The "safety net" and human capital formation in Australia

This study explores the validity of key assumptions and arguments about the nature, extent, depth, causes, and consequences of poverty that underpinned the statements and policy of the Howard Government during its decade in office. One important assumption appeared to be that an inability to afford the essentials of life plays a relatively unimportant, even negligible role in generating the low levels of human capital and school achievement exhibited by many ‘poor’ parents and their children. Drawing on extensive secondary evidence from disciplines as diverse as economics, sociology, neurobiology, epidemiology and developmental psychology, the study demonstrates that these assumptions and arguments do not stand up to close empirical scrutiny. The adequacy of income support payments as a ‘safety net’ from poverty, and the validity of various poverty ‘lines’ are examined against the costs of obtaining the ‘essentials’ that Australians believe no citizen should have to go without. This analysis reveals that the depth and prevalence of poverty in Australia is considerably more serious than has been admitted by the Howard Government and in many academic analyses. Next, the study demonstrates that the rise in so-called ‘welfare dependence’ is a product of economic, rather than cultural developments; that income support ‘customer’ data contradicts the claim that poverty is mostly a transitory phenomenon; and that ‘work first welfare to work policies’ are not a solution to poverty, even during an economic boom. The second half of the thesis explores evidence from a variety of disciplines that suggests that the financial stress and material hardship associated with poverty have direct, indirect and cumulative impacts which commonly include compromised brain function and development and a reduced capacity for physiological and behavioural self-regulation. These consequences undermine physical and mental health, inter-personal relationships, parenting and health behaviours, learning capacities, and the development and maintenance of cognitive and non-cognitive abilities that are valued in the labour market. Contrary to the policy conclusions that flow from mis-characterisation of these consequences as symptoms of the intrinsic deficits of the poor, the multi-disciplinary evidence suggests that the real economic costs of allowing poverty to continue are likely to be higher than the costs of preventing it