In the late 1990s, American writer and activist Barbara Ehrenreich spent a year working in low end jobs in the United States documenting the pitifully low wages, the oppression, and barriers to upward mobility for the vast stratum of America’s “working poor”. From her experience, she produced the 2001 classic, Nickel and Dimed. Ten years later, Ehrenreich’s post GFC update provides a distressing perspective on the lives of these same “working poor” who have lost their jobs in the economic meltdown.

Ehrenreich’s 2011 update affirms the stream of images of the “American nightmare” of the last few years: the homeless and hungry, the tent cities, the abandoned and decaying housing stock as a result of mortgage foreclosures. Further, when Americans lose their jobs, they also lose their health insurance, and for many this means access to healthcare altogether (notwithstanding Obama’s health care reforms in train). Yet these trenchant images do not go far enough.

In her update, Ehrenreich explores another dimension of the meltdown for America’s jobless poor: the “criminalisation of poverty”. Because of the fragmented nature of the social safety net in the United States, many people who lose their jobs especially at the low end of the labour market, are quickly mired in a downward spiral of debt accumulation.

This may lead to homelessness, but worse still, a stint in jail for unpaid bills and fines or for minor misdemeanors related to being poor such as not being able to afford repairs to a car which make it unroadworthy. Without health insurance, medical costs can also lead to indebtness and again a risk of imprisonment. (In her 2008 essay collection, Going to Extremes, Ehrenreich calls this the “criminalisation of illness”.

As homelessness itself is outlawed in many public precincts, this itself may lead to incarceration. In some states, debtors have to pay for their own upkeep in jail which in turn leads to more debt. Of course, a criminal record greatly reduces or even nullifies a person’s capacity for improving his or her economic position through paid employment.

Ehrenreich reports on the ways that the poor can be victimised. She cites examples of how police raids are commonplace in disadvantaged black communities and amongst those with the least means to protect themselves. Public resources are ramped up for policing the poor while the resources that could have reduced the poverty and hardship in the first place are withdrawn. What would Charles Dickens have made of it?

In contrast, Australian jobs held up through the GFC even if hours were reduced in some industries, and our social safety net, including universal healthcare coverage, continued to take the edge off the worst of economic hardships. But complacency for Australian workers is hardly a going concern in these times.

We have a “two-speed economy” with growth concentrated in the mining sector, but more limited capacity for growth in the manufacturing and service industries, which support most of our jobs but where our comparative advantage in a global economy is relatively weak, as Ken Henry points out. Some important industries for employment such as car manufacturing have already hit troubled waters as Remy Davidson explains.

It seems likely that there will be some painful structural adjustment ahead with forecasts emerging of increased unemployment.

While 5% of our workforce is currently unemployed compared to 8.2% in the USA and 10.3% across the European Union, a further 8% of our workforce is underemployed. Altogether, 13% of the Australian workforce has no work or not enough work.

The pain of structural adjustment can be assuaged by the right policy formulae particularly in terms of the social safety net which needs to do two things: provide an adequate income for the necessities of life and ensure that people are positioned to quickly reintegrate, into satisfactory paid employment or “decent work”.

What can we say about the safety net at this point in time for unemployed Australians? First of all, unemployment payments, that is the Newstart Allowance, are significantly below poverty benchmarks as acknowledged by the OECD21&docLanguage=En) and a very wide range of other commentators. While Newstart is certainly better than what is available for many Americans, it nevertheless is driving many unemployed people into penury (see Peter Whiteford’s article).

As one participant in my research who was trying to survive on a Newstart payment with a little casual employment said: “You just simply cannot, nobody, absolutely nobody, can live on a Centrelink benefit (Newstart), you just can’t do it.” For this woman, her very low income meant living in a rooming house in Melbourne, the worst form of accommodation in this city, and struggling to make ends meet on a day-to-day basis.

To receive Newstart payments in Australia, one is also under the “mutual obligation” requirements to look for work and be available to work in any job deemed “suitable” which at a level sounds fair enough.

For another participant in my research, a former public sector employee, her mutual obligation requirements for Newstart meant a minimum of four job applications per week, which over three years had mounted to 600 applications. Out of the 600 applications, she attained two jobs on a “probationary” basis, but she had not survived the probationary periods. She attributed this to her loss of confidence and deterioration in her mental health that had accrued from such a long period of punishing and unsuccessful job search.

Receiving Newstart also means entanglement in the maze of Centrelink and employment service “industries”. In her book The Short Goodbye, Australian writer Elizabeth Wynhausen tells of the range of dispiriting experiences that go with being a Newstart recipient: the endless form filling, the intrusive monitoring, the queuing, the futile training, echoing the stories I heard in my research.

Knowing something of the current rigours attached to income support for Australia’s unemployed, I wondered who and what the Coalition has in mind for the social safety net if it wins the next election. According to the Coalition’s speaking notes leaked by Crikey, the Coalition is committed to “break the cycle of idleness and habits of apathy that can develop in those on welfare” and “make welfare a disincentive for those who just want to bludge”. In fairness, it does also say it will provide more assistance to get people into jobs more quickly but this is what political parties always promise and rarely deliver on.

It is hard to imagine how the current social safety net could be made even tougher without it more starkly taking on the American approaches of punishment and pauperisation of the unemployed. This most certainly would set back our needed structural adjustments by eroding the capacities of unemployed people to reintegrate into the workforce and, at the same time, exacerbating social divisions. As the evidence compiled by Wilkinson and Pickering in The Spirit Level attests, the more unequal a society, the worse its performance across nearly all social and economic indicators.