The historical development of budget standards for Australian working families

Abstract: Recent research on budget standards conducted by the Social Policy Research Centre (SPRC) is the latest in a long line of Australian budget studies. This article reviews the budget standards research undertaken by the 1920 Royal Commission on the Basic Wage and as part of a study of household income and saving undertaken at the University of Melbourne in the 1940s. The concepts developed in these studies are related to those used in the SPRC research, and can be traced back to ideas originally developed in the UK in the 1890s and by the US Department of Labour in 1919. Estimates from all three Australian budget studies have been used to help set minimum wages, most recently in the 2004 Wages Safety Net Review. However, the budget standards method has been criticized for being arbitrary, by those who favour alternative approaches to the determination of minimum wages, and by those who prefer alternative ways of measuring poverty (or reject such measurement altogether). When the Australian budgets for 1920 and 1942–43 are updated by movements in prices and by the growth in real incomes to 1997, there are some remarkable similarities with the recent SPRC estimates. This casts doubt on claims that budget standards are arbitrary and thus do not provide a sound guide to setting wages or the incomes required to avoid poverty