Australian Philanthropy and the Wealth Gap

Wealthy Australians have come under the spotlight. Investment returns and executive salaries are up while, apart from the East Timor Levy, taxes are coming down. To what extent do they recognise the need to give back by supporting causes that address the inherent inequality in our society? Thankfully, recent developments show that the bus to a stronger culture of giving in Australia has left the station. Philanthropy, charity, social investment - or whatever we prefer to call it – is now a topic, an issue. So, let’s debate it.

Surprising findings emerged from a recent Givewell survey (Australian Charities 1996 – 1998 – a financial analysis) of the funding of 276 major Australian charities with a combined total income of $2.6bn. In 1998 government funding (federal, state and local) represented 40% of their total income, increasing by 7% in dollar terms. This was in an environment of deficit reduction, predominantly conservative parties in power and widespread reporting of cutbacks to the welfare sector.

Individual Australians, through their business or their deceased estate, are also being asked to give more – and they are. Fundraising income of major charities also grew by 7% in 1998. “There are just so many causes and charities asking for support these days”, we were often told at focus group sessions.

And so with a new focus on giving and good economic times, it was gratifying to see this response. But why give more? Is it a case of asking for the sake of it? The reality is that extra pressure on social needs will likely exceed the supply of funds. The Royal Bind Society http://www.givewell.com.au/details_name.asp?txtOrganisation=RBS forecasts a 43% increase in vision impairment from 1993 to 2010. The Arthritis Foundation http://www.givewell.com.au/details_name.asp?txtOrganisation=AFV estimates that 85% of the population aged over 65 is affected by arthritis. The Alzheimer’s Association http://www.givewell.com.au/details_name.asp?txtOrganisation=ALW expects a 65% increase in those with moderate to advanced dementia over the next 20 years. Diabetes Australia http://www.givewell.com.au/details_name.asp?txtOrganisation=DAN points to the 400,000 odd Australians with undiagnosed secondary diabetes with one new case being diagnosed every 10 minutes. A similar story applies for hearing impairment, multiple sclerosis, homelessness, disaster relief etc. We are also finding cures and other ways to reduce suffering. However, let’s remember that early stage medical research is also funded by private philanthropy. Government funding often comes after the hard yards have been put in. There is also pressure on our volunteering effort primarily from increased female workforce participation.

The underlying factors which explain this pressure on social needs are the same as those that underpin the trend towards self-funding in retirement and for health care. Our population is ageing and it is politically impractical to expect government funding alone to match the increase in need, which means we must pick up the tab. Another factor is the wealth gap – the rich are getting richer. The Luxembourg Income Study Inequality Indices show that Australia has recorded a steady increase in the wealth gap since 1980. The latest figures show that our income spread is less equal than Belgium, Canada, Denmark, Finland, Germany, Norway and Sweden. As long as executive pay rises remain twice that of the average worker, combined with high levels of long-term unemployment, the wealth gap will continue to widen.

What’s more, those on high incomes are less inclined to bridge this gap with charitable donations. A 1997 consumer survey conducted by AGB McNair found that those on incomes over $50,000 pa gave 0.4% of their income to charity, while those with less income gave 0.6%. This indicates that many people are statistically rich but less generous. This group is also a significant beneficiary of tax reform and are major consumers of the new necessities of life - 2 car family, home PC, mobile phone, imported kitchen range, pay TV, private school fees etc. How can you feel rich and generous when faced with all these bills? Many such people have also moved up a step on the social spectrum, and a $50 donation is still a lot of money! However, let’s not be too quick to criticise. This group’s taxes also makes a significant contribution to today’s welfare state. They effectively pay for their parent’s pension and while saving for their own. They can’t count on a big inheritance and will face major costs for health, retirement incomes and ultimately aged care.

Commentary on Australian philanthropy of late has tended to point the finger at big business. While it’s true many large companies have well organised community development programs, their budgets often bear little relation to the economic benefits they enjoy. Some argue that business should not be required to make donations to charity as a matter of public policy. The same logic could suggest that business should not pay taxes. Business is part of the community just as much as it’s part of the economy. Its legal obligations to employees, customers, the environment and the public all recognise this. Public policy should also acknowledge the attendant moral principle of giving back to the community.

The bottom line is we should give generously, support causes we feel connected with, get involved and enjoy our contribution. There is little debate about that. As with many things the argument is about the money. Those of us who give 1% of our income (or profits) are paying full fare and there are still plenty of seats left at the front of the bus.

Michael Walsh
Executive Director, Givewell