Confusion about Poverty in Fjii by Fr Kevin Barr

SUMMARY. Wages Council Chairman Fr Kevin Barr defines poverty as it affects some 35% of Fiji's population; the Family Assistance Scheme (FAS) that assists the 3-4% who are destitute, and shows how the 2012 Budget has done nothing that directly help the 31-32% of the population that is poor but not destitute. 

• He shows how the 20% devaluation in 2009 and the 2½% increase of VAT to 15% in 2010 made the poor significantly poorer, and appeals for the lifting of VAT on non-luxury food items.  
• He agrees that the Budget will make  middle income families better off but shows how  the new $15,600 tax threshold will help only 20-30% of those earning under the threshold.  
• Government argues that the indirect benefits of the lower tax rates will "trickle down" to the poor by creating new jobs.  Fr Barr says this will only be so if Government passes regulations to ensure reasonable minimum wages. Creating new jobs on wages below the poverty line will merely entrench poverty. Some 60% of workers covered by the Wages Councils are already below the poverty line.-- Croz

For a number of years there has been a number of confusions in the minds of many people concerning the poor. They continue to surface in national budgets, articles on poverty as well as in the conversations of ordinary people. Unless these confusions are clarified then a number of misunderstandings arise which can have serious consequences.

Recent reports based on the 2008-9 Housing Income and Expenditure Survey indicated that roughly 35% of our population was in absolute poverty. This means that at least one third of our total population are unable to meet their basic needs of nutritious food, proper housing, health care and education. Another way of putting it is that 35% of our population have incomes below the current established poverty line (income poverty). In addition others may not have access to proper education, health care, transport, and markets for their produce (poverty of access). He

Government has a program called the “Family Assistance Scheme” (FAS) for those extremely poor people who are in desperate situations. It is administered by the Ministry for Social Welfare and covers about 24,000 people or about 3%-4% of the total population. It used to be called the “Destitute Allowance” because, in reality, it covers those who are destitute or the worst cases of those in absolute poverty. The allowance is given according to very strict criteria – single mothers, those with serious disabilities, the elderly without other means of income, those whose husbands are in prison etc. They may receive monthly payments of between $60 and $100 a month and are eligible for $30 worth of food stamps as well as special assistance at hospitals.

It is extremely important to note that the Family Assistance Scheme does not cover all those in poverty. Of the 35% of those said to be in poverty in Fiji the scheme covers only 3%-4% of the population. The other 31%-32% is not covered. Only some very serious cases who may be on the waiting list for FAS may benefit from the food stamp program.

A recent World Bank study said that the FAS was well administered by the Social Welfare Department and successfully reached 70% of its target group. In other words 70% of those on FAS were truly destitute and met the strict criteria demanded by the scheme. Unfortunately this was interpreted by some senior government officials as meaning that the other 30% were not poor and should be excluded from assistance. But the Report did not say this. In fact they were poor but did not fit the strict criteria of the scheme. Previous reports had pointed out that the criteria applied were too narrow and needed to be enlarged to include other categories of people who were destitute.

Unfortunately when the National Budget and some other government Ministries talk about poverty alleviation and the poor they think mainly about those covered by Social Welfare (the 3%-4%) and not the whole 35% of those in the country who are living in absolute poverty and cannot meet their basic needs. Many of them are in full-time employment but are earning wages well below the poverty line. They are often referred to as the “working poor”.

Recent Additional Hardships for the Poor

Moreover everyone seems to have forgotten that we are living in the aftermath of two recent disasters for the poorer section of our nation. The first - the 20% devaluation of the Fiji dollar in 2009 - meant that the purchasing power of existing low wages decreased while food increased by 36% and building costs by 29%. The second was the increase in VAT from 12.5% to 15% in 2010. Being a regressive tax it had serious effects on poor and low income families. Everyone seems to gloss over these disasters as though it is all “water under the bridge” and no harm done. But a lot of harm has been done to the quality of life of poorer people in the nation and nothing in the recent budget really addresses the effects of these disasters.

The vast majority of those who are poor hardly feature in the Budget even though they are a huge percentage of our population. They need better incomes, reasonable food prices and better, more affordable housing. VAT needs to be removed from all food (except luxury foods and food bought in restaurants). Housing needs to be subsidised in varying degrees for those earning below the tax threshold.

The 2012 Budget

Some commentators suggested that the new tax structure in the 2012 budget would assist low income families to have more money in their pockets. However the expectation that the changes in the tax structure will put more money in the pockets of low income families is very unrealistic. It will certainly assist middle income families but not low income families who are in the vast majority and make up those who live below the poverty line or are vulnerable to poverty. I may be wrong, but previous statistics showed that 50% of those in full-time employment earned incomes below $10,000 and 71% of those in full-time employment earned incomes below $15,000 (the previous tax threshold). So, when the tax threshold is increased to $15,600 at least 70% of workers will not take home any extra pay. Maybe only about 20%- 30% of those in full-time employment will benefit and they will not be the low income earners. The 60% of workers covered by the Wages Councils all earn below the poverty line. Consequently the claim of the FCEF that more money will be put into the pockets of ordinary workers is far from the truth.

A Further Misconception about Economic Growth

The recent Budget set in place policies such as huge corporate and personal tax reductions to attract investors and encourage the business sector in order to increase economic growth BUT how does this economic growth benefit the workers and the people of the nation unless regulations are set in place to make sure that workers receive just wages and all the people benefit from the economic growth? The old theory of “trickle down” has been proved to be a myth. It rarely happens. For thirty years or more we have been hearing about attracting investors and increasing economic growth but it never seems to happen.

Again economic growth depends not just on investor capital but on a well trained, satisfied and enthusiastic workforce. But how can workers be expected to work productively and enthusiastically when their wages are kept low and their Unions are emasculated and their Union leaders vilified.

We may need many more private sector investors BUT workers and their Unions are as important to economic growth as any investor and this has not been captured in the Budget. Instead, what we are seeing is worker’s rights being ignored and their unions effectively destroyed while every advantage is being offered to investors and the business sector. In such conditions do you think workers want to be productive and cooperative?

Of course we all want to see greater economic growth but economic growth depends on more that attracting more private sector investment. That is only part of the solution. Authentic economic growth depends on the workers and the resources of the nation and cannot be achieved at the detriment of our own people. Also we need to spell out clearly how any economic growth – big or small – will really benefit the ordinary people of Fiji and not just investors. The economy is meant to benefit all the people of the whole nation.