No Super increase is enough to fix retiree poverty, and pretending otherwise is dishonest

The proposed increase to the Super contribution percentage (from 9.5% to 12%) is currently being thrashed out in the national discourse.

It's widely argued that this will help tackle poverty among the elderly, which is rife in Australia, particularly for women.

Here's Anthony Albanese:

"Every Australian should have one thing in common: they should have dignity in that retirement."

Here's Tanya Plibersek:

ordinary workers shouldn’t be forced to choose between low wages or poverty in retirement. How about we pay decent wages and increase super?

And here's Labor-aligned think tank Per Capita:

Surely the purpose of the retirement income system is to ensure that Australians enjoy their older age in comfort and dignity, free of the fear of poverty.

You'll find plenty of similar messaging from unions, super funds, and many other Labor-aligned organisations.

However, this argument is a terrible one. The inherent design of the Super system makes it an irredeemably bad anti-poverty program. Increasing the super percentage even substantially cannot overcome these problems - short of transforming the Super system into a completely different system, there isn't any way to fix this. There are positive aspects of the Super system (I've written about the strong potential of the Super system as a vehicle for increased worker control of the economy), but curing poverty isn't one of them.

This line of rhetoric has got to stop. It is irresponsible for people with political and policy influence to mislead people about the causes and possible solutions for poverty.

The core problem: Super is a product of market income, and thus inherently fails non-earners and low earners

It's easy for professional-class full time workers to assume that most people are living lives similar to them. But any given time, around half the population are non-earners, who (in the market sense) do not work, and thus have no income. This is due to basic demographic reality - at any given time, a huge slice of the population will in one (or more) of the non-working categories: Children, elderly, students, disabled, sick, caregivers, unemployed.

It is these people, and crucially, their families, that poverty hits the hardest, due to the obvious zero income but also typically higher expenses (childcare, medical costs, etc). At minimum people still need food, shelter, and all the usual financial needs, which means less income to go round for their family.

Matt Bruenig of the People's Policy Project has done important work in highlighting this in the US context, and in laying out the case for designing welfare policy with redistribution from worker to non-worker as the guiding principle.

As Bruenig points, out, this seems quite obvious. Except, because the discourse revolves so heavily around the affluent professional class, this is under-discussed.

But to anybody who has experienced anything close to poverty, this will be understood vividly - child-rearing is expensive and career-disruptive, supporting family members with disabilities is costly, and unemployed family members add financial stress.

These dynamics make poverty inevitable, before we even begin counting those on non-zero but low incomes, caused by bad pay/conditions, limited hours, sporadic work, unexpected redundancies, industry decline, regional decline, retraining and moving costs, and the endless variety of other misfortunes that afflict the modern working class in late capitalism.

Super cannot fix this

Super, being a direct percentage of market income, obviously does a terrible job of compensating for low and zero incomes (12% of zero is zero, and 2% extra of not much is still not much), and in fact makes pre-retirement poverty worse.

For those without surplus income during the most poverty-vulnerable phases of life (such as the child-rearing years), Super reduces disposable income. A permanent 12-15% hit to a household's disposable income is a lot for a family scraping by.

Then once retirement hits, Super punishes those who endured low lifetime market incomes and little other savings with low super balances - if you were designing a punitive retirement system deliberately, you'd design it a lot like this.

The statistics bear this out - the median balance at retirement for women in 2017 was $36 000. Half of all women are retiring with even less than this.

Child-related expenses are typically over by retirement (although not always, for instance I lived in my grandmother's house for much of my childhood) but expenses for sickness and disability typically increase and bring the threat of poverty with them.

Again, Super compensates for none of this, offering no additional support for the costs of ill health.

Super and the lifecycle

There are further problems, caused by Super's individualized balances and the uncertain nature of human life.

Because we cannot predict in advance when we die, we cannot consume savings at the optimum rate. Risk-averse retirees without an excess of savings are thus loath to draw down on assets, and so the amount sensible to comfortably spend each year drops even further.

A related issue is inheritance - there is a widespread want (and often unhealthy expectation) to leave funds behind for children, even if funds are meagre, which means even further undesirable belt-tightening. Meanwhile intergenerational wealth inequality is perpetuated by the enormous balances being passed along by the already well-off.

A contrasting problem presented by individualized balances is early death. We've all seen movie plots where "one last mission before retirement" goes terribly wrong - those who die immediately before retirement Australia endure a lifetime of reduced disposable income for a retirement they never see.

A long retirement means risking running out of funds, while a short retirement means missing out on the enjoyment of a lifetime of savings.

Once again women are disproportionately affected by these issues due to their longer lifespans and lower lifetime incomes.

No substitute for a welfare state

Driving much of the bad thinking here is the taboo around the otherwise simple, easy, straightforward, proven solution - a welfare state, funded by higher taxes.

Neoliberal brain poisoning borne from excessive electoral defeats, Accord-era compromise, union decline, and the Bob Hawke personality cult have put core left ideas like welfare states, wealth taxes, public ownership, and worker control outside the Overton window of political acceptability to even discuss.

The national dialogue is unable to look outside itself and see how welfare states have successfully reduced poverty internationally - instead we're reduced to a discussion dominated by weak reformism at best, that would fix nothing beyond upper-middle class concerns.

Welfare states really do have all the answers here: Child allowances and generous benefits solve the non-worker poverty problem, and paying pensions on demand from a combined pool rather than individualized accounts eliminates all the lifecycle problems.

30 billion dollars to not fix poverty

Super also harms the wider cause of eliminating poverty by swallowing up a grotesque amount of money in fees that gets funnelled to the financial class rather than going to the most vulnerable: $30 billion every year, roughly the same as the military budget, and around double what the country spends on power.

By comparison, raising the Newstart benefit by $75 dollars per week would cost a small fraction of this, around $3.3 billion annually.

Again, a public retirement system is the solution. By way of international comparison, Norway's retirement fund operates with roughly 20x lower fees per dollar.

Selling women short with fake solutions

The Super system is bad for women, and the stark gap in average balance between men and women is widely noted and even promulgated by the super industry itself.

Unfortunately the accompanying solutions proposed amount to minor technocratic adjustments that don't substantively address these fundamental structural problems.

A particularly ill-considered idea is joint Super accounts for couples: Policy that implicitly tells women "we'll financially punish you unless you get married" is horrifically anti-feminist. The inherently sexist nature of capitalism already tells women this on a daily basis of course, but shared balances for spouses would make this even worse.

There's also an excessive focus on the professional class experience, when lower-income women are suffering the most from Super's design flaws. Tellingly, the average balance is talked about much more than than the median balance, even though it's bizarre to average highly unequal balances rather than consider the conditions of the median person.

Again, these inherent problems with a market-linked system are easily solved with via decent welfare systems. Why should women have to wait an eternity for the market economy to become less sexist instead of simply enjoying a welfare state that funds retirements equally?

Bravery required

Absent a complete re-imagining of the system, Super's income-linked design will always reflect the wider inequalities and discrimination that exist in incomes in the wider economy (remember, Super is just forcibly saved incomes).

That won't change until the case is made for a generous, comprehensive welfare state, starting with higher, more universal pensions. Unfortunately, nobody is doing this. Anthony Albanese's recent address on retiree poverty focussed almost wholly on Super, only very briefly touched on the pension, and made no mention of expanding the welfare state more broadly.

Poverty is caused by violently enforced deprivation - simply put, a shortage of money. The dialogue around Super instead treats poverty with a sinister right wing parternalism - an implicit assumption that the poor are profligates who simply need to be forced to save more.

The first step to changing this attitude is a basic honesty among purported progressives on poverty, its effects, and its solutions. The conditions of people suffering the misery of poverty ought to be addressed in good faith, not misused as a rhetorical weapon for professional-managerial class concerns.