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Maxwell Newton, The Weekend Australian, May 24-25, 1980, p. 22.

The insane pressure from organised labour for a 35-hour week underlines the growing desperation of the ordinary male worker, who finds that in the Welfare State he has emerged as the bunny who is paying more and more of the cost and getting less and less of the benefits.

The worldwide insanity of escalating wage demands, allied with industrial unrest on an unprecedented scale may be explicable mainly as a product of the frustrations created in the working classes by the immense financial demands of the welfare state.

The welfare state has turned out to be a divisive and destructive thing, whose cost is seen in wild wage demands, bitterness and frustration, disillusion and community hatred. I very much doubt whether we shall see a return to industrial and community peace, to moderate wage demands and hence to a strong reduction in inflation until there is a major dismantling of the welfare state.

This is because the welfare state costs are evidently resented by the people who are paying more than their fair share of the cost — the ordinary male wage and salary earners. Thus, the need for a bar on the growth of government spending is not merely justified by ideology but far more importantly by the fact that the growth of government spending in recent years has been the principal engine in the escalation of money wages demands.

ISSUES

Certainly, the growth of union power has been a necessary condition for the industrial agitation and the outrageous money wage demands.

But it is in my view by no means a sufficient condition.

In the five years to 1977-78 while gross national expenditure rose in current money terms by $125, and private consumption expenditure rose by $116, government final consumption expenditures rose by $180.

It is a well know story. Government demands on the nations resources have been rising since 1972-73 very much faster than have demands by private consumers and by businesses.

That is the essence of the growth of the welfare state.

In terms of employment, we know that between May 1973 and January 1980 the total number of people employed rose from 5,719,000 to 6% — an increase of only 6% over a period of six and a half years.

Yet between June 1973 and January 1980 the total number of pensioners and unemployment, sickness and special beneficiaries (excluding something like a million veteran pensioners) rose from 1,288,000 to 2,242,000 — an increase of 74%.

Over this period, the number of pensioners per thousand employed workers rose from 225 to 369.

We also know (and we are constantly being reminded by socialist ideologues who don’t like the way the welfare state is working out in practice) that the PAYE tax payers are finding their tax payments escalating much faster than total tax collections and than the tax payments of either corporations or self-employed individuals.

OPT OUT

Very large numbers of individuals and corporations (large and small) have found that they can opt out of paying their “fair share” of the horrendous costs of the welfare state and are doing so.

The result of these various trends is that the “real” after-income tax earnings of the average male with two dependent children has stagnated since the early 1970s.

Why would this not be so? Governments are taking a bigger and bigger share of gross national expenditures for welfare state purposes: PAYE collections are assuming a growing share of total tax collections.

The time has long since passed when the average wage and salary earner could be dissuaded from making demands for bigger and bigger money wages by appeals to the fact that he is receiving a growing proportion of his social benefits in the form of government-provided services such as inefficient hospital and medical care and half-hearted quote education unquote for his children.

Additionally, a growing proportion of the work-earned entitlements of wage and salary earners is in the form of non-wage entitlements, such as improved sick leave, holiday pay, workers compensation and superannuation/long service leave entitlements which do not figure on the weekly pay picket but which figure very large (something like $35 of the average wages bill) in the labour costs of employers. Hence, each increment of a dollar in pre-tax labour costs yields the wage earner only about 65 cents in after-tax earnings, while loading his employers costs with something like a $1.30 increment in costs, which are passed on in prices.

As the average family has scrambled to maintain its “non-government” real consumption growth there has been a mass movement of females, including married females, into the workforce.

Between May 1973 and February 1980, while total male employment rose by a miserable $4 over the period of almost seven years, total female employment rose by $16 and married female employment rose by $13.

This pattern continues. In the year to February 1980, total female employment rose by $4, more than twice as fast as the (still quick) increase of $1.7 in male employment. Increasingly, household after-tax incomes depend on contributions made by single and married females.

Family consumption aspirations depend more and more for their satisfaction on the female contributions.

The family, faced with a stagnating source of real after-tax income from dad, has had to rely more and more on mum and the unmarried daughters to finance a continuing growth in family expenditures such as improved housing, improved furnishings, motor vehicles, travel and the like. In order to maintain the momentum of growth in such expenditures at the rate to which family became accustomed in the pre-welfare state days of the sixties, there has had to be a very substantial addition to the after-tax funds dad is bringing home.

Not surprisingly, there is evidence of widespread breakdown of the family under these pressures. Total of divorces have been: 1973=16,266; 1974=17,744; 1975=24,307; 1976=63,267; 1977=45,175; 1978=40,525. The divorce rate (per 1000 of mean population) was 1.2% in 1973 and, even after the first upheaval caused by the new family law act had passed in 1976 and 1977, was still more than double the 1973 rate, at 2.8% in 1978.

The “halls of hate” — the family courts of Australia — still echo loud and clear with the pain and disillusionment of life under the welfare state.

Additional family pressures have also followed the growth of the enormous population of young dole-recipients frozen out of employment by the protective barriers thrown around adult wage levels by union success in demanding and getting youth wages levels totally out of relation to youth productivity. While this union pressure has tended to protect dads pre-tax wages levels, it has left him saddled with a dole-recipient son adding his fair measure to family tensions.

In essence, the welfare state has left family goals deeply confused and has generated confusion and resentment among male family heads. The average working stiff knows he is being taken for a ride — and not surprisingly he resents it and is lashing out. There will be no end to today’s great age of inflation until the welfare state is dismantled.

(in order of appearance on Economics.org.au)
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  3. Maxwell Newton Audio at Mises.org
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  19. The Bulletin on Maxwell Newton as Workers Party national spokesman on economics and politics
  20. Menzies: A Legacy of Lies and Legislation Limiting Liberalism
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  25. Maxwell Newton on Reg Ansett
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  27. 1975 Max Newton-Ash Long interview on the Workers Party
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  36. Maxwell Newton on ideas for cutting government waste
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