Archive for March, 2008

Changing minds

As other bloggers said last week, I survived the cull of middle-aged men living in Melbourne, Sydney and Canberra to be selected for the 2020 talkfest. I’m in the stream called ‘productivity agenda – education, skills, training, science and innovation’.

According to the invitation letter I received today, I have to wait for a password before I know how this will all actually work. In the meantime, they are asking all participants to answer two questions in 100 words or less:

1. If you could do one thing in your stream area, what would it be? What is is that you think would make the most difference?

2. What issue have you changed your mind about in the last ten years? What changed your mind? (that’s a paraphrase).

Except for the word limit, the answer to the first question will be easy: higher education themes very familiar to readers of this blog.

The second one is much harder, for me and many other participants I expect. Issues usually involve normative elements, and these tend to be more stable than the facts and evidence that might cause arguments to be modified. On the issues likely to be discussed in this stream, I don’t think I have changed my basic position in the last ten years.

And if most participants are like me, will the 2020 discussions have any chance of reaching consensus?

The Liberals and blue collar voters

How does your demographic theory work with the “battlers” phenomenon? Was it merely transitory?

- asks commenter Leon Di Stefano.

I don’t think anyone has quite worked out how to define ‘battler’ in an easily defensible way. Peter Brent wrote a paper (pdf) a few years ago showing that Labor had always held on to its traditional seats in low income areas. But people much further up the income scale may still think of themselves as ‘battling’. Even in the top 20% of income earners, the General Social Survey finds a small percentage of people who have been unable to pay bills on time.

But claims that blue collar workers have swung to the Coalition have been easier to test. In the Australian Election Survey, data collated (pdf) by Murray Goot and Ian Watson shows that the Liberals did do better among blue collar voters 1996-2004 than they did 1987-1993, picking up 5% on average (Labor lost twice that, with blue collar voters going to minor parties as well as the Liberals). But except for 1996 Labor still had more blue collar voters than the Liberals.
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Demographic problems for the Liberals

I have long been pessimistic about demographic trends in Liberal support. Last May Ian Watson, using data from both the Australian Election Survey and Newspoll, clearly showed problems for the Liberals in that their support was concentrated in older cohorts.

This week, Watson has updated the Newspoll part of his analysis, which confirms the pattern of results in previous studies. Of course in a year the Coalition was defeated that’s hardly surprising in an analysis based on voting intentions. When general swings are on they usually cut across all age groups. The yet-to-be-released 2007 Australian Election Survey, which by asking also about party identification can get beyond some of the transitory factors affecting election outcomes, will be more interesting.

With this proviso, they key figures in Watson’s analysis look at the voting intentions of people in their 50s. We can see the political effects as the dreaded Whitlam generation comes through, replacing more conservative voters born in the 1930s and 1940s (Watson’s data goes back to the 1987 election). A whole generation of Russells!

Fortunately younger Labor politicians are on average far more sensible than their Whitlam-era equivalents, so the effects on public policy shouldn’t be too serious. But it confirms that elections will be harder for the Coalition to win in the future than they were in the past.

Should small government liberals abandon the Liberals?

Sinclair Davidson’s suggestion that the most formidable opponents of small government are conservatives rather than social democrats is interesting. I wonder whether this could lead to a realignment of Australian politics.

- commenter Winton Bates, in a comments thread prompted by a post on how the rich paid an increasing share of net income tax under the Howard government.

As I argued in my big government conservatism article, the Howard government turned into a conservative social democratic government. Like Labor before them, the Liberals under Howard used the proceeds of a broadly market economy to finance a large welfare state. Under Howard, welfare spread up the socioeconomic ladder, towards the universalism that social democrats have long wanted to create wider support for the welfare state. And by boosting the not-poor but not-rich middle class from taxes on the top 25% of earners, Howard helped keep overall income inequality fairly constant under his watch, despite growing inequality in market income.

It remains to be seen whether this is a medium or long-term ideological shift. At one level, Howard’s policies can be explained (though not explained away) by factors that are unlikely to be permanent. Politically, periods of prosperity are accompanied by greater pressure to spend more on government-provided services, so we are in the spend part of the tax-and-spend public opinion cycle. It is hard for governments without massive public opinion support for other reasons to resist such political pressures – especially when the necessary money is just flowing in on existing tax arrangements with no need to raise tax rates.
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More self-serving arguments against HECS

The National Union of Students had a flop last week with a very poorly attended ‘national day of action’. But they showed smarter tactics in peddling this story to The Age for a slow news Easter Monday.

The story opened this way:

THE Federal Government is under growing pressure to revamp the Higher Education Contribution Scheme, as students seize on research suggesting it could contribute to reduced home ownership, low fertility rates and tax evasion.

None of this ‘research’ should trouble the federal government, or anyone else, at all.

I’ve not seen any statistical evidence showing that graduates are suffering particularly in the housing market. Less than two weeks ago the papers were reporting research that despite high housing prices more young Australians were embarking on home ownership than in the past. I can’t find the paper on which that claim was based, and I am sceptical about whether it is true in absolute terms. But certainly earlier research found (pdf) that once you control for other factors affecting the time of house purchases, such as marriage and children, there hasn’t been a reduction in home ownership among the young (though the increases in house prices in the last few years should put a question mark over whether that would continue to be true in the future).

Regardless of the precise trends, though, as I argued last year there is no case for graduates getting a special first home owners grant. Effectively what NUS is saying is that even though graduates earn more on average than non-graduates, they should get an additional goverment subsidy so that they can further bid out of the market other Australians who did not go to university. Though Kevin Rudd has made the home ownership point himself, I would hope that on thinking more carefully a social democratic government would reject such a regressive policy.

On fertility, The Age says:

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Do public schools create ‘melting pots’?

Over Friday and Saturday, The Age (as commenter Brendan pointed out) ran its own version of the SMH‘s ‘white flight’ from government schools story, adding in refugees in Victoria to the Lebanese and Aboriginal students in NSW allegedly causing an Anglo-Asian flight to private schools. The news hook was statements by Laurie Ferguson, Parliamentary Secretary for Multicultural Affairs and Settlement Services, that refugees needed to be spread more widely rather than concentrating them in particular areas.

As with the SMH story, no statistical evidence was provided of the scale (or indeed, beyond principal’s unverified reports, reality) of this white flight. But let’s assume it’s true to some extent. If as we know parental background is an important predictor of school success, then the children of parents with poor English language skills, and who in the case of African refugees particularly may not be literate in any language, are not going to be ideal classmates, whatever exotic opportunities they may provide for cross-cultural experiences.

In a government school system still based primarily on people attending their closest school, the concentration of refugees in public housing that is also geographically concentrated means that refugee kids will form a large percentage of students in some schools.
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Should workers support using fiscal policy against inflation?

The Australian Workers’ Union commissioned Roy Morgan Research to conduct a poll on the idea that half Labor’s promised tax cuts should be diverted to superannuation.

As in the Galaxy poll of Queenslanders a couple of weeks earlier, a bit over a third of voters wanted the tax cuts in full. In the Galaxy poll, 55% wanted all the tax cuts to be put into superannuation. In the Morgan Poll, 50% wanted the money to be split half each between tax cuts and superannuation.

According to AWU National Secretary Paul Howes:

The poll shows voters are economically literate, and politically sophisticated enough to understand that in the fight against inflation and rising interest rates the option of increased superannuation rather than tax dollars in the pocket is smart stuff.

But should workers really be so keen on establishing the idea that budgetary policy should be used to combat inflation? As RBA Governor Glenn Stevens pointed out in a recent speech:
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Could plastic bag use rise 40% in one year?

Media reports this morning are claiming that a ‘confidential draft report’ to the federal government shows that plastic shopping bag use soared last year:

Bag use dropped steadily to 3.36 billion a year in 2006, but spiked back up to 4.84 billion in 2007, the report said.

Now I can think of at least one reason that this report is ‘draft’: that number fails a basic ‘does it look right?’ test. Despite the active efforts of retailers to reduce plastic bag use – supermarkets with their canvas bags, other retailers switching back to paper – and consumers declining additional bags when a new item can go in an existing bag, per capita use actually increased 40% in just one year?

The people writing that report would need a very good theory to explain that before I would believe it. The most obvious explanation I can think of is that either or both of the 2006 and 2007 figures are wrong.

Such a shonky set of numbers is worthy of re-opening my old Catallaxy-era ‘dubious research’ category.

The social democratic (former) Howard government

I have argued before for the social democratic tendencies of the former Howard government. One basis for doing so is that upper income earners during the Howard years provided an increasing share of the government’s total income tax revenue.

With the release yesterday of the ATO’s 2005-06 income tax statistics, Sinclair Davidson has updated the series of statistics (1996 to 2003 here) he has been keeping on what proportion of all income tax the top 25% of taxpayers pay. As it did every year except one since 1996-97, the top 25% picked up a larger share of the tax bill in 2005-06 than it had the year before.

In 1996-97, the top 25% of income earners paid 60.8% of all income tax. By 2005-06 that had increased to 65.2%, compared to 64.3% the year before. That was despite the complaints back in 2005 (eg from Andrew Leigh) that the tax cuts implemented that year would be regressive.

Yes, this was off an increased share of total income – up from 50.5% to 50.9%. But such is the effect of still very high marginal tax rates that a 0.4% increase in the top 25%’s share of income translated into a 0.9% increase in the share of all income tax paid. It helps explain why overall income inequality is quite stable.

Uni fees and the working class

The Age this morning reports the findings of 2006 census analysis I did wearing my University of Melbourne hat.

It looks at 18 and 19 year olds living at home (so we can see parental occupation and household income) to see how socieconomic background affects university and TAFE attendance rates. As there are similar census studies for 1991, 1996 and 2001, we can also observe trends over time.

For regular readers of this blog, the finding that the increased university attendance charges in 2005 had no negative impact on low SES attendance rates will come as no surprise. But the growth observed between 1991 and 2001 for all groups has stalled.

Unfortunately, the 1991 to 2001 census data does not disaggregate 18 and 19 year olds; which means it is hard for me to work out whether this is a real stalling, or a by-product of students starting university studies at a later age. For the 2006 census, there were significant increases in university attendance rates between age 18 and age 19 (21% of 18 year olds, 30% of 19 year olds).

The most striking finding, as it had been in earlier census-based studies, was that for the sons of blue collar families the normal pattern of university attendance increasing with household income is reversed. The more the family earns, the less likely it is that their sons will attend university, and the more likely it is that they will attend TAFE. For the daughters, the usual relationship is observed, but the attendance rate is only 3% higher in the wealthiest blue-collar families than it is in the poorest.
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