Social exclusion and disadvantage in the New Economy

RESEARCH AND ADVOCACY TEAM
Working Paper No.2
Social exclusion and disadvantage in
the New Economy
Gianni Zappalà, Vanessa Green & Ben Parker
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Copyright © 2000 The Smith Family
December 2000

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Research & Advocacy Team
Working Paper
No.2, 2000
Social exclusion and disadvantage in
the New Economy
By
Gianni Zappalà, Vanessa Green & Ben Parker

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Research and Advocacy Team
Working Paper No.2, 2000
Preface
In March 1999 The Smith Family moved to enhance its research capacity by forming the Research
and Advocacy Team. In line with its vision for a more caring and cohesive Australian community,
the Research & Advocacy Team of The Smith Family researches different forms of disadvantage to
propose evidence based preventive responses to them and to work for the development of social
policy that benefits the entire community. A general theme that integrates all of The Smith
Family’s research activities is social capability. It refers to the capacities of communities and
individuals in them to draw from their own strengths and social capital and to move beyond the
limitations of disadvantage. The establishment of the Team also reflects The Smith Family’s
commitment to evidence based programs by ensuring ideas are tested in pilot studies and
evaluated for effectiveness. The Smith Family will also use outcomes from its research to
contribute to the policy making process to build a better future for all of the disadvantaged through
an enhanced advocacy role.
The Smith Family intends to play an active research and publication role, as well as form strategic
alliances with universities and other social sector organisations to bring about societal change. A
range of publications will make research undertaken by the Team available to a broad range of
people who have either an interest in or a commitment to The Smith Family’s work. Background
Papers identify areas to be researched as well as provide important pre-evaluation information of
Smith Family programs and activities. Working Papers present preliminary research findings that
contribute to the development of evidence based social policy and initiate professional dialogue on
critical research questions. Briefing Papers provide analysis of Smith Family programs and wider
social policy issues in a more concise timely manner. A regular E – Bulletin will publicise the
Team’s publications as well as provide a summary on TSF research, policy and advocacy matters.
These publications, as well as occasional reports, submissions and monographs will either be
produced by members of the Research & Advocacy Team, be the product of collaborative efforts
with other researchers or arise from commissioned research. All publications are subject to a
refereeing process.
On behalf of the Research and Advocacy Team I trust that you find the following Working Paper a
worthwhile contribution to evidence based social research and to the development of social policy
that unlocks opportunities and builds capacity for all Australians.
Dr Rob Simons
National Program Manager
Research & Advocacy
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Research and Advocacy Team
Working Paper No.2, 2000
Contents
Preface
About the authors
iii
Abstract
2
Introduction
3
Understanding the new economy (I): the use and access to information technology
4
Implications for the disadvantaged: the digital divide
5
Understanding the new economy (II): the rise of the ‘network society’
7
Implications for the disadvantaged: new economy insiders and outsiders
The wage pyramid
8
The growing income and wage divide in Australia
9
The role of education: Labour market skills & training
11
The role of education: Schools and the new economy
12
The new economy, social exclusion and ‘social isolation’
14
Conclusion
16
Acknowledgements
18
References
18
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Research and Advocacy Team
Working Paper No.2, 2000
List of Figures and Tables
Figure 1
Percentage of adults with access to a computer and the Internet
at home, 1998 to 2000
4
Figure 2
Percentage of adults with Internet access at home, by income level,
1998 to 2000
5
Figure 3
Percentage of adults with Internet access at home by
educational qualification, 1998-2000
6
Figure 4
Australians in poverty by labour force status of head adult in
household, 1999
10
Figure 5
Australians in poverty by main income source of their family, 1999
10
Table 1
Percentage of adults with access to the Internet at home by
household income and age of the eldest child, 1999
6
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Research and Advocacy Team
Working Paper No.2, 2000
About the authors
Dr Gianni Zappalà is the Research Coordinator in the Research & Advocacy Team of The Smith
Family. He has degrees in Economics, Industrial Relations and Political Science from the
Universities of Sydney, London and Cambridge. Prior to joining the Research & Advocacy Team at
the end of 1999, he held various teaching and research positions at the Universities of Sydney,
Cambridge (Fellow of Emmanuel College), Wollongong and the Research School of Social Sciences
at the Australian National University. In 1996 he was appointed the Australian Parliamentary
Fellow at Parliament House, Canberra. He has published widely in the areas of labour markets and
industrial relations, immigration and citizenship, and Australian politics. His recent books include
Four Weddings, a Funeral and a Family Reunion: Ethnicity and Representation in Australian
Federal Politics (Canberra: AGPS, 1997) and Speaking for the People: Political Representation
in Australia (Melbourne University Press, forthcoming, 2001) with Marian Sawer.
Dr Vanessa Green is the Research Officer in the Research & Advocacy Team of The Smith Family.
She has degrees in Social Science, Education and Psychology from the Universities of Waikato
(NZ), Southern Queensland, and Queensland University of Technology. Prior to joining TSF in April
2000, she held various research and teaching positions at the Royal Rehabilitation Centre,
Sydney, Queensland University of Technology and the University of New South Wales. She has
published several articles in social, cognitive and developmental psychology, nursing practice and
severe communication impairment.
Ben Parker is the Senior Research Assistant in the Research & Advocacy Team of The Smith
Family. He has a Bachelor of Science from the University of Sydney and is currently completing a
Bachelor of Social Science at the University of New South Wales. He has worked in a research
capacity at TSF since March 1998, before taking up his current position with the formation of the
Research and Advocacy Team in 1999.
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Research and Advocacy Team
Working Paper No.2, 2000
Abstract
The term ‘new economy’ has become increasingly used in Australia by the media, policy makers
and scholars. The new economy remains, however, an elusive concept. Some also claim that the
new economy will lead to a reduction in poverty and disadvantage. This paper outlines two main
definitions of how the term has been used to date and the corresponding implications for the
disadvantaged. The first definition of the new economy relates to the extent and usage of the new
information and communication technologies (ICT) among countries and firms. The key implication
for the disadvantaged is whether access to and usage of ICT is equitably distributed across
particular individuals and groups in society.
The second way the term new economy is used is in referring to the broader implications of ICT
and ‘know-how’ for the economic and social structures of society. The term new economy in this
context is often used interchangeably with the ‘knowledge economy’, the ‘information economy’,
and the ‘information age’. The key implications for the disadvantaged in this context relate to the
labour market effects of the new economy. In particular, its impact on the type and nature of jobs,
the remuneration of those jobs, and whether individuals have adequate access to training at work
and school.
Most models of the new economy suggest that it has led to increased disadvantage for certain
groups in society. This paper adopts a ‘social isolation’ approach to social exclusion to argue that
new economy developments, in the context of the current policy environment, run the risk of
exacerbating inequality in Australia and facilitating the opting out of a wealthy minority from the
common institutions of society. This in turn increases the likely number of citizens at risk of
becoming socially excluded and breaks down the conditions for social solidarity.
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Research and Advocacy Team
Working Paper No.2, 2000
The new economy is global in dimension, digital in mechanism, leisure and information in
content and is profoundly destabilising established social and economic structures (Tanner
1999:84)
Introduction
The ‘new economy’ has become the new catch phrase of the decade. It is a term seen and heard
daily in the media. The term has also become fashionable among politicians and policy makers.
Whether a country is seen to be a new economy has been argued to affect a wide variety of factors
including:
• the value of its currency (Lewis 2000);
• trade union recruitment strategies (Kennedy 2000);
• ethnic relations and racism (Rampini 2000);
• the clothes people wear to work (Hewson 2000);
• the presence of dog-friendly workplaces (Long 2000); and even
• the percentage of gays in the population (Hartcher 2000)!
Some scholars have been zealous in proclaiming that the new economy will mean the end of
poverty and disadvantage. They argue that we are witnessing the end of inflation, the end of the
business cycle and recessions, a return to full employment, productivity increases, reduced
monopoly power and an unleashing of entrepreneurial spirit (Sahlman 1999). A new economy
version of the trickle down theory will ensure that all sectors of society as well as all countries will
benefit and prosper from this increased competition, reduction of prices and increased employment
said to result from the new economy.
Similarly, in a recent address to a special conference organised by the Centre for Independent
Studies, the head of the American Enterprise Institute argued that the new economy, by improving
the efficiency of free markets, was responsible for the present prosperity of the West (DeMuth
2000). Indeed, according to DeMuth the problems of poverty have been solved and ‘the truly
serious, overarching policy problems have become cultural and ethical’. Technology and wealth
now pose a challenge to ‘live in a world where wealth and freedom have amplified man’s
capacities for vice along with his capacities for virtue’ (DeMuth 2000). What are we to make of
such rosy (naïve?) views of the supposed impact of the new economy? 1
Before we move to a closer examination of the ‘new economy’ we need to briefly turn our attention
to the first half of the title of this paper. Disadvantage has traditionally been understood in
financial terms. Once an individual’s or family’s financial resources increased beyond some
minimum standard (poverty line) they would no longer suffer from the effects of disadvantage. Over
recent years, however, it has been acknowledged that inadequate income is only one of a host of
factors that can lead to disadvantage. This is reflected in the wide-range of studies that use
frameworks of social exclusion to understand disadvantage (Jones & Smyth 1999).
Social exclusion refers to a situation in which individuals or communities are subject to multiple
forms of disadvantage such that they cease to be full citizens and are unable to participate in the
economic, social, cultural and political dimensions of society (Bittman 1998). Social exclusion

1 See Zappalà (2000) for a summary and critique of the economic debates surrounding the new economy.
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Research and Advocacy Team
Working Paper No.2, 2000
often has a spatial and ethnic/racial dimension to it and is linked to economic change and
processes of intergenerational inequality. It places issues of social cohesion and solidarity at the
centre of social policy analysis (Jones & Smyth 1999:19). Our analysis is informed by the ‘social
isolation’ approach to social exclusion developed by Barry (1998). In brief, it refers to a situation
where the processes by which the disadvantaged are socially excluded occur simultaneously with
the socially advantaged ‘opting out’ and isolating themselves from the community’s common
institutions. The wealth of a minority enables them to erect barriers that exclude the majority of the
citizenry. This situation undermines the basis for social solidarity in a democratic society.
Understanding the new economy (I): the use of and
access to ICT
Despite the euphoric headlines, definitions of what is meant by the term ‘new economy’ remain
elusive. Neverthless, two main ways in which the term ‘new economy’ is used can be delineated
(Zappalà 2000). The first way the term ‘new economy’ is used is in referring to firms that are
involved in the Internet and information and communications technologies (ICT). It is also a term
used to contrast with so-called ‘old-economy’ companies or industries, such as mining, traditional
manufacturing and transport. When commentators refer to Australia as an ‘old economy’ they
usually refer to the fact that primary resources rather than technology industries are still the main
driver of economic growth. Key indicators of the ‘new economy’ in this definition of the term
include: the extent of Internet access and usage in society, the production and use of information
technologies, and the extent of e-commerce between business and consumers and business and
business (B2B).
If Internet usage is an indicator of being a new economy then Australia is certainly ‘newer’ than
most. In terms of individuals’ Internet usage Australia ranks in the top five countries in the world
(Bryan & Potter 2000:58). In terms of e-commerce servers per capita, Australia ranks second
behind the US (Allard 2000). Australia ranks well above the OECD average in terms of Internet
hosts per 1000 inhabitants and its Internet penetration is the highest in the Asia-Pacific region
(OECD 2000; Wilson 2000). Over the past three years, Australia has seen an increase in both the
number of computers in homes and the number of homes connected to the Internet. Computer
ownership increased from 53 per cent in 1998 to 64 per cent in 2000 while Internet access at
home has increased at a rapid rate from 25 per cent in 1999 to 37 per cent in 2000 (Figure 1). A
key reason for Australia’s high rate of Internet connectivity is its relatively lower costs for Internet
connection and usage (OECD 2000).
Figure 1
Percentage of adults with access to a computer and the Internet at home,
1998 to 2000
70
60
50
Percentage of 40
1998
Adults
30
1999
2000
20
10
0
Computer at home
Internet access at home
Source: Hellwig & Lloyd (2000:12)
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