22 September 2016
by Peter Martin
Stress. The real reason our extraordinary low rate of Newstart is dangerous
You'd be forgiven for thinking that money matters to everyone except those who don't have it.
Last week, after months of anguish, the government gave ground on its plan to to wind back the super tax concessions directed to the wealthiest 4 per cent of the population. It didn't want them to suffer too much.
This week, at the National Press Club, Social Services Minister Christian Porter dismissed suggestions that it needed to lift the Newstart unemployment benefit of just $264.35 per week.
"The fact that people who find it challenging to subsist on Newstart do so for short periods of time might actually speak to the fact that that's one of the design points of the system," he said. The low rate was "working okay because the encouragement is there to move off those payments quickly".
As it happens, there's nothing "designed" about the rate of $264.35 per week. If there was, it would stay constant relative to other payments instead of drifting lower. A decade ago Newstart was 20 per cent of full-time average earnings. This week, it'll be just 17 per cent; and that's after Thursday's increase. Newstart climbs each March and September in line with a more miserly formula than the pension and most rates of pay. This week's increase is just 55¢ per week. That's right: 55¢, taking the weekly rate from $263.80 to $264.35.
By contrast $271 is the minimum amount per night Porter has charged, on top of his wage, for travelling away from home according to the most recent set of records. At times he has charged up to $438 per night. Living is expensive.
For almost everyone, it's more expensive than $264.35 per week, which is why, on request, Centrelink will dole out the allowance weekly rather than fortnightly. There are people who can't wait.
Even those who can wait suffer, in ways that are more serious than generally imagined.
The latest set of Boyer Lectures on ABC radio are eye-opening. Michael Marmot, an Australian who lives in London, is perhaps the world's leading expert on what kills us: not just the immediate things such as cancer and heart disease, but the mental and physical conditions that bring them about.
"How can an older person lead a life of dignity, take their place in public without shame, if they cannot buy presents for their grandchildren?" Marmot asks. How can families with children live without stress if they can't buy them new clothes or entertain their friends?
In the Whitehall study, his most famous, Marmot examined the lives and deaths of 17,530 British civil servants. There is nothing particularly remarkable about civil servants, he explains in his lectures. They are "neither the richest nor the poorest in society".
Yet those public servants on the lowest rate of pay, with the least control over how they spent their days, were extraordinarily more likely to die in any given year than those at the top. Even when he controlled for risk factors (comparing non-smokers to non-smokers and so on), those at the bottom were twice as likely to die as those at the top.
If we are short of money our stress system kicks in.
Even those on step 2, just one rung below the top, were far more likely to die of all causes than those at the very top. His explanation is stress. Hormones such as cortisol can kill, through all sorts of mechanisms. People who don't know how they will make it through the week are loaded with them.
In their new book Scarcity: why having too little means so much, economist Sendhil Mullainathan and psychologist Eldar Shafir describe what they call "bandwidth tax". Many of us can easily cope with unexpected calls on our finances such as traffic fines or emergency visits to the dentist.
But if we are short of money our stress system kicks in. Worrying consumes our mental bandwidth as well as poisoning us. At an American mall, they asked high income and low income shoppers how they would cope if their car suddenly needed a $3000 service. The low income shoppers performed incredibly badly on a series of intelligence tests administered immediately afterwards; much worse – an incredible 13 IQ points worse – than low income shoppers who hadn't been asked to think about the $3000 service. The high income shoppers performed no worse.
Thirteen points is the difference between "superior" and average intelligence, it's the difference between average intelligence and "borderline deficient". It could be the reason why people stressed by trying to live on $264 per week (plus whatever they can scrounge) do so poorly at job interviews.
Porter wants to get people off welfare, which is fine. But getting them out of anguish-inducing poverty is important regardless. Instead he revealed at the press club that the Turnbull government plans to press ahead with the Abbott government's decision to extend the waiting period for Newstart from one to four weeks. It would be better off dropping the measure (which was never likely to get through the Senate) as a gesture of goodwill. Unemployed Australians might even believe the Coalition can imagine how they feel.