dependency ratios

We look at Dr Katharine Betts's latest graph of ABS statistics on the ratio of working to dependent in Australia, noting that it is both untrue and discriminatory to imply that the 'Aged' are by far the biggest group of 'dependents.' In relation to the graph, we also look at the role of land-use planning and the social division of work in industrial society in creating financial dependencies where none previously existed. We note that established financial and institutional investment in the post-war industrial-contractual model makes it inflexible and resistant to changes in economic feedback, but that change it must as fossil fuels deplete. Left to their own devices, Australians would probably return to the human default social organisation around kin and place, which is flexible and low cost. This will only become possible, however, with cheaper land and an economic system which permits increasing relocalisation and more flexible use of land than the current plans for packed appartments and dense dormitory-suburbs anticipate.

Click on above image to see larger full-size graph.

Sources: Disability, Ageing and Carers: Summary of Findings, Australia 2003, Catalogue no. 4430.0, ABS, Canberra, 2004; Labour Force, Australia, Detailed - Electronic Delivery, Catalogue no. 6291.0.55.001; General Social Survey 2006, Confidentialised Unit Record File supplied by the ABS.

Notes: The ABS defines a profound disability as one where the person always needs help with one or more of the activities involved in communication, mobility and self care, and a severe disability as one where the person sometimes needs such help.

The data on labour force participation are for December 2009, but detailed age break downs were only available for June 2009. All of the data have been standardised to the age/sex structure of the population in June 2009.

Graph and "Notes" (above) by Assoc. Prof. Dr Katharine Betts, (Swinburne University, Victoria) author of Immigration Ideology, MUP, 1988 and The Great Divide, Duffy and Snellgrove, 1999. She is also the co-editor, with Bob Birrell, of the Monash demographic quarterly, People and Place.

Introduction: We look here at Dr Katharine Betts's latest graph of ABS statistics on the ratio of working to dependent in Australia, noting that it is both untrue and discriminatory to imply that the 'Aged' are by far the biggest group of 'dependents.' In relation to the graph, we also look at the role of land-use planning and the social division of work in industrial society in creating financial dependencies where none previously existed. We note that established financial and institutional investment in the post-war industrial-contractual model makes it inflexible and resistant to changes in economic feedback. Left to their own devices, Australians would probably return to the human default social organisation around kin and place, which is flexible and low cost. This will only become possible, however, with cheaper land and an economic system which permits increasing relocalisation and more flexible use of land than the current plans for packed appartments and dense dormitory-suburbs anticipate.

Discussion

This is a complicated graph. Rather than start out looking for the greatest number of dependents, it is probably easier to look for the greatest number of full time then of part time workers. What is outside those full-time and part time workers gives you your main 'dependents'. Many of those are defined as dependent simply because they are not working in a paid job or deriving an income from a source in their own name. They may however be receiving support from a partner, such as a husband, while they are rearing children. In addition, many of the students aged 15 and over have paid jobs, some of them full-time.

However the real dependents are those who are literally unable to work.

Dependency is defined economically, by material income and paid work or the ability to participate in getting an income, and it carries a stigma, since it is assumed that 'dependent persons' cost the taxpayer. Although we know that many women do an enormous amount of unpaid work in the home as mothers, partners and grandmothers and as volunteers, if we only count people in paid work as making an economically useful contribution, this unpaid work is overlooked. (The ABS does know about this problem; they don't mean to denigrate domestic work). If dependent means not in paid work, women are the largest 'dependent' category at all ages (even in infancy, because more survive).

How the growth lobby misrepresents the ratio of dependency

Because the growth lobby likes the idea of women having lots of children, there is a tendency to misrepresent dependency as only occurring among the elderly.

We can see, in fact, that the numbers of officially totally dependent people (the red category) remain quite small in all cohorts. These are people who, because of some disability, need help from others in order to cope with tasks of daily living, such as washing and dressing. We can also see that the largest totally dependent category- pink and pale turquoise with border - are not actually classified as such at all. They are classified as infants or students. [Due to possible confusion of similar colours, let us precise here that light blue, as opposed to turquoise with border, represents students who are employed part-time.]

It looks like the government’s and the growth lobby's constant use of 'Aged' as virtually synonymous with 'dependents' is a blatant case of age discrimination, since it implies that elderly people are by far the biggest group of the totally dependent.

There is another group in yellow which isn’t in paid employment. From the age of 60 the yellow category starts to get quite large. That doesn’t mean that it is ‘dependent’. The people in the yellow category are living by some means – probably through superannuation, pension or investments.

Much larger, however, are the pale turquoise and pink categories. These categories extend over the first 15 to 20 years of a person's life. [1]

The non-dependent categories

The green categories – i.e. the ‘employed’ – both part-time and full-time – are considered to be supporting the yellow, the red, the pink and the pale turquoise with border categories. From a purely financial perspective, it doesn't matter if they are generating taxes to support babies, students, homemakers, disabled people or elderly infirm people.

Some people worry that if the number of new babies dwindles, there won't be enough people moving up from the bottom of the pyramid to carry the dependencies that increase at the top. They forget that if a population has a smaller base than middle, that means that by the time the people in the middle stop working and the smaller population base enters the workforce, the competition for land will have reduced, so the cost of living will be much less. This will reduce the cost of funding retirees.

Positive economic impact of decrease in number of young dependents

Also to be considered is the fact that, as the proportions of pink and pale turquoise infants and full-time students decrease, so will the burden on taxpayers. Schools, child-care and health and welfare services for the young are supported by taxpayers, just as are old age pensions. But children also involve heavy private costs for their parents. And often this means that parents have to forgo earned income, as they stay out of the labour force in order to provide care. Of course children bring many intangible benefits to their parents, but from the point of view of time and money, there would be more resources for other needs if we had rather fewer of them.

With regard to the yellow categories, just because they are not in paid employment, it does not mean that they are not doing something useful. Wives or husbands support their working partner by looking after house and garden, growing food, doing accounts, looking after children, and participating in the community. Many grandparents may also look after children so that parents can work, or they provide knowledge, experience and an example to the community. Elderly people are the eyes and ears in a street where everyone else goes to work all day. There are also so many things which need attention in our society and housewives/husbands and elderly people and the unemployed are among the ones free to participate in groups monitoring the environment and political developments at all levels.

Dependency and Variations in the Social division of work and land-use planning systems

Australia's industrial social organisation and its land-use planning system have also come to mean that the extended family, with which the responsibilities of earning a living, raising a family and participating in the politics of one's community were formerly shared, has become disorganised and dysfunctional. This is not, as is often suggested, simply because Australians are 'selfish'. The early and strong continuing urbanisation of Australian society, with drift to big cities in search of work, harsh expectations of relocation along with one's employer, and migration from one country to another or one end of Australia to the other end, splinters clans from their original location, isolates nuclear families and splits up parents and children. This makes most of us ever-more-dependent on the industrial models of salaried employment, bank loans and insurance, new housing, and, notably, contractual nurturing, caring, and nursing arrangements. The industrial state has adapted to try to mitigate this fragmentation and fracture of human social systems, in formal 'social services', which it finances through much higher taxes than in pre-WW2 years. If these professionalised and contractualised services are privately contracted, they need somehow to make a profit, which also raises the costs of dependency, as we see in child-care centers and private nursing homes.

Established financial and institutional investment in this industrial contractual model makes it resistant to change, but change it must, in the face of declining margins of profit associated with declining availability of cheap and abundant fossil fuels. It is not surprising that the state is concerned about its ability to provide for 'dependent' Australians, but it should be able to recognise how the system it relies on has created more dependency and more expensive dependency. Left to their own devices, Australians would probably return to the default social organisation around kin and place, which is flexible and low cost. This will only become possible, however, with cheaper land and an economic system which permits increasing relocalisation and more flexible use of land than the current plans for packed appartments and dense dormitory-suburbs anticipate.

Notes

[1] This span of years of dependency of youth could well expand in the future if the industrial employment model doesn't last as which have tended to last for something like 20 years.

Note that finishing study, around the age of 15 or 20, does not necessarily mean an end to 'dependence'. Dependence, in the form of 'unemployment' could well expand in the future if the industrial employment model doesn't last as depletion of fossil fuel progresses. Partial dependence could expand through categories if median wages are unable to afford unsubsidised accomodation or food, power and water if land-prices continue and push up the cost of everything else.

Republished here to give background to Sheila Newman's remarks in her debate with Steve Bracks on the Jon Faine show 19-4-2010. You can comment on Jon Faine's "Population Forum" about the debate here and you can listen to the podcast here. The sector in Australia that has the most costly dependency ratio must be the property sector, since it costs all Australians an enormous and unreasonable amount just to cover the cost of land for housing, business and agriculture. Most of the very high costs involved are completely unnecessary, except in the eyes of greedy developers and their hangers-on

Mr Salt, wrong again

Yesterday (4 Feb, 2010) the Australian had Bernard Salt raising the alarm about the dependency ratio (again). But the man is hopelessly misinformed. Elderly people are not the big problem. And children (who are more dependent and for longer and who outnumber elderly people) are not the problem either.

The sector in Australia that has the most costly dependency ratio must be the property sector, since it costs all Australians an enormous and unreasonable amount just to cover the cost of land for housing, business and agriculture. Most of the very high costs involved are completely unnecessary, except in the eyes of greedy developers and their hangers-on. The only reason that the costs are so high is that the industry wants it that way and our state and federal governments are in cahoots with it.

The housing industry is making life in Australia miserable

Australians pay these monstrous costs first and must deduct them from their disposable income. These unnecessary costs affect the amount of hours we must work and how hard we must work and whether we can afford to take holidays. They affect our health and happiness. The high prices affect the cost of doing business, of manufacturing, of storage, garaging etc. When these costs are inflated they take away from other economic and social obligations, which are to provide education, hospitals, child support and retirement funding in the form of pensions and superannuation. Yes, even for self-funded retirees, the cost of doing business is inflated by the cost of land and is deducted as a variety of costs from any profits which devolve to shareholders.

Australia's inflated land-costs

Australia's inflated land-costs mean that small business has had increasing difficulty surviving and that for an increasing number of Australians, survival itself - in terms of accessing shelter and having enough money left over for food and clothing - has become difficult and sometimes impossible. For more Australians each year, transport to get to work or education to train for employment, are luxuries. Yet all this could be changed if property development and housing were no longer considered as private profits but as public expenses and the factors that contribute to their inflation were adjusted accordingly. These factors are those which drive up demand. Demand is affected by births, deaths and immigration and, to a lesser extent, by household size, location and position, which may all be to some extent discretionary.

What drives the high cost of land in Australia?

The most noticeable adjustable drivers of demand are overseas and interstate immigration. Interstate immigration can be dealt with by adjusting building permits at local levels. Overseas immigration can be dealt with by State Governments ceasing advertising for new immigrants and by National Government revising immigration quotas downwards. For maximum reduction of costs, land and housing availability should be exactly equal to demand.

In a steady state society, houses would become available as people died, with some overlap, at very little cost.

It is Australia's housing industry which is responsible for elderly people being scapegoated instead of honoured and supported to enjoy the long and happy lives that we should all be able to look forward to.

ABS data

"For most Australians, whether buying or renting their home, the provision of adequate housing for themselves and their families involves substantial ongoing expenditure throughout much of their lives. Housing costs are often the largest regular expenses to be met from a household's current income.

The housing costs measure compiled from the Survey of Income and Housing is defined as the sum of:

* rent payments,
* rates payments (general and water), and
* mortgage or unsecured loan payments, if the initial purpose was primarily to buy, add or alter the dwelling."
Source: 1301.0 - Year Book Australia, 2008

It is always very difficult to get information from public sources on how the cost of land affects the cost of living in Australia because the Australian Bureau of Statistics refuses to treat land as a 'commodity' and our cost of living measure, the consumer price index, only factors in the cost of 'commodities' - other things you buy.

This kind of information is about the best we can get from the ABS (see below). It doesn't tell us very much. Most of the information is in the private sector and costs a lot to see.

It also doesn't tell us how much people who have businesses pay for rent and buildings on top of the money they pay for their own housing.

The ABS doesn't admit that land is like a commodity in Australia

Yet land is treated like a commodity in Australia, and we know for sure that for many of us it is our greatest burden:

“The development of stock mortgages and wool and crop liens in Australia represented legal ingenuity in that on traditional analysis, a property transfer was taking place with respect to something which would only come into existence in the future – the crop or wool to be grown.

In Australia land was not in itself a source of power but an asset capable of producing wealth. Improvements, particularly fencing, represented a high proportion of the value of real estate and borrowings on the land seem to have been greater than in England. It is thus argued that land in Australia was always viewed as a commodity, see Davidson and Wells, “The Land, the Law and The State: Colonial Australia 1788-1890” (1982) 2 Law in Context 89 AND Whalan, D., The Torrens System in Australia p.98.” Source: Adrian J Bradbrook, Susan V MacCallum, Anthony P Moore, Australian Property Law, LBC Information services, 1996, p.1.103:

Is the Property Development industry becoming an embarassment to its members?

Mr Salt recently argued that the property sector was being too timid. He implied that they had become somewhat embarrassed by bloggers highlighting the industry's reasons for promoting high immigration. He urged them to weigh into public debate and wondered why usually high profile growth lobbyists were acting like such wall-flowers.

"... I must say the “growth vs no growth” issue is ascendant and is likely to remain so during 2010. What disappointed me about this debate was the lack of supporting comment emanating from the property industry. No-one that I could see was out there putting the case for growth.

And I suspect the reason is that “big (property) business” doesn’t want to draw attention to itself on a contentious public issue. There seems to me to be almost a timidity in property individuals getting involved in public debate about growth. The logic seems to be don’t rock the boat."

Who would want to admit they are in this industry?

Well, maybe, the property industry is becoming a little more self-aware and less inclined to shoot from the mouth. Perhaps some of the younger people in the industry are becoming ashamed of the role the industry plays in creating and increasing poverty and inequality. Perhaps some of the young planners and builders aren't too keen on trashing the countryside. Maybe when young property developers, engineers, planners and developers you go to parties these days, their mouths go dry and they blush when some nice girl or bloke asks them what they do for a living.

I mean, what do you say? "I make my money out of unaffordable housing." "My boss is a land-speculator." "I serve the land-lords of the world." "We're in the business of overpopulation. It's good for our profits." "Oh, your mother protested on the steps of parliament last week?" "You hate people who bulldoze trees?" "Um, you think we cause most of the carbon gas increases in Australia?" "Well, I didn't choose to have small animals flee at my approach." "Gee, I might be responsible for people dying of thirst in a few decades, and I'm already responsible for animals dying of starvation, but hey, it's a job."

"The only way to offset the impact of the baby bust next decade is to grow the tax base through immigration. That’s why we need a big Australia, at least in the short term. And, make no mistake, this trajectory is good news for the property industry," writes Bernard Salt.

Well, no, Bernard. There is another way and it involves downsizing the property development industry so that we can afford what any normal functioning society can expect to provide for its children and elderly.

I look forward to some intelligent and responsible leadership from those young people who are currently embarrassed by their industry.

Anticipating the counter-argument

Basic economics requires profit to be made from land so that society can have publicly available infrastructure. Land commodifiers and speculators use the need for a profit margin to justify the buying and selling of land at unreasonable prices and for government and business conspiring to inflate those prices. But, when the costs of land are so high that they make business impossible, the time has come to say good-bye to the private housing and development industries.

NOTES

First published here 2/6/2010 but republished to give background to my remarks on Jon Faine Show - 19-4-2010