Friday, September 25, 2009

Times Are Tough, But Not At The Top

It’s always easy to take a cheap shot at politicians receiving a pay rise because of the widespread perception that they do so little to earn it. Never mind that the decision is made by the independent Remuneration Tribunal, never mind the obvious logic of keeping up with cost of living increases, and never mind the bizarre fact that politicians are in many cases paid less than the public servants who answer to them. Every time a pay rise is awarded for politicians there will always be the usual chorus of disapproval, and the decision announced this week is no exception.

The Tribunal has awarded an increase of 3%, which will lift a backbencher’s salary to just over $130 000 a year, and the Prime Minister’s income to about $330 000. This compares to an average increase in wages across the community of about 4%, so it’s not exactly extreme. It’s even more modest when compared to the recently publicized 10% plus increase in average pay for top corporate executives. But there is one very important difference this year which provides much greater than usual justification for the criticism. This is the year when the so called Fair Pay Commission told low income earners that there would be no increase at all in the Federal Minimum Wage. None. Zip. Nothing. Zero.

The Commission explained its decision by telling us that it was “intended to protect jobs and to support a stronger recovery in employment as the economy picks up”, conveniently ignoring the increases to the cost of living over the preceding year. Effectively, we were told that times are tough and sacrifices must be made. Well it’s pretty clear now just who is expected to make the sacrifices. It is the low income earners who will receive no pay rise at all under the Federal Minimum Wage, and it is the workers who have had their hours reduced or who have been asked to go from full time to casual to keep their jobs while the boss still enjoys an increase to his income. It is the unemployed who are still asked to survive on $228 a week, after an increase of just one dollar a week after the most recent indexation.

There are some who suggest that politicians are not paid well enough to reflect the nature of their responsibilities, and that paying a rate more in keeping with corporate pay might attract a better caliber of politician. That’s a separate argument, and may have some merit, especially if it was introduced along with other reforms to remove the vast array of rorts available through allowances and other benefits. But let’s not kid ourselves. The corporate world is not necessarily the paragon of good practice in such matters either. Paying $30 million to Sol Trujillo didn’t exactly ensure that Telstra got a better caliber of executive, and that’s just one example among many.

The bottom line is that the politicians we elect are supposed to be there for our benefit. They are supposed to uphold our rights and freedoms, and they are supposed to manage the economy for the benefit of all Australians. To have those same politicians accept a pay rise of any kind while the poorest people in our community are told that there is not enough to go around and that they have to go without is an utter insult. Sure times are tough, but apparently not if you’re at the top.

Thursday, September 24, 2009

The “Not As Lucky As We Thought” Country

It comes as something of a surprise to be told that, according to figures from the OECD, unemployed people in Australia are the poorest in the developed world. According to the figures, 55% of unemployed Australians are officially poor, as compared to the OECD average of 37%. Poverty is defined by the so called Henderson line, which is calculated according to family and employment status, and is currently set at $405.52 per week for a single person. The payment available on the unemployment benefit, known these days as Newstart Allowance, is $228 a week, plus rent assistance up to a maximum of $55.90 a week if you qualify. That leaves a single unemployed person with no dependents almost $120 a week below the poverty line.

There is also a significant gap between unemployment benefits and the age pension which has just become even wider because of the long awaited increase to pensions. The rise in the pension was long overdue and quite literally the least the government could do to address the very real problem of pensioners being condemned to live in poverty. It could be argued that pensioners still deserve more than the $30 odd a week extra that they are now receiving, but for people on unemployment payments there is no comfort at all.

Now, it has been argued many times that pensions are meant to be a permanent income for people who will not be returning to work, while unemployment benefits are not. Unemployment benefits are intended to be a short term measure to provide support for people between jobs. People are not supposed to live on unemployment forever. For that reason there is some justification for not paying as much to unemployed people as we do to pensioners, but that approach overlooks two very important things. First, even at the increased rate the pension is not exactly a bonanza and is not in itself a relevant yardstick. Secondly, the reality is that there are significant numbers of unemployed people who will not be finding jobs anytime soon.

The current economic climate has seen a 30% increase in the number of people relying on the unemployment benefit, and all the expectations are that unemployment figures will continue to rise for the next year. There are regional areas with large numbers of long term unemployed who cannot hope to find a job where there are simply not enough jobs available. There are thousands of people over 50 who may never work again because the jobs they once held are now going to younger people or perhaps don’t even exist anymore. Older people in particular are trapped in the twilight zone of making applications for non-existent jobs for years to come until they reach pension age.

The case for increasing the level of support for unemployed people is overwhelming. It simply isn’t possible to survive in the hi-tech, high rent world which exists today on the level of payment currently available. That’s not to say that people should be able to enjoy a life of comfort and ease at the taxpayers’ expense, but at least they should be able to pay the rent. The fact that unemployed people in Australia are worse off than in any other OECD country, is a clear warning sign that something is wrong. It seems that Australia is turning out to be the “not as lucky as we thought” country.

Wednesday, September 23, 2009

The Real Travesty Is Government Cost Cutting

There are strong arguments on both sides of the debate over corporate sponsorship at the Australian War Memorial. It was revealed this week that the local Canberra utilities company TransAct had done a deal to sponsor the Last Post ceremony each day at the Memorial just before closing time. For $25 000 a year, TransAct is entitled to have a small logo displayed on the lectern used by the master of ceremonies. They also get a mention on the Memorial’s website along with dozens of other sponsors. It would seem to be a reasonably tasteful form of corporate sponsorship without any tacky or garish paraphernalia. But this is the Last Post, considered a solemn and sacred event, and so the accusation has been made that the Memorial, and more importantly the government, has sold out.

While nothing should be allowed to detract from the importance of the ceremony, opinions are divided on just whether or not such a sponsorship deal does so, or is in keeping with other sponsorship arrangements already in place and long accepted. For example, the eternal flame at the Memorial has been sponsored for over twenty years, and that contribution is noted by a small plaque alongside the flame. Nobody has ever been offended by that. The Memorial actively seeks out support from both individual and corporate donors and sponsors, and has benefited considerably from that assistance over the years.

It should also be considered that sponsorship provides an opportunity for good corporate citizens to make a contribution to something that is worthwhile and important to the community. It is a way for companies to give something back to the Australian community from the profits that they make. None of these companies is obliged to support the memorial, and there are thousands of other public relations and marketing opportunities available to them which in many cases might even offer them better exposure. They could be sponsoring a football team and receive plenty of media coverage, but instead they have elected to allocate some of their marketing money to something which is of great significance to the community.

Wars have been fought to preserve democracy and freedom, and one of the freedoms that we have defended is the freedom to do business in a free market economy. From that point of view, it is perfectly fitting that the businesses which operate in our free market should honour the sacrifices made by the members of our armed forces in preserving that freedom. Is there anything wrong if they also gain a public relations benefit from that? Of course, nobody wants to see any such solemn event turned into a blatant commercial message exploiting the goodwill associated with the War Memorial. That would be a travesty, but for precisely that reason, no corporate sponsor would want that anyway as it would reflect just as badly on them as it would on the curators of the Memorial. But there is nothing wrong with sponsorship arrangements which are tasteful and appropriate.

Of course, if every exhibit and every event at the Australian War Memorial is to be tagged with a sponsorship message, the real risk is that it will start to look very much as if the government is simply failing to provide adequate funds to sustain what is such an important part of our nation’s heritage. With real funding for the Memorial falling as part of the government’s efficiency drive, it would be easy to come to that conclusion, and that is the real travesty.

Tuesday, September 22, 2009

Gravy Train Still Steaming Along

There has been a lot of discussion in the past couple of days about Geoff Dixon and the enormous salary he enjoyed as the C. E. O. of Qantas. In the last financial year, Mr. Dixon was paid almost $11 million, and he didn’t even work for the whole year. The total salary of $10.7 million included his termination payment, his unused annual leave entitlement, bonuses, and a $3 million compensation payment because a change to the law had capped his superannuation contributions and reduced his benefit. There has been sharp criticism of this arrangement because for most of us a change in the law which results in a disadvantage is just our bad luck, and we don’t have our employer pick up the difference. That’s a good point, but it is just one aspect of a larger problem.

It is not a question of whether or not Mr. Dixon deserved the payment, or whether or not he did a good job as the boss of Qantas. It is a question of whether or not it is good for business, good for shareholders, and good for the community generally to disproportionately reward executives, especially at a time when ordinary workers are having their wages frozen, and having their hours reduced to cut costs. Although Mr. Dixon is the one who attracted plenty of headlines, the fact is that he is not the only one. Recent figures indicate that on average executive pay has continued to increase despite the global financial crisis by a factor of about 10% over the past financial year.

During the same period, more than 200 000 full time jobs have been lost across Australia, pushing people into casual and part time positions if they can find them. Fewer hours are being worked, and workers on the Federal Minimum wage have been told that they will get no increase at all this year. We are told that times are tough, credit is tight, the world is in recession, and sacrifices must be made. But it appears that there are some people who are immune from the need to make any such sacrifice at all, despite all of the big talk from politicians and regulators about doing something to curb corporate excess and greed.

The real problem with corporate executives is not that they are highly paid. It is perfectly sensible to pay someone well for a job well done. The problem is the basis on which they are paid, and the disproportionate bargaining power that executives seem to have when negotiating their pay packets. While talented people may well deserve to be richly rewarded, too often the reward is not connected to the talent, and even more often the reward is not connected to the risk. Top executives get paid to make big decisions, taking big risks, with money which does not belong to them. It is not their own capital which is at stake, and that fundamental distinction impacts upon the decisions that they make.

I have spoken and written many times before about the corporate privateers, the buccaneers, who demand enormous salaries to run companies which do not belong to them, and do so with their own interests uppermost in their consideration. That can appear to work just fine so long as the best interests of the executive coincide with the best interests of the company, its shareholders and its customers, but when that is no longer the case it is the shareholders who are left to pick up the tab.

The truth is that despite the walloping of the Global Financial Crisis, and the big talk from the politicians, nothing has changed and the big end of town is still getting bigger, while everybody else is picking up the crumbs from the table. Over in America, the big investment banks like Goldman Sachs are generating record profits and paying their executives record bonuses. Here in Australia, we never had the same extremes which existed in the United States, and that is one of the most important reasons why our economy has survived so much better. It looks as if the fat cats on the gravy train still haven’t realized that, but then again it is much more likely that they just don’t care. And so long as the gravy keeps on running, and somebody else picks up the cost, why would they?

Monday, September 21, 2009

Four Star Luxury For Ferguson, While Pensioner Waits For Toilet To Be Fixed

Last week I told you about the pensioner with severe psychological disorders who lives in a Housing New South Wales apartment which is in need of repair. There is a catalog of problems which require attention including a toilet which leaks water all over the floor, incomplete bathroom plumbing, a hole in the wall in the kitchen where the paneling has disintegrated exposing the electrical wiring behind it, doors and windows which do not open and close properly, as well as incomplete paintwork and refuse left over from previous efforts to make repairs. The substance of the tenant’s list of defects is broadly consistent with the report compiled by the department itself, although there is some variation in the assessment of the degree of severity and urgency of the work.

The reason that this repair work remains incomplete after more than a year of discussion is the range of mental health issues from which the tenant suffers. They include depression, social anxiety disorder, and agoraphobia. Independent psychological assessments have been provided to both the department and myself which indicate that the severity of the tenant’s condition makes it impossible for her to be present while contractors are admitted to the apartment to carry out the work. It might not seem a big deal to most of us, but independent medical experts have indicated that her distress is both genuine, and extreme, and has a corresponding impact on her physical health.

Last year, the department temporarily relocated the tenant to a motel so that the bath could be replaced. According to department guidelines, the nature of the work was such that it was considered that the premises would be unfit for habitation while it was undertaken. The tenant claims to have been told that all the necessary work would be completed in her absence, but apparently it was not. Ever since then she has been requesting another period of temporary relocation in order for the work to be completed. The position of the department is that the remaining work is not of a nature which would render the apartment unfit for habitation while it is carried out, and so according to the guidelines there is no justification for spending taxpayers’ money on motel accommodation for this tenant.

Last week, I suggested that this approach would appear to completely disregard the mental health issues in making such a decision, indicating perhaps a failure of guidelines to recognize or allow for such issues to be considered. I suggested that given the protracted nature of the affair it might actually be cheaper for taxpayers to grant the request for special consideration rather than waste more money on abortive attempts by contractors to gain entry while the tenant is in residence. I also wondered whether the taxpayers of New South Wales would prefer to spend their money helping to resolve this dilemma or to pay for the paedophile Dennis Ferguson to be accommodated in public housing, jumping the queue ahead of 39 000 desperate people who are still on the waiting list. Then I read the weekend papers.

On the weekend, the Sydney Morning Herald revealed that prior to being housed at the unit in Ryde which attracted so much attention last week, Dennis Ferguson was put up in a four star hotel for a period of two weeks. It struck me immediately that there is something seriously wrong with a system which will pay for Mr. Ferguson to have a two week holiday at taxpayers’ expense in four star luxury, while the poor old pensioner who has, to my knowledge, never broken any laws, can’t even be put up in the local motel for a couple of nights while essential repairs are carried out to her apartment. I’m pretty sure it is not what the taxpayers would want.