Living standards and our material prosperity

Poorly performing measures of inflation and real wages

Inflation figures, upon which claims of real wages growth are based, do not accurately measure many increases in the cost of living for ordinary people. The most scandalous example is the omission of the cost of land from the Australian Bureau of Statistics' Consumer Price Index. Given the galloping inflation in costs of housing, of which land is by far the greatest component, the Government's claimed 20 per cent increases in average real wages bear little relation to the reality that many Australians face when struggling to pay off mortgages or rent.

The average distance involved in commuting to and from work has steadily climbed for increasing numbers of people obliged to live in new outer suburbs. These suburbs don't have adequate public transport and the public transport that there is, in any case, is increasingly neglected. A reliable car has become a necessity.

In the past many people still had a large yard and a shed in which they could repair their own car. Even in the outer suburbs now, garden, yard and shed space is shrinking and this affects garage and workshop activity. When people lived closer to work and had good public transport there was less urgency associated with having a vehicle available. The car owner could take their time doing their own repairs or shop around for a reasonably priced and reliable mechanic.

An added complication is that newer cars also have complex computerised parts that cannot be repaired by non-specialists. The upshot is that most people now have little choice but to pay whatever it takes to have the car fixed quickly by the first available mechanic.

For many, mobile phones and the Internet are not just a convenience, they are an expensive necessity for employment and business. They entail substantial costs for equipment and subscriptions.

It is easy to come up with many other examples of newer overheads of work and daily life which are not measured by inflation figures. These overheads are necessary to deal with the ever escalating complexity of our lives.

Among other factors, this complexity is the result of:

• ever greater crowding of our cities due to enforced population growth;
• delegation by government to the less efficient private sector of the responsibility for providing services that the government itself had previously provided, and;
• the government's own propensity to increase the amount of red tape that citizens need to comply with.

Many things that were once either free or very cheap are now out of reach for ordinary people. In the 1950s and 1960s it was possible for my late grandfather to take his family to a holiday by the beach at Maroochydore on Queensland's Sunshine Coast each year for the entire six weeks of the summer holidays all on the single wage of a primary school teacher. Today, such a holiday is completely beyond the means of ordinary Australians.

Many Australians work longer hours, often as unpaid overtime, often involuntarily, for low wages. Then there are a lot of people who have low hourly rates and are unable to find enough hours of work to make up a decent wage.

The hours worked are often organised in shorter stretches for employer convenience. Thus the unfortunate employee has to make more commuting trips consequently spending more time and money travelling. In all cases the average overall intensity of work during the hours of workday has increased. This means that people who cannot continuously keep up the pace are not able to participate in the workforce as they would like or need to.

If the ABS inflation figures were to comprehensively measure these costs, and attach monetary values to the various ways in which the quality of life for many has declined, the “real wages” figures would probably reveal a substantial drop in the actual standard of living of most Australians and a massive drop for many on the lower end of the income spectrum.

To be sure, a significant number of Australians employed in areas like the mining industry, where some skills are in high demand, do enjoy more material prosperity. If, however, they were to ponder the above factors they might realise that this prosperity is not nearly as great as it superficially appears to be.

The material prosperity we do have, moreover, depends upon high consumption of material goods manufactured mostly in countries like China and India in highly polluting processes which increase the greenhouse effect.

Objectively our natural capital is being destroyed: we are moving backwards, not forwards.