Towards a new social democracy

I’m a 34-year-old social democrat who believes in equality of opportunity.

Some might choke on this declaration given my support for raising the GST, school vouchers, deregulated HECS fees, income tax cuts and less labour regulation.

Those people confuse the means with the ends.

Traditional social democrats have long supported organised labour, substantially higher tax and spend policies and regulation of markets as the primary driver of opportunity and equity. Until recently I’ve often been a fellow traveller on that path.

And yet, the evidence should lead those inclined to social democracy to different more radical solutions.

A recent Treasury paper found that those with only year nine schooling have workforce participation rates 20 per cent below those who complete year 10.

Kids who then complete more schooling earn more in later life and kids who go onto higher education earn substantially more and have much higher employment participation, fewer periods of extended joblessness and better opportunities.

The real question facing social democrats is whether traditional methods for solving long-term joblessness, child poverty and family violence work. Can governments create opportunity and improve lives?

The rise of the jobless family has been marked and is concentrated in the communities we traditionally associate with disadvantage, especially Aboriginal families, single parent families and those with low educational attainment. Indeed even in 2005, 14 per cent of children lived in jobless homes. This is not to blame but to observe.

Indeed, traditional disadvantage for children as measured by joblessness in the home has not been significantly reduced even by the economic boom years in the last decade and a half, since the last major recession in the early 90s.

This should be the scandal of modern politics.

It’s not an infrastructure deficit in Australia that’s the primary failing of the Howard government, at least to social democratic eyes, it’s that the relative employment, income and wealth of the disadvantaged didn’t improve enough during the Howard years and in many circumstances went backwards.

It’s clear that more spending should be targeted to those who are most disadvantaged, but targeted in ways that alter behaviour.

Aboriginal students in high school could be paid to attend and learn.

Early learning should be universal, prioritised and funded appropriately. Despite appearances Rudd Labor has only gone part way to satisfying this.

Tax cuts and social security reform should be progressive and directed at workforce participation among the low paid.

Weighted school vouchers would encourage school choice and the ability of parents from disadvantaged backgrounds to choose better schools.

Pricing greenhouse emissions globally is essential but not picking green technology winners.

Financial regulations striking a balance between making finance widely available to households and firms while ensuring the lending activities of financial institutions don’t pose undue risks to depositors and the wider economy.

Embedding competition in the economy, especially in areas such as the parallel importation of books, makes it easier for poor families to afford the tools of advancement.

Indeed aside from a fiscal stimulus to generate work during the global recession, when measured against criteria to alter behaviour among disadvantaged groups to induce better outcomes, the Rudd Government has conspicuously not delivered.

Yet we should also accept that opportunity results from the wider growth of the economy and that social investment should be funded by a budget in balance over the economic cycle.

Tax reform should be implemented, including raising the GST so that progressive tax cuts can be afforded that encourage work along with means tested education vouchers that make better schools available to working families and more funding for schools with disadvantaged kids.

While there is substantial middle class welfare, like the family tax benefits that should be repackaged as working tax credits, doing this is not enough by itself to rebalance the Budget without substantial cuts in government spending.

Big cuts in government spending as proposed by the Rudd Government with its 2 per cent spending rule and promise not to increase the tax burden as a percentage of gross domestic product above what it inherited in 2007 will certainly strain its claim to traditional social democracy in the next Parliament.

A better approach would be to accept that some increase in spending as a per cent of gross domestic product is needed above 2007 levels but that tax reform requires an efficient means for raising revenue and the most efficient means is to use consumption taxes.

However, unlike the failure of the Howard government, social democrats should accept that beneficial tax and wages policy reform can disadvantage low paid working families.

Better to accept this and use progressive taxation as compensation, than to devise workplace laws that might generate more income for those with work, but through cost pressures on business, then make it harder for those without work to get it.

There is a new social democrat waiting in the wings: one that has no strong ties to organised labour but is deeply committed to social mobility. That new social democrat will have its turn. It will be bold, new and different.

Let’s consign the shibboleths and move towards it.