My Blog

Tag: Tax, Spending & the Budget

  • The latest taxation statistics reveal the massive gender pay gap across the whole economy

    The 2019-20 taxation statistics released this week by the ATO provide a plethora of data that reveals with precision the salaries of people by location, occupation age and importantly, gender.

    Labour market and fiscal policy director, Greg Jericho, undertook a deep dive into the data. He notes in his column in Guardian Australia that in 91% of over 1,000 separate occupation groups from Nightclub DJ through to Magistrates and Judges, men have a higher median income than do women.

    The data reveals that women are less likely to work in higher paying occupations, and perhaps more damning those occupations with high levels of female participation are more likely to be low paid than are jobs which are mostly done by men.

    It is clear that work traditionally done by women is much lower paid than stereotypically traditional male jobs.

    But it is not just those occupations where the imbalance occurs. Even in jobs where women are the majority of workers, men will likely have a higher median salary and be more likely to be paid over $90,000 a year and be within the top two tax brackets.

    Women for example make up 57% of a journalists, and yet account for just 46% of all journalists earnings between $90,000 and $180,000 and a mere 36% of those earning above $180,000.

    The data highlights that the gender pay gap is not just about being paid the same hourly rate for the same work, but who gets the opportunity to work more hours, and who is more likely to be given roles that pay higher wages.

    It reveals a deep structural issue within our economy in which even in jobs largely done by women, the men in those occupations will most likely be paid more.

    The post The latest taxation statistics reveal the massive gender pay gap across the whole economy appeared first on The Australia Institute's Centre for Future Work.

  • A slap-dash budget revealing a government with no idea why it is in power

    But as Fiscal and Labour Market Policy Director, Greg Jericho notes in his Guardian Australia column, the slap-dash and short-term nature of the measures reveals this government has lost any real reason for governing.

    From the extra bonus of the low-middle income tax offset with no taper, which is now being used by businesses to argue against raising the minimum wage and the relative lack of concern about those in poverty while trying to exist on JobSeeker, this budget has all the hallmarks of an effort made up at the last minute and where poll numbers were more important than any economic figures.

    The post A slap-dash budget revealing a government with no idea why it is in power appeared first on The Australia Institute's Centre for Future Work.

  • Alison Pennington: Budget billions wasted as real wages go backwards

    The federal government’s budget would have us believe that the cost of living is a sudden problem because of higher oil prices.

    But the real reason people are feeling the pinch is because their real wages are going backwards.

    The budget forecasts wage growth of 2.75 per cent in 2021-22, below inflation which is forecast to grow by 4.25 per cent. That’s a real wage cut of 1.5 per cent.

    The budget will increase the low-and-middle-income tax offset, but then scrap it at the end of this financial year. The fuel excise will be reduced for six months.

    Complex tax-bracket-shifting schemes are a good way to distract from powerful wage suppression policies. While we’re calculating “how much do I get”, these policies entrench insecure work, cap public sector pay, and stop collective bargaining. These measures hit workers every pay packet, not just at tax time.

    The amount workers get from the tax cuts is nothing compared to normal wage increases. For the 15 years to 2012, private-sector wages grew about 3.5 per cent per year. For someone on $70,000, that’s about $2500 more in one year.

    Distracting the income-strapped

    This budget is about trying to distract the income-strapped with temporary solutions that do nothing to help in the long-run. Alongside time-bound tax cuts are $250 one-off payments to income support recipients – thousands of people who permanently languish below the poverty line.

    The government is also hoping people believe in magical free-market fairies – that lower unemployment will finally unlock wages growth. As though holding a job automatically equips workers with bargaining power.

    The “record funding” fairies were out in full force, too. The Treasurer says “record funding” has been allocated in schools, hospitals, mental health, aged care, women’s safety and disability health. But if you reduce spending to rock-bottom, every marginal increase in spending with population growth can be called “record funding”.

    If it’s not enough funding to meet demand, then it can still be “record funding” for some. Shockingly, public school funding will be cut by $560 million over the next three years. Meanwhile, JobKeeper-subsidy-dripping private schools will get $2.6 billion more over the forward estimates. It’s not a budget without blows.

    Cuts to workers’ pay

    Worse, this budget signals more cuts to workers’ pay. The budget has earmarked reducing legislated minimum redundancy payments for part-time workers. This will disproportionately affect women.

    Women’s chronically low wages and poor job quality receive no attention. Hundreds of thousands of women in underfunded healthcare and social services need government to front up and fund their pay increases. This budget is proof the biggest barrier to Australian women’s progress isn’t glass ceilings, but their own government.

    This government will balls up any opportunity to address structural gender inequality. A new paid parental leave (PPL) scheme will combine the paltry two-week Dad and Partner Pay with the existing 18-week program for a combined 20 weeks. Packaged as empowering “family choice”, it will remove any incentive for fathers to take leave.

    PPL payment at minimum wage will continue to push women into primary caring roles. This is because men earn almost one-third more than women on average. That’s not women’s “choice”.

    Governments have wage-booting tools to deal with the higher cost of living. Across the ditch, New Zealand just increased the minimum wage by 6 per cent, recognising its frontline lowest-paid workers have offered the most in the pandemic, and been hit the hardest.

    Genuine cost-of-living help overlooked

    Along with boosting minimum wages, there are other options for helping workers deal with high inflation. The government could lower the cost of living by ending fee-for-service practices in all the areas they fund – child care, aged care, and disability care. Under the current government, out-of-pocket healthcare costs have increased almost three times more than CPI.

    And there’s not much hope for youth in this budget. Presented with a future of declining living standards, political dysfunction and ecological catastrophe, young people are given just $206 million in mental health funding. They can talk to someone on the phone while the world burns.

    The bottom rungs on the economic-opportunity ladder have been eliminated and youth can’t get up. Tens of thousands of educated capable youth languish in dead-end jobs. Sacrificed by a government that would rather turn unemployment into a misery industry than to create secure, career-building jobs.

    Billions of waste

    The government is wasting billions of dollars paying off their friends in business without conditions to invest in higher wages. Before this Budget, $291 billion in public spending was ploughed into a “business-led recovery” from COVID. On businesses responsibility to reinvest post-war record-high profits, there’s an eery silence.

    And in this budget, we have zero assurances new business subsidies will be invested in the real economy – people, capital, research – rather than more profit-padding.

    On budget eve, Morrison attempted to hat-tip a bygone conservative era. He said “families” will be key to winning the upcoming election. But he never invested in them, instead putting them in a pressure cooker of record-low wage growth and high living costs.

    The government was struck by enormous luck this budget. Extra revenue to play with and they’ve thrown it all away. Hundreds of billions in government spending and no era-defining economic reforms.

    Cos-of-living pressures wouldn’t be as acute if people had almost a decade of normal wages growth. But the truth is, the government has pursued wage suppression over the entire nine years it has been in power.

    The post Alison Pennington: Budget billions wasted as real wages go backwards appeared first on The Australia Institute's Centre for Future Work.

  • A short-term budget with no vision or coherency

    With the opportunity to use windfall gains in revenue to begin the fix of structural issues in the economy dealing with the low paid and essential services, the government instead has thrown money at voters in the hopes of re-election.

    The Centre’s Fiscal Director, Greg Jericho, goes through the budget numbers and finds that despite predictions of once again strong wage growth, the underlying assumptions are overly optimistic and would even still leave workers worse off than they were in the middle of 2019 until 2025.

    The budget forecasts are for strong growth now, while the money is being pumped out, but once that ends we find yourself back with the same middling growth we had prior to the pandemic.

    The post A short-term budget with no vision or coherency appeared first on The Australia Institute's Centre for Future Work.

  • Budget Analysis 2022-23: A Budget to Get to the Election

    This failure is all the more regrettable given the enormous discretionary fiscal resources which the government has at its disposal: the budget projects $133 billion in extra tax revenues over the next five years, compared to its MYEFO projections just three months ago, thanks to strong economic growth and rising nominal GDP. But instead of ploughing those revenues into reforming human services (like health, aged care, early child education, or disability services), undertaking a genuine policy to revitalise domestic manufacturing, or accelerating the energy transition, the government has prioritised one-time cash handouts to entice voters in the upcoming election.

    In this comprehensive budget overview, the Centre for Future Work’s team of economists unpacks the budget, considers its effects, and suggests alternatives.

    Our report reviews all aspects of the budget’s impacts on work and workers, including: wages, employment forecasts, vocational education and higher education, women workers and caring labour, labour standards enforcement, and manufacturing and energy jobs.

    Please also check out these rapid-response budget commentaries from two of our economists:

    “Six graphs that reveal the sugar-hit election strategy,” by Policy Director Greg Jericho in the Guardian Australia.

    “Budget billions wasted as real wages go backwards,” by Senior Economist Alison Pennington in The New Daily.

    The post Budget Analysis 2022-23 appeared first on The Australia Institute's Centre for Future Work.

  • In next week’s budget watch out for the tax cut that won’t cut your tax

    And while there will be the usual attempts to suggest better wages growth is just around the corner and those on low-to-middle income earners are benefitting the most, we should watch out for the almost guaranteed spin around tax cuts. 

    The Centre’s Fiscal Policy director, Greg Jericho, notes in his Guardian Australia column that the low-to-middle income tax offset (LMITO) was meant to be discarded when the Stage 2 tax cuts were introduced. However because doing so would have delivered no net benefit to people earning below $90,000 the government extended the offset in the 2020 budget. 

    It extended the offset again last year claiming it was providing tax relief to “10 million low-and-middle income earners” despite it actually doing nothing other than keeping the tax rate of those workers at the same level.

    We can expect the same to occur next week. 

    Budget spin is always a sight to behold, but we are now at the point where income earners are being told they are getting a tax cut that does not actually see them pay any less tax.

    Meanwhile the Stage 3 tax cut that will deliver a cut of up to 4.5% for those earning $200,000 remains in place.

    Spin and imaginary tax cuts for some; truly excessive tax cuts for others.

    The post In next week’s budget watch out for the tax cut that won’t cut your tax appeared first on The Australia Institute's Centre for Future Work.

  • Budget Analysis 2021-22: Heroic Assumptions and Half Measures

    While an abrupt turn to austerity was avoided in this budget, overall program spending is nevertheless declining substantially: falling $60 billion this year (or around 3% of Australia’s GDP) as COVID support programs are eliminated. And the new investments announced in some programs neither offset the contractionary impact of overall spending cuts, nor come close to meeting the real need for expanded services in any of these areas.

    Our briefing paper on the 2021-22 Commonwealth Budget describes the contradictory macroeconomic logic of the budget, and the risks of an economic recovery that is overwhelmingly dependent on consumer spending – at a time when consumer incomes are constrained by stagnant wages and cutbacks in income programs. It also reviews specific spending announcements in several key areas of relevance to workers and labour markets: including aged care, gender inequality, superannuation, manufacturing, and higher education.

    This budget was an opportunity for the government to recognise that a sustained recovery needs a balanced and inclusive economic and fiscal approach. Full recovery can only be underpinned by a commitment to more secure jobs, higher wages, expanded public services, and a broad portfolio of high-value industries. Sadly, the budget fails to deliver on all these counts. The government has not truly accepted its responsibility to oversee a lasting and inclusive reconstruction after the terrible events of the last year.

    The post Budget Analysis 2021-22: Heroic Assumptions and Half Measures appeared first on The Australia Institute's Centre for Future Work.

  • Budget’s Illusory Hope for Business-Led Recovery

    Key conclusions of our analysis include:

    • This budget says explicitly that Australia’s economic reconstruction after COVID-19 is to be trusted almost entirely to private business – helped along with generous tax cuts and business subsidies.
    • The need to strengthen public services (like health care, child care, and higher and vocational education) is largely ignored, as is the need to preserve and strengthen income security programs (with the phase-out of JobKeeper and cuts to JobSeeker going ahead).
    • Tax cuts, whether targeted at businesses or high-income households, will have little impact on actual spending and job-creation.
    • The government needs a more forceful, hands-on, and sustained reconstruction plan to ensure that the economy does not get ‘stuck’ in its current state of partial recovery. That needs much more public sector leadership, vision, and funding.
    • The government admits that wage growth is going to get weaker before it gets stronger – but is doing nothing about that critical problem (which will undermine consumer spending far more than tax cuts will stimulate it).

    Download our full review of the 2020-21 budget below.

    The post Budget’s Illusory Hope for Business-Led Recovery appeared first on The Australia Institute's Centre for Future Work.

  • Scourge Pricing: Understanding and Challenging Uber’s Business Model

    Her presentation discussed the historical, economic, and moral context for the rise of “gig-economy” businesses, such as Uber. She reviewed Uber’s business model, and the company’s recent IPO, in detail, arguing that it depends on underpayment of its drivers – who for all practical purposes are “employees,” even if current labour laws do not always explicitly recognise them as such.

    Growing competition, regulatory and legal problems, and growing resistance to the ultra-precarious and low-wage incomes offered in this type of work suggest that the future success of digital platform businesses like Uber is very much in doubt.

    Pennington also referenced findings of our previous paper estimating the net incomes of Uber-X drivers in 6 Australian cities.

    Please view Alison Pennington’s full presentation below.

    The post Scourge Pricing’: Understanding and Challenging Uber’s Business Model appeared first on The Australia Institute's Centre for Future Work.

  • Budget 2019-20: Ooops, They Did It Again!

    So the 2019-20 Commonwealth budget, tabled Tuesday evening by Treasurer Josh Frydenberg, featured another valiant prediction that fast wage growth is indeed still “just around the corner.” Despite a slowdown in wage growth in the last months of 2018, this budget simply replicates last year’s wage forecast – but delayed by one more year. Crucially, there is no discussion justifying why Australian workers might have confidence in this year’s forecast, when the last five so widely missed the mark (and always in the same direction).

    Our analysis of the 2019-20 Commonwealth budget focuses on the wages crisis facing Australian workers, and challenges the claim that cutting personal tax cuts can somehow compensate workers for the fact that their wages are not growing.

    Annual wage increases generate compounding benefits for workers and their families: since each year’s raise is applied against a larger and larger base. That cannot happen with tax cuts: to the contrary, their incremental effect can only shrink over time (as tax rates get lower and lower). Moreover, tax cuts always come with a significant cost: the loss of foregone public services, income supports and infrastructure that is the inevitable consequence of government’s shrinking revenue base.

    The tax cuts in this budget increase disposable incomes for workers by less than 1% (and by zero for the lowest-wage workers). In contrast, just one year of a normal wage increases delivers several times more benefits. And annual increases over three years (the term of the next government) delivers benefits dozens of times larger.

    Please read and share our full analysis of the 2019-20 budget below, which explains in detail how tax cuts cannot compensate for stagnant wages. You are also invited to view and share this short video summarising the argument (prepared with the help of our colleagues at the Australia Institute).

    The post Budget 2019-20: Ooops, They Did It Again! appeared first on The Australia Institute's Centre for Future Work.