This week there was a debate in the lower house about the Government’s proposed tax cuts package – and one statement caught the attention of media.
In a response to a hypothetical question by the leader of the opposition, the Prime minister responded
“..a 60-year-old aged-care worker in Burnie is entitled to aspire to get a better job, is entitled to get a promotion, is entitled to be able to earn more money.’
The assumed premise being that tax cuts for higher income earners are an incentive to lower-income workers. One would think just having the chance to get a higher income would be incentive enough, but putting that aside, I thought it would be interesting to explore just what a 60-year-old aged care worker in Burnie actually earns.
60-something aged care workers in Burnie: a profile
According to the Census there were almost 50 aged or disabled care workers in Burnie aged between 60 to 69 in 2016.
It’s no surprise that these workers weren’t actually earning that much. In fact, the mean income per year was $34,000 and the median income was between $650-$799 per week or $33,800-$41,599 per year. There were no workers earning more than $65,000 per year.
Setting aside the fact that the odds are stacked against someone in their 60s attaining a job in a higher paid industry, in terms of getting a promotion there were only 7 Aged Care workers in Burnie who would potentially stand to gain any benefit from an increase in the second highest income tax threshold from $87,000 to $90,000 in 2018/19 and then to $120,000 in 2022/23. No Aged Care worker was earning more than $104,000 per year.
As mentioned, this is not surprising as Aged Care Workers are in the lowest 10% of paid occupations when it comes to average weekly earnings (quite remarkable when you also consider that 77% of the workforce in this industry have formal qualifications, compared to 55% for the whole economy).
The Prime Minister’s recent statement comes on the back of a statement he made in May when he said increasing the high-income threshold would mean
“Middle-income earners will be vastly better off… because they will only be paying a top marginal rate of 32½c”
Middle-income earners: a profile
Now Greg Jericho from the Guardian has dealt with this statement in some detail, but it doesn’t take that much digging to understand that $87,000 is far off what a middle-income earner is currently getting.
It is estimated that the median employee income in Australia was only $51,319 in 2016, which means they would need quite a big increase in the next few years to start hitting the 37c tax rate.
The PM went on to say
“teachers and nurses, electricians and mechanics—these are the types of occupations who will be substantially better off”.
However, looking at incomes by occupations, it’s hard to suggest that the majority of these workers would be substantially better off. In 2016, the average annual earnings for these occupations were all under the current 37c tax threshold ($87,000). Only Electricians appear close to the mark and their average is boosted by large earnings in the resource states (WA and QLD).
Source: ABS Cat: 6306.0 – Employee Earnings and Hours, Australia, May 2016
Now there’s no question that the low- and middle-income tax offset set to be brought in under Phase 1 of the proposal would benefit numerous Australians. It has often been argued that tax cuts at the lower end provide the most incentive for people to seek employment and/or work longer hours.
However, it is hard to argue that people earning more than $87,000 a year require any more incentive when they are already in the top Quartile (25%) of income earners in Australia ($79,760 or more).
People are welcome to have different opinions on policy positions by both sides of parliament, but most people would at least like debate to be grounded in real evidence as a starting point. Misleading statements can influence debate and see bad policies enacted or good policies defeated.
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