Don’t abandon plans for high-speed rail in Australia – just look at all the benefits



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Marcus Luigi Spiller, University of Melbourne

The Grattan Institute’s call to “abandon” plans for any high-speed rail network in Australia fails to look at the wider benefits such a project can bring by way of more productive economies and more sustainable towns and cities.

The study authors argue the development of any bullet train network linking Brisbane to Melbourne via Sydney and Canberra is “unsuitable for Australia”.




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But what their argument neglects is that a project like high-speed rail has a unique capacity to reshape cities and population settlement patterns in positive ways.

A question of cost

The institute’s study says the idea of high-speed rail is an unwanted distraction in policy-making for the nation’s transport future. Its case relies on a review of the high-speed rail experience in Europe, Japan and China.

All of these nations, it says, have vastly different distributions of towns and major cities to that in Australia, which has extremely long distances between a few large cities.

The study also critiques a 2013 Commonwealth analysis that found a A$130 billion high-speed rail project linking Brisbane, Sydney and Melbourne would generate a benefit-cost ratio of 2.3 to 1.
So every A$1 invested in a high-speed rail network would generate A$2.30 in benefits such as travel time savings, avoided vehicle operating costs and reduced road congestion.

But the Grattan study authors say that figure is based on a “cherry-picked” discount rate of 4%. This is economics jargon for the minimum return that the community would expect from the investment of its collective resources in any project.

The Grattan study also says the 2013 cost-benefit analysis did not allow for cost over-runs. Nor did it consider the greenhouse gas emissions associated with the enormous quantities of concrete and steel needed to build the infrastructure.




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So why are some people, including the federal Labor Party, still so enamoured with the idea of high-speed rail when others would have it binned?

Some projects reshape cities

Not all transport infrastructure projects are equal when it comes to cost-benefit analysis. Some investments have a transformative effect on population settlement patterns – they shape cities and regions.

The Sydney Harbour Bridge and the Melbourne Underground Rail Loop are classic examples of city-shaping projects. Each altered travel times between different parts of the metropolis, which then shifted the location preferences of households and businesses. This led to a substantially different city structure compared to what might otherwise have developed.

Other projects, the vast majority of government transport outlays, merely follow or service the pattern of settlement established by the city-shaping investments. These “follower” projects include the local arterial roads and tramways that circulate people and goods within cities.

The Commonwealth’s official guidelines for major project evaluation recognise this distinction.

New ways of living, learning, working and playing become possible with city-shaping projects. By comparison, the procession of follower projects simply perpetuates settlement patterns and economic structures.

This is the claim and appeal of high-speed rail. Advocates argue such an investment would divert a significant proportion of urban growth from the far-flung suburbs of metropolitan areas to new regional locations. That’s because these regions will then have similar travel times into core city labour markets.

In these regional locations, households would enjoy greater housing choice and affordability, more walkability and better access to open space. They could even have better access to a range of community facilities than their metro suburban counterparts.




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Advocates also argue businesses in the big cities and intervening regional areas will be able to connect with each other at lower cost and source the skills they need more efficiently. This would boost productivity.

Consider all the benefits

The 2013 analysis took into account issues such as congestion, emissions (from travel) and transport accidents. But it did not attempt to quantify and monetise the effects of high-speed rail shaping cities and regions.

Arguably, the most important set of benefits from this investment were left out of the economic evaluation, simply because they are difficult to measure.

Modelling how the supply chains of businesses might change under the influence of city-shaping projects, or how the housing preferences of people might shift, is undoubtedly challenging. But being difficult to measure makes these impacts no less real.

Despite this limitation on the scope of benefits, the 2013 study said the high-speed rail project would return a benefit-cost ratio of 1.1 at a 7% discount rate, which the Grattan study says is the usual test applied to transport projects.




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Grattan says the project barely scrapes in at this higher discount rate and implies many other projects would offer ratios greater than 1:1 and should be preferred. These would typically be smaller, follower projects that address local congestion problems.

But a project achieving a 1.1 benefit-cost ratio means Australia would still be better off undertaking the project compared to a business-as-usual case.

If the transformative effects of high-speed rail include more compact and walkable cities with less car dependency and greater productivity, then such a network has good reason to keep its grip on the Australian imagination.The Conversation

Marcus Luigi Spiller, Associate Professor of Urban Planning (honorary), University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The costs of the shutdown are overestimated — they’re outweighed by its $1 trillion benefi



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Richard Holden, UNSW and Bruce Preston, University of Melbourne

As Australia begins to relax its COVID-19 restrictions there is understandable debate about how quickly that should proceed, and whether lockdowns even made sense in Australia in the first place.

The sceptics arguing for more rapid relaxation of containment measures point to the economic costs of lockdowns and appeal to the cold calculus of cost-benefit analysis to conclude that the lives saved by lockdowns don’t justify the economic costs incurred to do so.

Their numbers don’t stack up.

To be able to weigh the value of a life against the economic costs of forgone output from lost jobs and business closures, requires placing a dollar value on one person’s life. This number is called the value of a statistical life.




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In Australia, the Government generally uses a value of A$4.9 million. The United States uses a value of US$10 million.

What are the benefits of the shutdown? This is the value of lives saved plus any indirect economic or health benefits. Lives saved are those excess lives that would be lost if government relied on a strategy that allowed enough people to get infected to result in so-called herd immunity.

How many extra lives would be lost under this second strategy?

To answer this, we need assumptions about the virus.

The lives lost if we let it rip

The initial reproduction rate of the virus, R0, was thought to be about 2.5. This means that every 2 people infected were likely to infect another 5; producing an average infection rate per person of 2.5.

Herd immunity for COVID-19 is estimated to require roughly 60% of the population be infected before the curve begins to flatten and the peak infections fall.




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This happens when the reproduction rate, R0, falls below one. Because of subsequent new infections, the total number infected over the course of the pandemic is closer to 90%.

Given a population of 25 million people and assuming a fatality rate of 1%, this would produce 225,000 deaths.

An assumption of a 1% fatality rate is low from the perspective of those making decisions at the onset of the pandemic, at a time when crucial and reliable data were missing.

Those lives are valued at $1.1 trillion

Converting those fatalities to dollars using the Australian value of a statistical life of A$4.9 million per life yields a cost of A$1.1 trillion.

In rough terms, that’s the amount we have gained by shutting down the economy, provided deaths do not skyrocket when lockdown measures are relaxed and borders re-open.

It is about three fifths of one year’s gross domestic product, which is about A$1.9 trillion.

What are the costs of the shutdown?

These are the direct economic costs from reduced economic activity plus the indirect social, medical, and economic costs, all measured in terms of national income.

A starting point is to take the lost income that occurs from the recession that has probably already begun.

What will the shutdown cost?

Let’s assume that the downturn results in a 10% drop in gross domestic product over 2020 and 2021 – about $180 billion – consistent with IMF forecasts of a fall in GDP of 6.7% in 2020 and a sharp rebound of 6.1% growth in 2021, and comparable to the Reserve Bank of Australia’s forecasts in the latest Statement on Monetary Policy.

Comparing this cost from shutting down – about $180 billion – to the benefit of $1,103 billion – makes the case for shutdown clear.

But this calculation grossly overestimates the costs of the shutdown.

The recession is a consequence of both the shutdown and the pandemic.

We need to attribute costs to each.

Most of the economic costs of the recession are likely to be due to the pandemic itself rather the shutdown.

Many costs would have been borne anyway

Even before the shutdown, economic activity was in decline.

Both in Australia and internationally air travel, restaurant bookings and a range of other activities had fallen sharply.

They were the result of a “private shutdown” that commenced before the mandated government shutdown.

Even in a country such as Sweden, where a shutdown has not been mandatory, there has been a more than 75% reduction in movement in central Stockholm and a more than 90% reduction in travel to some domestic holiday destinations.




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To be generous, let’s assume the costs attributable to the government-mandated part of the shutdown are half of the total costs, making their cost A$90 billion.

In reality, they are likely to be less, one important study suggests much less.

It is hard to imagine a much bigger private shutdown not taking place had the government decided to simply let the disease rip until its spread was slowed by herd immunity.

Support is not a cost

It is also important to note that the government’s spending of A$214 billion to support the economy during the shutdown is a transfer of resources from one part of society to another rather than a cost.

It creates neither direct costs nor benefits for society as a whole, other than the economic distortions coming from raising the revenue to service the spending.

With long-term government bond rates near 1% (less than inflation), the total cost of distortions is likely to be tiny.

Of course, this discussion simplifies what are incredibly complex social, health and economic questions. There are clearly further costs, from both relaxing restrictions and keeping them in place.

Other costs are not that big

These costs are worthy of serious study and should rightly be part of a comprehensive public policy discussion. But looked at through the lens of a cost-benefit analysis these combined effects are likely to be small relative to the value of preventing mass death.

Among them are the incidence of mental health problems and domestic violence under lockdowns. They are important concerns that should be addressed by targeted and well-designed programs.

Weighing against that is evidence that economic crises are associated with declines in overall mortality rates.




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While suicides rise, total mortality, including deaths from heart attacks and workplace and traffic accidents, falls.

In the specific case of this pandemic there is survey evidence based on respondents from 58 countries suggesting that strong government responses to the pandemic have been reducing worry and depression.

Also, we have to acknowledge that recessions and educational disruption have health and economic costs that are unequally spread.

The shutdown disproportionately impacts more-disadvantaged people including short-term casual workers, migrant workers, those with disabilities and the homeless.

The most-disadvantaged suffer, either way

This skewing will also be present in the herd immunity option. As New York City makes clear, a rapid spread of the disease also disproportionately impacts disadvantaged communities. One can only speculate about the disease burden should some of our remote indigenous communities get exposed.

To this we should add further achievements of the shutdown:

  • elimination of mental trauma and grief from losing our loved ones

  • avoiding the costs of possible longer-term implications of the disease, which we still know little about

  • avoiding a collapse in the capacity of the health system to deal with other emergencies through the sheer numbers of COVID-19 infected combined with staff shortages due to illness

Those advocating cost-benefit analysis of this kind have to apply the principle systematically. It is difficult to see how the total of these sorts of considerations on each side of the ledger could compare to the benefit of lives saved. They will be an order of magnitude, if not two, smaller.

$90 billion, versus $1.1 trillion

In the cold calculus of cost-benefit analysis, a highly pessimistic view of the economic costs of Australia’s shutdown comes to around $90 billion.

It is a small price to pay compared to the statistical value of lives the shutdown should save, around A$1.1 trillion.

It produces a simple message. The shutdown wins.




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The question we now face is how quickly to relax restrictions. Here, too, there are costs and benefits, and we need to be mindful of the economic cost of a second-wave outbreak, plus mortality costs of disease spread before effective treatments or vaccine become available.

And in all of this bean counting, we should remember that putting a price tag on human life is sometimes unavoidable – such as when a doctor with access to only one ventilator has to choose between two patients.

But we shouldn’t mistake necessity for desirability. We should seek to avoid needing to make such wrenching choices whenever possible.


Dr Jen Schaefer of the Royal Children’s Hospital Melbourne assisted with the preparation of this piece.The Conversation

Richard Holden, Professor of Economics, UNSW and Bruce Preston, Professor of Economics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Should we re-open pubs next week? The benefits seem to exceed the costs



Kuranda pub, Far North Queensland.
Shutterstock

Jonathan Karnon, Flinders University and Ben W. Mol, Monash University

Nothing our leaders can do now will return the economy to where it was before COVID-19. For one thing, international travel is likely to remain closed for a long time.

But there are things they can do, and on Friday the prime minister outlined a roadmap.

Of interest to us is whether it makes sense to reopen bars and restaurants.


Commonwealth government, Friday May 8, 2020

The Australian Government committed A$320 billion over six months to support businesses and workers whose incomes has been hit by the COVID-19 pandemic.

That amounts to $12 billion per week.

Reported job losses suggest around 29% is being paid out to support the accommodation and food services industry.




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That’s about $3.4 billion per week. Bars and restaurants are likely to account for half of it, $1.7 billion per week.

That can be thought of as one of the costs of keeping bars and restaurants closed.

What about the benefits? What costs do we avoid by keeping bars and restaurants closed?

It helps to illustrate our thinking as a decision tree.


The Conversation/Figures author provided, CC BY-ND

The upper branches of the tree represent the decision about whether or not to lift restrictions.

If restrictions are lifted, there may, or may not, be a new outbreak that requires the reintroduction of restrictions.

While we don’t know the likelihood of a new outbreak, we can test different assumptions.




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Given the very low number of new cases of COVID-19, the assumption we have tested is that there would be a one in ten chance of a new outbreak requiring the reintroduction of restrictions.

We also assume that if there was a new outbreak, there would be a 95% chance it could be controlled by re-imposing restrictions on bars and restaurants and only a 5% chance it could not.

It’s a matter of probabilities

If the outbreak was controlled by reimposing restrictions (the 95% probability) we assume an extra 40 COVID-19 deaths and an extra four weeks of restrictions at a financial cost to the government of $6.8 billion.

If the outbreak was more severe and a broader set of restrictions are required (the 5% case) we assume an additional 200 deaths and extra cost to the government of $17 billion.

(We also assume that 25% of the government spending to support the hospitality industry would remain because a decision to reopen bars and restaurants would not result in the industry returning to it’s pre-COVID-19 state – many people would remain cautious about the risks of contracting COVID-19 or have become conditioned to less frequent socialising.)

When we weigh these costs by their probabilities we get expected costs to the government from reopening of $1.1 billion, compared to costs from keeping bars and restaurants closed for another week of $1.7 billion.

Is the $600 million per week value for money?

It suggests the government would be $600 million per week better off it it reopens bars and restaurants.

We would expect a number of extra COVID-19 deaths. Multiplying the probabilities of the extra deaths under each scenario by the likelihood of each scenario suggests there would be an extra 4.8 deaths if bars and restaurants are reopened this week.

Because the average age of people dying due to COVID-19 is around 80 years, and each might have around ten more years to live, the number of life years per week that would be lost as a result of the $600 million per week the government saved would be 48.




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It suggests each life year saved as a result of keeping bars and restaurants closed costs around $12.5 million.

Decisions on whether government should fund health interventions are commonly based on an assessment of whether the health gains justify the additional costs.

As a ballpark figure, new measures are funded if they are shown to gain an additional life year at a cost of around $50,000.

This suggests that by keeping bars and restaurants closed the government is paying 250 times more than it would usually pay to gain a life year.

It is funding that doesn’t pass the usual test

A separate guideline used by Australian governments to assess regulations and infrastructure projects puts the value of a statistical life year at $200,389 in today’s dollars.

This suggests that by keeping bars and restaurants closed the government is paying 60 times more than it would usually pay to save a life.

It’s why we think governments should reopen them, next week.

Like all such analyses, ours depends on the assumptions used.

We have put a spreadsheet of our decision tree online to allow readers to experiment with different ones.




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Our analysis leaves much out. It includes neither the negative impact of COVID-19 on people’s quality of life, nor the negative impact of shutting bars and restaurants on people’s health and quality of life.

It gives us an indication of how many life years the government is saving for the $600 million per week it is costing it to keep bars and restaurants closed.

It suggests the government could save many more life years by spending the money in a different way.The Conversation

Jonathan Karnon, Professor of Health Economics, Flinders University and Ben W. Mol, Professor of Obstetrics and Gynaecology, Monash University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Myth busted: China’s status as a developing country gives it few benefits in the World Trade Organisation



President Trump and Australia’s Prime Minister Scott Morrison insist it matters whether China is classified as “developed” or “developing” in the World Trade Organisation matters. It may not.
Shutterstock

Henry Gao, Singapore Management University and Weihuan Zhou, UNSW

Whether China is a “developing” or a “developed” country for the purposes of the World Trade Organisation matters a lot to the US president.

President Donald Trump ignited a new front in the US-China trade war in July by tweeting that the world’s richest nations were masquerading as developing countries to get special treatment.

They were “cheating”, according to Trump.

He directed the US Trade Representative to “use all available means to secure changes” at the WTO.

Then Australia joined in. While in the United States, Prime Minister Scott Morrison referred to China as a “newly developed economy”, and backed Trump, saying that “obviously, as nations progress and develop then the obligations and how the rules apply to them also shift”.

China is digging in. It hasn’t resiled from a statement by its commerce ministry spokesman Gao Feng in April:

China’s position on WTO reform has been very clear. China is the largest developing country in the world.

But what’s at stake? In practical terms, almost nothing. Trump and Morrison are demanding something that would give them little.

What does “developing” even mean?

In the WTO, developing countries are entitled to “special and differential treatment” set out in 155 rules.

However, none of those rules define what a “developing country” is.

Instead, each member is able to “self-designate”, subject to challenges from other members.

Being recognised as a developing country was one of the three key principles China insisted on when negotiating to join the WTO in 2001.

It faced resistance. Several members cited “the significant size, rapid growth and transitional nature of the Chinese economy”.

In response the WTO took what it called a “pragmatic approach,” meaning that China got hardly any of the special treatment that would normally be accorded to a developing country.




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For example, under the Uruguay Round of tariff reductions that applied to developing countries already in the WTO, China would have only needed to cut its average industrial tariff from 42.7% to 31.4%. Instead, it agreed to cut it to 9.5%.

Similarly, it agreed to cut its agricultural tariff from 54% to 15.1%, instead of the 37.9% that would have been required had it already been in the WTO. These put its commitments on par with those of developed rather than developing countries.

On some issues, China’s commitments far exceeded those of even developed countries. For example, it agreed to eliminate all export subsidies on agricultural products, an obligation that developed countries were only able to accept 14 years later.

It also undertook to eliminate all export taxes, which are still allowed under WTO rules and still widely used by many governments.

Many of China’s WTO commitments were imposed only on it or modified the general rules to either impose heavier obligations on it or confer less rights on it.

Contrary to popular belief, China has received hardly any of the benefits that accrue to developing countries when it became a WTO Member, other than the ability to use the title “developing country”.

It’s more about identity than benefits

After its accession, China acted as a member of the developing country group and pushed hard for its interests. In 2003 it joined India and Brazil in pushing developed countries to reform their agricultural trade policies while retaining flexibility for developing countries, a push that has yet to achieve success.

In the meantime, it enjoys little preferential treatment for itself, partly because it has eschewed special benefits, partly because most of the transition benefits that were available to it have expired, partly because some of the provisions available to it are essentially voluntary on the part of the country offering them, and partly because many of the benefits available to developing countries are not available to developing countries with large export shares.




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At times it has actively forgone important benefits, such as by not invoking its right to receive technical assistance under WTO’s Trade Facilitation Agreement.

However, on some other issues, the sheer size of China has made it difficult to accommodate China’s claim for developing country treatment. One example is the negotiation on fisheries subsides, which would not be able to move without substantial commitments from China, which operates one of the largest subsidies in the world.

Identity matters to China

In its position paper on WTO Reform, China says it “will never agree to be deprived of its entitlement to special and differential treatment as a developing member”.

At the same time, it says it “is willing to take up commitments commensurate with its level of development and economic capability”.

It remains far less developed than traditionally developed countries. In purchasing power terms, its standard of living is about one-third of that in the United States.

Although not practically important in terms of its obligations under the WTO, its developing country status is useful to it in other ways, giving it the opportunity to gain meaningful advantages in other international organisations such as the Universal Postal Union.

It costs the rest of the world little to accommodate China’s wish to be described as a developing country. If Trump and Morrison got what they wanted, they would find little had changed.The Conversation

Henry Gao, Associate Professor of Law, Singapore Management University and Weihuan Zhou, Senior Lecturer and member of Herbert Smith Freehills CIBEL Centre, Faculty of Law, UNSW Sydney, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Indians promised benefits of 100 smart cities, but the poor are sidelined again



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Residents of slums like Kamla Nehru Nagar, a kilometre away from Patna Junction, have yet to share in the promised benefits of smart cities.
Sujeet Kumar, Author provided

Sujeet Kumar, Jawaharlal Nehru University

India’s urban population is growing. More than 50% of the country’s population is forecast to be living in cities by 2030. This is a major challenge for government because the country’s cities lack the infrastructure (affordable housing, roads) and basic services (sanitation, water, health care) for existing inhabitants, let alone the influx of people over the next decade.

Globally, one in eight people live in slums where they face issues of durable housing, access to safe drinking water and toilets, and insecure tenure. In India, one in every six city residents lives in a slum.




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Many Indian children are growing up in very disadvantaged circumstances. These two live in Mahmudi Chak slum next to Rajendra Nagar Railway Junction in Patna.
Sujeet Kumar, Author provided

However, estimates of slum populations differ widely in many Indian cities due to differences in the counting criteria. For example, in cities like Mumbai and Delhi, it’s estimated more than 50% of the population live in slums, but the 2011 Indian Census put the figures at 41.3% and 14.6% respectively.

Launching the national Smart Cities Mission in 2016, Indian Prime Minister Narendra Modi said: “… if anything has the potential to mitigate poverty it is our cities”. He said the mission, which has a target of 100 smart cities, aims to ensure access to basic services for the people. This includes houses for the urban poor.

The program aims to fulfil the aspirations and needs of the citizens through comprehensive development of institutional, physical, social and economic infrastructure. This comprehensive development would also ensure increased public participation, Modi said.

Villagers migrated to the Danapur Block slum after the Ganga river flooded.
Sujeet Kumar, Author provided

Smart city plan has a dark side

In one of the 100 cities selected for the Smart City Mission, Patna (Bihar), I witnessed the flip side of the smart city. Patna, the state capital of Bihar, has a rich history, but 63% of its population lives in slums. And 93% of them are from the historically oppressed “scheduled castes” and “other backward castes” (based on data collected in 42 slums).

Demolished homes at Meena Bazar.
Sujeet Kumar, Author provided

The city administration often demolishes slums without following due process of law in order to seize the land in the name of beautification and development of Patna.

In slums like Meena Bazar (near the famous Nalanda Medical College Hospital) and Amu Kuda Basti (near Patna Airport) people have been living there for generations in houses often partially funded by government housing projects. These have been bulldozed.

Riot police are on hand when slum dwellers’ homes are demolished at Amu Kuda Basti.
Sujeet Kumar, Author provided

The city administration usually makes ad-hoc loudspeaker announcements before bulldozing these settlements. A massive police presence and riot vehicles are on hand in case residents protest the demolitions. They use derogatory language and forcefully enter houses and thrash male members, say women in Amu Kuda Basti.

The government could have given them more time or relocated them elsewhere in the city, rather than just bulldozing their houses, which they had built with hard-earned money, the slum dwellers said.

Residents of slums like Amu Kuda Basti say houses they built with their own hard-earned money are being demolished with little notice.
Sujeet Kumar, Author provided

There is apparently reason to smash these homes. There always is. The usual arguments for demolition include: beautification of the city, construction of a government building or enterprise, extension of the airport, crime locations, governance, illegality, encroachment etc. The state says demolitions of such slums are necessary for the development of the city.




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In 2011, the state proposed a slum policy to relocate slum dwellers who had lived in the city for generations to the outskirts in a plan to develop Patna and make it a smart city, says Kishori Das, an advocate for the rights of slum dwellers for years. Faced with widespread protests, the state deferred the policy, but it is silently applying it on the ground, he said.

Who speaks for the marginalised poor?

These two leaders from Meena Bazar are among 84 community representatives, elected and non-elected, interviewed by the author.
Sujeet Kumar, Author provided

Local and mainstream media are not reporting these demolitions and forced evictions, especially when it happens in non-metro cities like Patna. Civil society and advocacy NGOs also take little notice of these frequent demolitions, probably due to threats to life and, if not, then to co-option by the state. The roles of the ruling party and opposition are also dubious.

Bihar has been ruled by leaders who attracted votes by campaigning on issues of poverty, caste and social justice for the past three decades. In the early 1990s, the prominent leader Lalu Prasad Yadav mobilised the poor and the oppressed caste groups under the umbrella of “Vikas nahin, samman chahiye” (we want dignity, not development). The present chief minister, Nitish Kumar, also known as Sushaasan Babu (good governance man), adopted the slogan “Nyay ke saath vikas” (development with justice).

However, the frequent injustices suffered by the urban poor negate the political commitment. These actions are also in conflict with the motto of the Indian Constitution, which frames justice as a balancing wheel between the haves and have-nots.

Promises of social justice ring hollow for residents of bulldozed communities like Amu Kuda Basti.
Sujeet Kumar, Author provided

These challenges are not limited to one city. In the name of smart and developed cities, the government is not only taking over urban land where millions of the poor have lived for decades but is also acquiring fertile land and violating the constitutional rights of farmers, tribes and other indigenous groups in various cities.

These reports of struggle and forced evictions contradict the statements by Modi when he said smart cities development would strictly follow large-scale public participation in preparing these plans.

Such demolitions reveal a dark side to making Indian cities smart and cast serious doubt on claimed government commitment to the urban poor. These actions hardly live up to the idea of the rights of the poor. It became more challenging when the head of the biggest democracy in the world denounces those who speak up for the poor, oppressed and voiceless as “urban Naxals”.

In the words of Abraham Lincoln, democracy is “government of the people, by the people, for the people”. For India, this means the urban poor need help both from political parties and civil society so that their voice finds expression and their demands and concerns are heard and considered in public policy. The Conversation

Children sleep out in the open in a slum area in Harding Park, Patna.
Sujeet Kumar, Author provided

Sujeet Kumar, Senior Research Fellow, Centre for the Study of Law and Governance, Jawaharlal Nehru University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Most of the benefits from the budget tax cuts will help the rich get richer


File 20180509 34015 7hqble.jpg?ixlib=rb 1.1

Chris Samuel/Flickr, CC BY-SA

Robert Tanton, University of Canberra and Jinjing Li, University of Canberra

In the federal budget, Treasurer Scott Morrison promised tax cuts to all working Australians in the form of an offset and changes to tax income thresholds. But our analysis of Treasury data shows that while the government advertised these as payments to low and middle income Australians, most of the benefits would flow through to high income earners in future years.

If all of the stages of the tax plan passed parliament, there would be a sharp increase in benefits for people earning above A$180,000, due to the reduction of their marginal tax rate from 45% to 32.5%.

https://datawrapper.dwcdn.net/QA4kF/3/

Taxes in most countries are progressive. This means that the more you earn, the higher your marginal rate (the additional amount you pay for each dollar earned).

There are good reasons for this – progressive tax systems mean those on a lower income pay a lower average tax rate, while those on higher incomes pay a higher average tax rate. This reduces income inequality – as you earn more, for each dollar you earn, you will pay more in tax than someone on a lower income.

With the 2018-19 budget, the proposal is for a “simpler” tax system from 2024-25. This means a reduced number of tax brackets, and a lower rate of 32.5% to those earning between A$87,001 and A$200,000.

Treasurer Scott Morrison said following the budget:

Well, you’ve still got a progressive tax system. That hasn’t changed. In fact, the percentage of people at the end of this plan, who are on the top marginal tax rate is actually slightly higher than what it is today.

However this new tax system from 2024-25 is less progressive than the current system. It means higher income inequality – the rich get more of the tax cuts than the poor.

As part of the new proposal, low and middle income earners get a tax offset in 2018-19, with high income earners getting very little. This part of the plan is progressive – more money goes to lower income earners.

However, by 2024-25, the tax cuts means high income earners gain A$7,225 per year, while those earning A$50,000 to A$90,000 gain A$540 per year, and those earning A$30,000 gain A$200 per year.

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Of course, another factor of tax cuts is that they only benefit those who are employed. Tax cuts don’t benefit people like the unemployed, pensioners, students (usually young people) and those on disability support pensions.

The conversation Australians need to have is how we should be spending the revenue boost we are seeing over the next few years. We can either spend this windfall gain on benefits to high income earners, in the hope that this will flow through spending to everyone else; or maybe we should encourage young people into housing through an increase to the first home owners grant, or increased funding for our schools, universities and health system.

The ConversationWe’ve developed a budget calculator so you can see how your family is affected by the 2018 budget.

Robert Tanton, Professor, University of Canberra and Jinjing Li, Associate Professor, NATSEM, University of Canberra

This article was originally published on The Conversation. Read the original article.

Labor benefits from completed draft boundaries, plus South Australian and Tasmanian final results



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As a result of the electoral boundary changes, Labor notionally gained two seats in Victoria and one in the ACT, and the Coalition lost two seats in Victoria.
AAP/Tony McDonough

Adrian Beaumont, University of Melbourne

On April 6, the Electoral Commission announced draft boundaries for Victoria and the ACT, with both jurisdictions gaining a House seat. Victoria went from 37 to 38 seats, and the ACT from two to three.

As a result of these changes, Labor notionally gained two seats in Victoria and one in the ACT, and the Coalition lost two seats in Victoria.




Read more:
Poll wrap: Labor maintains its lead as voters reject company tax cuts; wins on redrawn boundaries


On Friday, draft boundaries were announced for South Australia, with that state dropping from 11 seats to ten. According to The Poll Bludger, the safe Labor-held seat of Port Adelaide is to be abolished, but the new seat of Spence (formerly Wakefield), Adelaide and Hindmarsh become much safer for Labor.

Margins in Liberal-held seats were not greatly affected by the redistribution. Boothby has been reduced from a 3.5% to a 2.8% Liberal margin, and the SA-BEST-held seat of Mayo goes from a 5.4% to a 3.3% Liberal vs Labor margin. After SA-BEST performed poorly in the South Australian election, Mayo is an opportunity for either major party.

After the next election, there will be 151 seats in the House of Representatives, up from the current 150. The Coalition will notionally hold 74 seats (down two), Labor 71 (up two), and the five current cross-benchers notionally hold their seats. The new Victorian seat of Cox (formerly Corangamite) is too close to call on the new boundaries between the Liberals and Labor.

On the new boundaries, Labor requires just a five-seat gain to win a majority, while the Coalition needs to gain two seats to retain its majority.

The draft boundaries will go through a further consultation process before they are finalised. Final boundaries will be gazetted (become official) by July 20. If an election is called before all boundaries are gazetted, emergency redistributions are used. These emergency redistributions have never been used.

An election of the House and half the Senate could be called in early July, before the new boundaries are gazetted. However, according to the ABC’s Antony Green, the Coalition would lose from the emergency redistributions.

South Australian election final result: 25 Liberals, 19 Labor, 3 Independents

At the South Australian election held on March 17, the Liberals won 25 of the 47 lower house seats (up three since the 2014 election), Labor 19 (down four) and independents three (up one).

The Liberals won the two party vote by a 51.9-48.1 margin, but this represented a 1.1% swing to Labor from 2014, when Labor clung to power despite losing the popular vote 53.0-47.0.

Primary votes were 38.0% Liberal (down 6.8%), 32.8% Labor (down 3.0%), 14.2% SA-BEST, 6.7% Greens (down 2.1%) and 3.0% Conservatives (down 3.2% from Family First’s 2014 vote).

In South Australia, there is a fairness clause that requires boundaries to be drawn so a party with over 50% of the two party vote should win the election. The boundaries used at this election notionally gave the Liberals 26 seats, Labor 20 and one independent (Geoff Brock in Frome).




Read more:
Xenophon’s SA-BEST slumps in a South Australian Newspoll, while Turnbull’s better PM lead narrows


On the new boundaries, both major parties lost a seat to independents who had defected during the last parliamentary term. The Liberals gained King from Labor, but Labor gained Mawson from the Liberals. In Mawson, sitting Labor member Leon Bignell had a 4.5% swing in his favour, just overcoming a hostile redistribution.




Read more:
Liberals win South Australian election as Xenophon crushed, while Labor stuns the Greens in Batman


Conservative commentators such as Graham Richardson have blamed Labor’s loss partly on its renewable energy policies. Between 2011 and 2014, Labor governments that had been in power for 14 to 16 years were smashed in New South Wales, Queensland and Tasmania. In South Australia, Labor had a two party swing in its favour. Renewable energy probably helped Labor, rather than damaged it.

The upper house results have not yet been finalised. In the race for the final seat, Labor has 3.46 quotas and the Conservatives 0.42. With preferences to come from Animal Justice, Dignity, SA-BEST and the Liberal Democrats, it is likely that Labor’s fourth candidate will defeat the Conservatives.

Final Tasmanian result: 13 Liberals, ten Labor, two Greens

At the Tasmanian election held on March 3, the Liberals won 13 of the 25 lower house seats (down two since the 2014 election), Labor won ten (up three) and the Greens two (down one). This is the first time a single party has had a one-seat majority at a Tasmanian election since 1978.




Read more:
Liberals romp to emphatic victory in Tasmanian election


There were two seats contested between different parties that were undecided on election night. In Franklin, the Greens won the final seat by 226 votes or 0.02 quotas against the Liberals. Labor gained a seat from the Liberals.

Final primary votes gave the Liberals 2.90 quotas, Labor 2.06, the Greens 0.86 and the Shooters 0.17. As expected, the Liberals greatly benefited from Shooters’ preferences, but were damaged by within-ticket leakage. With only Labor votes left (they had 2.20 quotas at this point), the final Liberal led the final Green by just 81 votes. Labor’s votes then flowed strongly to the Greens.

In Bass, the Liberals had 3.53 quotas, Labor 1.58 and the Greens 0.56. At the three-way crunch point, the Liberals were just behind the Greens and Labor and were excluded. On Liberal preferences, Labor comfortably defeated the Greens by 801 votes or 0.07 quotas, thus gaining a seat from the Greens.

Final statewide vote shares were 50.3% Liberal (down 1.0% since 2014), 32.6% Labor (up 5.3%), 10.3% Greens (down 3.5%) and 3.2% Jacqui Lambie Network. This was the Greens’ lowest Tasmanian vote since 1998, when they received 10.2% – their vote has more than halved since they won 21.6% in 2010.

I believe the Greens’ poor result was mostly because Labor has a young left-wing leader in Rebecca White, and Labor’s anti-pokies policy attracted Greens’ voters.

The upper house was not up for election. The 15 members of the Tasmanian upper house are elected for rotating six-year terms in single-member electorates. Every May, two or three electorates are up. Labor has four upper house seats, and there are four left-wing independents, so the left currently controls the upper house.




Read more:
Dems easily win Virginia and New Jersey governors. Left gains control of Tas upper house


New South Wales March ReachTEL: 52-48 to Coalition

A New South Wales ReachTEL poll for The Sydney Morning Herald, conducted March 15 from a sample of 1,521, gave the Coalition a 52-48 lead, unchanged since October 2017. Excluding 6.2% undecided, primary votes were 44.7% Coalition (up 3.8%), 34.6% Labor (up 0.9%), 10.0% Greens (up 0.1%) and 5.4% One Nation (down 3.5%).

The ConversationIncumbent Gladys Berejiklian led Opposition Leader Luke Foley 52.3-47.7 as better Premier in ReachTEL’s forced choice question. By 59-26, voters opposed the government spending $2.5 billion on constructing new stadiums.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

US shouldn’t give up benefits of ‘green card lottery’ over low risk of terrorism



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The Statue of Liberty casts a wary eye at the bike path that runs along the western edge of Manhattan, where the Oct. 31 attack occurred.
Songquan Deng/Shutterstock.com

Ethan Lewis, Dartmouth College

After a man barreled down a New York City bike path on Oct. 31, killing eight, President Donald Trump reacted by calling for an end to the “green card lottery” program that allowed the attacker to enter the country.

The Diversity Immigrant Visa Program, as it is officially known, has been in the sights of the president for a while. In August, Trump publicly backed a GOP bill that would end the program and replace it with a merit-based system.

Trump and his fellow Republicans have long decried illegal immigration, but they have traditionally favored the legal kind, partly because their business donors demand it.

As someone who researches the impact of immigration on workers, I believe their plans to change who can enter the country legally is a big mistake. We would be giving up a program that benefits American workers with very little chance of a gain in safety.

While the driver reportedly entered the country through a green card, very few Americans have been killed by recipients of such visas.
AP Photo/Bebeto Matthews

Curbing immigration

While Trump’s tweets about the lottery program are based on security concerns, the usual argument supporting curbs on immigration is that new arrivals hurt native-born American workers and the economy at large.

I’ll leave analyzing the security concerns to other experts; suffice it to say that the risk, according to experts, is very small. Green card holders have killed just 16 people – including yesterday – in terror attacks on U.S. soil since 1975.

As for the economic impact on U.S.-born workers, the key thing to bear in mind is that the more homogeneous and similar immigrants are to natives, the greater the odds they’ll in fact have a negative effect.

In contrast, immigrants who come from diverse backgrounds with a range of skills – such as the lottery winners and the so-called “Dreamers” – tend to produce greater economic benefits. That may be one reason at least some Republicans and most Americans are in favor of keeping the Deferred Action for Child Arrivals program that protects the Dreamers from deportation, which Trump recently ended.

A new approach

Currently, the U.S. receives a lot of immigrants without a college degree or with imperfect English. About half of immigrants fit either description.


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Legislation proposed earlier this summer – the Reforming American Immigration for Strong Employment (RAISE) Act – would exclude most such workers and reduce the total number of green cards awarding permanent legal U.S. residence to just over 500,000 from more than one million today.

It would also end the green card lottery, which awards 50,000 green cards a year to people from countries with low rates of immigration to the U.S.

Importantly, it would also change who gets a leg up when applying for a green card. Currently, family of U.S. citizens and legal permanent residents, including siblings and adult children, are able to apply. The new system would limit that to minor children and spouses.

Instead, the bill would create a point-based system like those used in countries such as the U.K. and Australia that use factors such as English ability, education and job offers to rank applicants. However, it would be stricter than point systems used in those countries, which admit immigrants through other programs as well.

In essence, the plan would make the pool of immigrants more homogeneous and dramatically smaller in number, mirroring the misguided origin-based restrictions from the 1920s.

The DACA program’s inherent diversity is what makes it a boon for the U.S. economy.
AP Photo/Pablo Martinez Monsivais

What economists say

Those who wish to restrict immigration often cite what they naïvely call “supply-and-demand economics” to essentially argue that the economy is a fixed pie that gets divided among a country’s residents. Fewer immigrants means “more pie” for the U.S.-born, as the story goes.

I am an economist, and this is not what my colleagues and I say. The commonplace argument that more immigrants, by themselves, lower wages and take jobs from Americans – an argument which Attorney General Jeff Sessions used to defend ending the “Dreamers” program – has neither empirical nor theoretical support in economics. It is just a myth.
Instead, both theory and empirical research show that immigration, including people with few skills and little English, grows the pie and strengthens the American workforce.

The main registry building on Ellis Island is shown in this 1905 photo. It was once the nation’s gateway for millions of immigrants.
AP Photo

Value in diversity

While all the recently proposed changes to our immigration system will make U.S. workers worse off, the English requirement is likely to be particularly harmful to U.S. workers, especially low-skilled ones.

Indeed, I have found the relative fluency of U.S.-born workers is what keeps them from being harmed from labor market competition from immigrants.

The reason for this is the following. Essentially, immigrants with imperfect English skills tend to specialize in jobs that are less “communication-intensive,” such as manual labor. Americans fluent in the language, on the other hand, tend to take on higher-paying, communication-intensive jobs that are out of reach of those without a strong grasp of English. In other words, these groups aren’t likely to compete for the same jobs, making them more complementary than adversarial.

In contrast, when new immigrants are more fluent in English, something the Trump-backed proposal would encourage, the types of occupations they are qualified for are almost identical to those of American workers. Thus, insisting on strong English skills as a condition of coming to America is likely to increase labor market competition and suppress wages.

When Congress in 1964 ended the Bracero program, which allowed large numbers of Mexicans to work on U.S. farms, neither wages nor employment rates of American workers rose.
AP Photo

Immigration that helps

Immigration that emphasizes diversity, rather than merely merit, tends to attract more people who specialize in occupations uncommon among U.S.-born workers. And, in fact, this is the key source of the well-known economic benefits of immigration.

Studies by economists Giovanni Peri and Chad Sparber, for example, show this tendency toward job specialization is a key reason the large volume of low-skill immigration does not drive down incomes of Americans. Other research by Peri and Gianmarco Ottaviano shows that simply encouraging immigration from diverse origins lifts wages.

Put differently, there is direct evidence that the sort of diversity that the green card lottery encourages makes all Americans better off. It would be a shame to give all of that up because of a tiny risk of terrorism.

The ConversationThis is an updated version of an article originally published on Sept. 15, 2017.

Ethan Lewis, Associate Professor of Economics, Dartmouth College

This article was originally published on The Conversation. Read the original article.

The costs of a casual job are now outweighing any pay benefits


Joshua Healy, University of Melbourne and Daniel Nicholson, University of Melbourne

Low wages growth has been a spectre hanging around the Australian economy for some time. In our series What We Earn we unpick the causes for this and why some workers might be feeling it more than others.


Workers aren’t being compensated as much as they should be for precarious work in casual positions.

One in four Australian employees today is a casual worker. Among younger workers (15-24 year olds) the numbers are higher still: more than half of them are casuals.

These jobs come without some of the benefits of permanent employment, such as paid annual holiday leave and sick leave. In exchange for giving up these entitlements, casual workers are supposed to receive a higher hourly rate of pay – known as a casual “loading”.

But the costs of casual work are now outweighing the benefits in wages.

Costs and benefits of casual work

Casual jobs offer flexibility, but also come with costs. For workers, apart from missing out on paid leave, there are other compromises: less predictable working hours and earnings, and the prospect of dismissal without notice. Uncertainty about their future employment can hinder casual workers in other ways, such as making family arrangements, getting a mortgage, and juggling education with work.

Not surprisingly, casual workers have lower expectations about keeping their current job. For example the Australian Bureau of Statistics (ABS) found 19% expect to leave their job within 12 months, compared to 7% of other workers. Casuals are also much less likely to get work-related training, which limits their opportunities for skills development.

The employers of casual workers also face higher costs. High staff turnover adds to recruitment costs. But perhaps the main cost is the “loading” that casual workers are supposed to be paid on top of their ordinary hourly wage.

Australia’s system of minimum wage awards specifies a casual loading of 25%. So, a casual worker paid under an award should get 25% more for each hour than another worker doing the same job on a permanent basis. In enterprise agreements, the casual loading varies by sector, but tends to be between 15 and 25%.

The practice of paying a casual loading developed for two reasons. One was to provide some compensation for workers missing out on paid leave. The other, quite different, motivation was to make casual employment more expensive and discourage excessive use of it. However this disincentive has not prevented the casual sector of the workforce from growing substantially.

Casual jobs aren’t much better paid

One approach in determining whether casual workers are paid more is simply to compare the hourly wages of casual and “non-casual” (permanent and fixed-term) employees in the same occupations. This can be done using data from the 2016 ABS Survey of Employee Earnings and Hours.

We compared median hourly wages for adult non-managerial employees, based on their ordinary earnings and hours of work (i.e. excluding overtime payments). If the median wage for casuals is higher than for non-casuals, there is a casual premium. If the median casual wage is lower, there is a penalty.

The 10 occupations below accounted for over half of all adult casual workers in 2016. In most of these occupations, there is a modest casual wage premium – in the order of 4-5%.

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The size of the typical casual wage premium is much smaller, in most cases, than the loadings written into awards and agreements. Only one occupation (school teachers) has a premium (22%) in line with what might be expected.

Three of the 10 largest casual occupations actually penalise this sort of work. And overall for these 10 occupations there is a casual wage penalty of 5%. This method of analysis suggests that few casual workers enjoy substantially higher wages as a trade-off for paid leave.

Taking a closer look involves controlling for a wider range of differences between casual and non-casual workers. One major Australian study in 2005 compared wages after taking account of many factors other than occupation, including age, education, job location, and employer size.

All else equal, it found that part-time, casual workers do receive an hourly wage premium over full-time, permanent workers. The premium is worth around 10%, on average, for men and between 4 and 7% for women.

These results imply that most casual workers (who are in part-time positions) can expect to receive higher hourly wages than comparable employees in full-time, permanent positions. However, the value of the benefit is again found to be less than would be expected, given the larger casual loadings mentioned in awards and agreements.

It seems that while there is some short-term financial benefit to being a casual worker, this advantage is worth less in practice than on paper.

A recent study, using 14 years of data from the Household, Income and Labour Dynamics in Australia Survey (HILDA), finds no evidence of any long-term pay benefit for casual workers.

The study’s authors estimate that, among men, there is an average casual wage penalty of 10% – the opposite of what we should see if casual loadings fully offset the foregone leave and insecurity of casual jobs. Among female casual workers, there is also a wage penalty, but this is smaller, at around 4%.

This study also finds that the size of the negative casual wage effect tends to reduce over time for individual workers, bringing them closer to equality with permanent workers. But very few casual workers out-earn permanent workers in the long-term.

Inferior jobs, but fewer alternatives

The evidence on hourly wage differences leads us to conclude that casual workers are not being adequately compensated for the lack of paid leave, or for other forms of insecurity they face. This makes casual jobs a less appealing option for workers.

This does not mean that all casual workers dislike their jobs – indeed, many are satisfied. But a clear-eyed look at what these jobs pay suggests their benefits are skewed in favour of employers.

Despite this, the choice for many workers – especially young jobseekers – is increasingly between a casual job or no job at all. Half of employed 15-24 year olds are in casual jobs.

The ConversationIn a labour market characterised by high underemployment and intensifying job competition, young people with little or no work experience are understandably willing to make some sacrifices to get a start in the workforce. The option of “holding out” for a permanent job looks increasingly risky as these opportunities dwindle.

Joshua Healy, Senior Research Fellow, Centre for Workplace Leadership, University of Melbourne and Daniel Nicholson, Research Assistant, Industrial Relations, University of Melbourne

This article was originally published on The Conversation. Read the original article.