labourers during periods of temporary unemployment, and the New South Wales Government introduced widow’s pensions and child endowment. However, in general, unemployed workers and their families were forced to rely on relief from charities which resulted in enormous distress during the Depression (Macintyre 1986; 2015; Murphy 2011).
Attempts to legislate for expanded benefits were consistently frustrated by dissension between conservatives, who favoured the introduction of contributory social insurance schemes similar to those in Britain and Germany, and the labour movement, which demanded the retention of the existing non-contributory system of funding (Watts 1987; Roskam 2001). Garton calls Australia’s social policy record during the 1920s and 1930s ‘dismal’ compared to other western countries (1990: 123).
The growth of the Australian welfare state 1941–1949
The basic legislative and programme components of the Australian welfare state were introduced between 1941 and 1945, which has been referred to as ‘the heroic age in the history of the national welfare state’ (Beilharz, Considine and Watts 1992: 82).
A significant contributor to this development was the Joint Parliamentary Committee on Social Security set up initially by the conservative United Australia Party (UAP) Government in 1941. The Committee’s First Interim Report tabled in September 1941 reported that ‘a considerable proportion of Australia’s citizens are poorly housed, ill-clothed or ill-nourished – living in conditions which reflect no credit on a country such as ours’. The Report recommended that social services would contribute to the war effort ‘by improving the morale and willingness to work of the employees, who will feel that a regime which is prepared, even at this time of emergency, to improve their conditions is worth working and fighting for’ (Shaver 1987: 415).
The aim of the social security reforms, therefore, was to rectify the inadequacies of the earlier ‘wage earners’ welfare state’ by adding income transfers to supplement market outcomes. Among the measures introduced during this period were child endowment (introduced in the last days of the UAP Government and extended to Aborigines on condition that they were able to show evidence of progress towards assimilation), funeral benefits for deceased pensioners, a new form of maternity allowances, widows’ pensions, unemployment, sickness and pharmaceutical benefits, and hospital and tuberculosis benefits. By the end of the Second World War, the Commonwealth had assumed responsibility for all major income security benefits and health care (Kewley 1969; Murphy 2011).
The Labor Party governments led by John Curtin and later Ben Chifley from 1941 to 1949 were strongly influenced by a Keynesian social liberal tradition (Watts 1999). This philosophy emphasized the integration of social and economic policy via a combination of free markets and government economic planning to ensure continuous economic growth and full employment, and protection of the social and economic rights of the underprivileged. For example, Labor Party Prime Minister Chifley asserted that it was the ‘duty and responsibility of the community, and particularly those more fortunately placed, to see that our less fortunate fellow citizens are protected from those shafts of fate which leave them helpless and without hope’. The labour movement would fight to ensure a future ‘free from want, insecurity and misery’ (Chifley 1953: 85).
In his 1949 election statement, Chifley argued that:
The Labor government’s programme of social security is directed to establishing a minimum degree of well-being and security below which no one should be permitted to fall and without waiting for anyone first to fall a victim to destitution and grevious distress.
But at the same time, the Australian Labor Party (ALP)’s promise to provide a minimum income for all citizens was balanced by a classical liberal concern not to promote welfare dependency by providing social security ‘on a scale that would eliminate personal incentive or a proper measure of self-help’ (Chifley 1949, quoted in Mendelsohn 1954: 156).
A benevolent welfare state?
Most commentators regard the introduction of Labor’s welfare state as an expression of compassion and benevolence that marked a sharp break from the earlier periods of conservative inaction (Dickey 1980; Garton 1990). However, some left-wing critics argue that the welfare legislation also reflected pressing political and fiscal considerations.
According to this viewpoint, there were substantial policy continuities in policy thinking between the conservative governments of the 1930s and the Labor period. Much of this continuity reflected the influence of a powerful group of economists, political scientists and public servants – H. C. Coombs, L. F. Giblin, D. B. Copland, R. T. Downing, etc. – involved in the key policy-making processes. These policy advisers viewed welfare initiatives not solely from the vantage point of compassionate idealism aimed at securing social equity and fairness, but also as a pragmatic means of dealing with the demands of wartime economic, manpower and taxation policy.
Thus it is argued that Labor used its welfare measures to redefine financial obligations and to secure more revenue for the Commonwealth Government by imposing heavy taxation on low-income earners. This was achieved by lowering the tax exemption rate for single income earners from £156 per annum to £104 per annum. In short, despite traditional Labor opposition to contributory funding, workers were now being asked to pay at least in part for their own welfare benefits (Watts 1987; 1999; Beilharz, Considine and Watts 1992).
A further criticism relates to the precedence given to economic development and full employment over welfare measures. This criticism notes that the Labor Party’s primary objective was to achieve full employment, which was seen as the real key to economic and social security. In the 1945 White Paper on Full Employment, for example, the essential mechanism of human welfare was defined as an efficient, fully-functioning wage-labour market. Social welfare was to play a subordinate role, being seen principally as a safety net that would play a compensating role in times of economic downturn (Watts 1987).
According to Prime Minister Chifley, ‘A comprehensive social security scheme was an indispensable concomitant of, a stabiliser in, full employment policy. It would help sustain purchasing power on which full employment depended, while full employment would keep social security costs to a minimum’ (Crisp 1961: 188–189). Consequently, Australia’s spending on income security as a percentage of Gross National Product in 1949/50 was only 4.7 per cent compared to an average of 8.025 per cent for 12 advanced countries (Castles 1985).
However, a counter view holds that this critique reflects too narrow an identification of social policy with welfare payments per se, and ignores the broader Keynesian interventionist policies and objectives of the Chifley Government. Social concerns were to be directly addressed via government intervention in the market to secure economic growth and full employment, rather than through a narrower focus on social welfare (Smyth 1995; Fenna 1998).
According to Smyth, ‘The relatively minor importance attached to the establishment of welfare services is a sign, not that plans for post-war reconstruction were insignificant, but that other policy instruments were considered more powerful means of attaining social objectives’ (1995: 53). It was only later that the focus of the welfare state debate became narrowed from the integration of social policy and economic measures to the relatively marginal issue of social services (1995).
The conservativism of Liberal–Country Party Coalition governments 1949–1972
Keynesian economic theory, which emphasized the importance to economic growth of full employment and social security, was highly influential in the immediate post-war decades. Keynesianism allowed the Liberal Party to develop a compromise between the full-scale planning of ‘extreme’ socialism — which they despised — and the inhumane laissez-faire economics which had been discredited by the mass unemployment and poverty of the 1930s. Thus whilst full employment and social services were to be guaranteed by state intervention, the Liberals argued – under the influence of the business community and the corporate-funded Institute of Public Affairs think tank – that overall economic progress would best be delivered by the free market (Smyth 1995).
This pragmatic compromise between individual and market freedom on the one hand, and welfarist compassion for the poor on the other, was typified by the rhetoric of the founder of the Liberal Party, Sir Robert Menzies. In his famous ‘Forgotten People’ speeches of 1942, Menzies specifically rejected ‘a return to the old and selfish notions of laissez-faire’ in which the state merely maintained ‘the ring within which the competitors would fight’. Instead, Menzies argued in favour of government assistance to, and protection of, underprivileged groups:
The country has great and imperative obligations to the weak, the sick and the unfortunate. It must give to them all the sustenance and support it can. We look forward to social and unemployment insurances, to improved health services … to a better distribution of wealth, to a keener sense of social justice and social responsibility.
(1942a: 25)
But at the same time, Menzies warned against the false benevolence of the ‘all-powerful State’ that would undermine the individual initiative and self-reliance which Liberals valued. Menzies opposed policies
designed to discourage or penalise thrift, to encourage dependence on the State, to bring about a dull equality on the fantastic idea that all men are equal in mind and needs and deserts, to level down by taking the mountains out of the landscape.
(1942b: 20)
The dominant philosophy of Liberal Party social policy was a commitment to individualism, incentive and self-reliance. Whilst the Liberals rejected a return to the unrestricted laissez-faire economics of the 1930s, they eschewed any collective responsibility to relieve distress and suffering, and continued to prefer provision to the poor by the family and private charities, rather than reliance on state bureaucracies. They also continued in principle to favour funding by insurance schemes rather than by general taxation, although they accepted that alternative financing methods could not be implemented within the existing political agenda (Roskam 2001).
Consequently, Menzies, as Prime Minister from 1949 to 1965, forged a limited welfare state which provided a safety net sufficient to keep the needy from destitution, whilst ensuring that the net was low enough to encourage self-reliance rather than dependence. Poverty was viewed as the outcome of personal behaviour and choices rather than as being caused by structural inequities beyond ...
