Every other day, new scandals pop up, disturbing the business community, and bringing forcefully to our attention that our wage, tax, and social security systems are ‘broken’, and in need of urgent attention and re-thinking.
Franchisee scandal of widespread underpayment
Have you ever wondered why you only seem to see Indian or other overseas students working in petrol stations and other franchises? As Adele Ferguson wrote in the Australian Financial Review on 5 March, the Fair Work Ombudsman has exposed “widespread, systemic underpayment of wages”, and an exploitative operating model in the franchise system. The situation is so bad that Caltex is planning to withdraw from its 237 franchisees and 433 sites. The bad business model has forced franchisees to cut costs by exploiting their workers,who are often paid $12 an hour, less than half the award wage.
It is not just Caltex involved with such fraudulent practices. As we have seen, 7-Eleven, United Petroleum, Pizza Hut, Domino’s, Hungry Jacks, and Retail Food Group (which includes Gloria Jeans and Donut King) have also been caught out. The problem is systemic and widespread. How has such malpractice been allowed to proliferate in such an important part of the Australian economy? Nearly 80,000 francises operate in Australia, employing 470,000 people.
Efforts to promote fairness in the economy are meeting obstacles even more troubling than the malpractice in some franchisees. John Hewson wrote on 28 February that “while the politics have becoming increasingly hopeless, the imperatives for tax and transfer reform have intensified … the corporate tax base is eroding, housing and superannuation concessions are excessive and blatantly ‘unfair’, base erosion and profit-shifting, particularly by multinationals, are excessive, and key welfare benefits, such as Newstart and the base pension, are now well short of an acceptable ‘poverty line’… Overall, the system is complex, inequitable, inefficient, and unsustainable”.
If politicians cannot do what is needed, then he recommended passing responsibility to a “truly independent” body, such as was done to establish the Reserve Bank.
Ken Henry: businesses exist to serve the community
No less a figure than former federal Treasury, Ken Henry, now chairman of the National Australia Bank, last week warned that political polarisation has resulted in public policy being driven by special interest groups, exacerbating inequality and deepening disadvantage for growing sections of the population.
On tax reform, he said Australia will see not progress, “unless the community sees vested interest make way for the national interest”. He warned that the business tax cuts of $65 billion would further increase Australia’s debt burden, unless undertaken as part of a thorough overhaul of the tax system, particularly by reforms to the capital gains tax concessions, including negative gearing and many other inequitable and distortionary taxes.
He added that taxes are “too low”; “we have to keep in mind that the purpose of taxation is to raise revenue to fund government spending; to do things like build a social safety net that reduces inequality, and to fund world-class education and health systems. The tax system is a critical determinant of our social fabric”.
In his address to the Australian Institute of Company Directors on 2 March, Ken Henry insisted that businesses must demonstrate clearly that they also act out of a social purpose to benefit the whole Australian community, and are not engaging simply out of self-interest.
The Henderson Poverty Enquiry as a guide to rework social policy
Ken Henry’s is not a lone voice. Many others are calling for a sensible public conversation about how to restore social equity, fairness, and opportunity for all Australians. The Melbourne Institute and the Brotherhood of St Laurence held a conference on 14-15 February on ‘Social Security Reform: Revisiting Henderson, Poverty, and Basic Income’. The economist, Vin Martin, has summarised the conference in the March 2018 issue of our SPC newsletter.
Former Deputy Prime Minister, and (among his various ministries) Minister for Social Security in the Hawke-Keating governments, Brian Howe, in his keynote address to the 160 or so participants, mainly economists, noted that governments were not listening to economic advice, and were overly influenced by ideology and special interests, resulting in a fraying of social policies and growing inequality. He urged economists to be increasingly effective and insistent with governments and in the public forum, including defending people experiencing acute financial and personal distress.
In view of the hardship faced by many, Howe urged economists to take the Henderson Enquiry as an inspiration of how social policies needed to be refashioned for our changed circumstances. The conference presentations will be published.
As Tim Colebatch points out in a recent article in Inside Story, the International Monetary Fund also called for increased fairness in the tax system in Australia, but not by raising the GST, a regressive tax disproportionately falling on the lower and middle-income groups. Instead, it argued that corporate and personal tax cuts should be financed by broadening the tax base, reducing tax breaks, and targeting income tax cuts. Colebatch pointed out, though, that the IMF report seemed unaware that “Australia’s stagnant unemployment” ranked it only fourteenth out of 27 comparable countries, and that our underemployment rate “is just about the highest in the Western world”.
Social Services struggling to cope with increased need
Like many other social agencies, Catholic Social Services Victoria (CSSV) is struggling to meet demands for help. CSSV organised a three-day conference for more than 200 Catholic and other community leaders over 21-23 February about the need for increased fairness and adequacy in social services. We are all aware of increasing numbers of people begging or sleeping on the streets in our major cities, but this is just the most visible sign of homelessness and the rising costs of housing. Many more are knocking on the doors of agencies and churches, asking for food and money, stretching resources, and often meaning people have to be turned away.
Prominent speakers at the CSSV conference included Phil Glendenning, Director of the Edmund Rice Centre and president of the Refugee Council of Australia, and Joe Zabar, Director of Economic Policy for Catholic Social Services Australia, speaking on No economy of exclusion and inequality. He was partnered with Labor member for Hotham, Claire O’Neil, and John Roskam from the Institute of Public Affairs.
Denis Fitzgerald, Executive Director of Catholic Social Services Victoria, spoke on how church agencies must confront the new challenges in the changing landscape of Catholic social work.
Former Director of Catholic Earthcare Australia, Jacqui Remond, addressed challenges of climate change. Dr Bronwyn Lay from Jesuit Social Services, and the specialist in utilities, Gavin Dufty from the St Vincent de Paul Society, raised other problems faced by many.
On sexual abuse issues, the Commissioner on the Royal Commission, Mr Robert Fitzgerald, gave a keynote address, with Maria Harries and Sheree Limbrick also speaking, followed later by Fr Frank Brennan. Their talks can be found on the website of Catholic Social Services Victoria.
One could be forgiven for feeling depressed with all the bad news we are hearing. But what is more significant is that so many people, right across political, academic and social spectra, are beginning to form strong coalitions to develop sensible and equitable social policies. If Ronald Henderson and his supporters could do it 50 years ago, why cannot we do it again today?