Giving a fair go not a handout

TONY Blair once famously declared that fairness in the workplace starts with the prospect of a job.

No amount of income support or legislated protection can bestow on the individual or society the benefits that come with a good job.

In today’s aspirational Australia, equality of opportunity should be our lodestar in creating a dynamic, innovative society that gets the best out of its people.

That means maximising the conditions for job creation and labour-force participation and equipping workers with the skills to adapt to changing labour market needs.

Income redistribution should be targeted to those who cannot support themselves, such as the aged, the infirm and those otherwise unable to work.

Other forms of income support should provide recipients with a springboard back into the mainstream economy.

The unemployed are best served by incentives to return to work and maintain skills while looking for a job. This includes measures such as work for the dole and relocation carrots and sticks for younger workers as well as making it easier to keep additional income from work.

More recently, attention has turned to so-called corporate and middle-class welfare.

One person’s middle-class welfare is another person’s family tax benefit. These benefits were originally intended to be given as lower tax, rather than outlays, to recognise the costs of rearing the next generation of taxpayers. In this area, lower spending should be accompanied by lower tax, if that is affordable.

The subtext of recent government decisions not to provide assistance to the cannery SPC Ardmona and the car industry is that public funding to prop up particular firms is not supported where the benefits will largely be appropriated by shareholders, unions and other stakeholders. While there may be short-term social benefits in preserving employment in particular areas, if long-run prospects of commercial viability are missing, subsidies only delay the inevitable.

Popular support for motor vehicle subsidies came down in tandem with consumers voting with their feet, in increasing numbers buying imported vehicles. Labor’s additional subsidies were followed by job cuts in the sector and higher costs, further souring the public mood.

Arguments for compensation because we have a floating exchange rate are a furphy. The float puts a premium on industry flexibility to absorb shocks and adjust production quickly.

Modern industry policy is about positive measures to support the process of readjustment and building new areas of comparative advantage in a region or industry sector.

Innovation and commercialisation of good ideas are areas where governments can provide leadership to address market failure. Basic or fundamental research where the social benefits exceed the private benefits has often led to many important spin-off products and industries. Governments can encourage the socially optimal amount of basic research through support for universities and public research institutes. Commercialisation entails continuous improvement in business and research links, a feature of successful innovation cultures such as the US and Germany.

New enterprises lacking a track record find it difficult to obtain funding, and tax systems discriminate against longer-term research and development. Onerous regulations that deter employee share schemes for innovative start-ups are an appropriate target of government intervention, as is the framework to facilitate new financing techniques such as crowd-source funding. All these are receiving government attention.

A stronger economy is also good for the budget. The falling terms of trade raise the prospect of the slowest growth in incomes per head for decades. Our ageing population will lower labour-force participation. If labour productivity were to grow at its long-term average, gross national income per capita would grow by about 0.75 per cent a year on average across the decade ahead. Australians are used to annual growth of 2 1/4 per cent.

Barring a resurgence in the terms of trade, the simple maths is that productivity growth must accelerate to about 3 per cent to achieve per capita income growth in line with its long-term average. This is double the rate achieved during the past decade.

Quickening the pace of structural reforms and facilitating adjustment will maximise income growth and the resources available to support those in need.

And that will make for a fair-go budget.