During the conference The Conversation will publish a selection of pieces written by the authors of papers to be delivered at the conference.
Since the surprise re-election of the Coalition, there has been renewed debate about the role the “aspirational” Australian played in the final outcome. The debate is taking place against the backdrop where income inequality has been growing in most developed countries over the past half-, including in Australia.
Bureau of Statistics figures released on Friday show that the wealth of Australia’s wealthiest households has grown much faster than the wealth of the rest.
Household net worth by quintile (top fifth to bottom fifth)
Over the course of the 20th century, income equality has been U-shaped, a point noted by French economist Thomas Piketty and Australia’s Productivity Commission.
In Australia, the income share of the top 1 per cent peaked at 14% in 1950, then fell to a low of 5% in the early 1980s before climbing again to 9% by 2015.
Wealth inequality has also followed a long term U-pattern, and in many countries wealth is even more concentrated than income.
The Productivity Commission finds that in Australia, a person at in the top 10% of wealth distribution has 40 times as much wealth as a person in the bottom 10%. That person has four times as much income.
Income shares of the top 1%, by country
In a paper to be presented to the Australian Conference of Economists in Melbourne on Tuesday, my colleague Monica Jurin and I shed light on wealth inequality over the past three decades through the lens of Australia’s super rich – the richest 200 households and families.
The super rich are changing
Based on the Rich List, compiled by the Business Review Weekly since the 1980s, and now updated annually by the Australian Financial Review, we examine the importance of inherited wealth versus entrepreneurship among Australia’s super rich.
The Rich List confirms the rise in wealth inequality. In 2019, the richest 200 families accounted for 3.6% of the aggregate net worth of all Australian families, up significantly from 2.3% in 1989.
But the importance of inherited wealth appears to have diminished.
Those with inherited wealth and family businesses today make up one-third of the super rich, well below 43% in 1989, with a gradual decline over each of the past three decades. Inherited wealth by itself accounts for 37% of the Rich List’s net worth today, well below 55% in 1989.
Today, the technology sector accounts for almost 8% of the Rich List’s net worth, compared to almost none in 1989.
The results seem somewhat less egalitarian when we examine whether those on the list have appeared on it before.
They’ve more persistence, less inheritance
For instance Frank Lowy, co-founder of Westfield, is considered to be self made. But once on the list, he remained on in each of the four decades we examined.
Whatever the sources of one’s entry to the Rich List, members like Mr Lowy provide evidence of persistence. Conditional on being on the list a decade earlier, members have a slightly higher probability of remaining on it than they did in 1999, controlling for death and other factors.
They find that inherited wealth has become less important and being college educated has become more important.
In Australia we find that a substantially higher share of the richest individuals are tertiary qualified today than they were in 1989, but we are reluctant to draw strong conclusions because the entire society has greater access to tertiary education than it did in 1989.
The super rich have occupied a unique place in modern Australian culture since the emergence of conspicuous entrepreneurs and the emergence of the Rich List in the 1980s.
They are changing, and probably in a good way, even as inequality is growing.
Rising inequality is a concern across the developed economies, including Australia where top earners’ pay has soared to a 17-year high while ordinary workers’ wage growth has been the lowest on record. And that’s ultimately bad news for economic growth. This is longer than the usual Conversation article, so allow some time to read and enjoy.
In the last decade or more, economic growth has slowed across the Western world, although a belated though weak recovery has been under way since around 2017. In the US, for example, growth in gross output per capita averages around 1% a year this century. That’s about half the average rate during the second half of the 20th century.
American economist Arthur Okun famously argued there was a trade-off between equality and economic efficiency, implying little chance of high inequality and sluggish economic growth occurring together. Yet this is exactly what is happening in the US. What has gone wrong?
In The Captured Economy, Brink Lindsey and Steven Teles explore US economic sectors such as finance, land use, occupational licensing and intellectual property rights. They argue powerful interests have captured these sectors and are using the state to distort markets to their advantage. This kind of rent-seeking is weakening growth and driving up inequality. As the authors put it:
Across a number of sectors, the US economy has become less open to competition and more clogged by insider-protecting deals … Those deals make our economy less dynamic and innovative, leading to slower economic growth … At the same time, they redistribute income and wealth upwards to elites in a position to exploit the political system to their favour.
This special dealing is but one facet of a much wider problem of competing claims for economic resources increasingly damaging Western economies. The arguments by Lindsey and Teles concern dysfunctions on the supply side of the economy.
In our recent book, Fair Share: Competing Claims and Australia’s Economic Future, Michael Keating and I argue that even bigger competing claims and distributional problems are now affecting the demand side of Western economies. These problems are also producing weak economic growth and rising inequality.
But how are these two outcomes connected? In Fair Share, we argue that rising inequality is weakening economic growth across the advanced economies by reducing aggregate demand. Our account differs from mainstream economics, which argues that growth stems mainly from the supply side of the economy.
In recent decades many neoliberal, supply-side policies have been implemented. The recent sluggish pattern of growth calls the supply-side theory into question. Indeed, the gap between theory and reality has prompted former US treasury secretary Lawrence Summers to argue that “the events of the last decade should precipitate a crisis in the field of macroeconomics”.
Even more important has been the rise in income inequality. The wage increases that have occurred have been largely concentrated among the top income earners. These “winners” have a lower propensity to consume than those in the lower deciles of earnings distribution. As a result, too much income inequality and slow wages growth relative to productivity growth risk a continuing shortfall in demand and hence weaker economic growth.
Prior to the Global Financial Crisis (GFC), many economic policies sought to avoid this shortfall in aggregate demand. This did so either by maintaining a very competitive exchange rate to support export-led growth (e.g. China, Germany) or, more often, by increasing the availability of consumer credit to support consumer demand (e.g. the US, UK).
Neither of these strategies has proved viable in the longer run. First, not all countries can be net exporters at the same time. Second, the required growth in consumer credit became increasingly risky, and eventually helped fuel the GFC.
Since then, the advanced economies have experienced protracted stagnation and a weak recovery due to a shortfall in aggregate demand. The longer this shortfall continues, the greater the risk that the rate of increase in potential output will also slow.
The impact on economic output is due to lack of new investment, on which technological progress depends, and atrophying of workforce skills when labour is not fully employed. Indeed, the combination of low unemployment and slow economic growth suggests this slowdown in potential output growth is already occurring in the US.
More generally, however, competing economic claims can potentially deliver various combinations of inflation, wage stagnation, growing inequality, weak demand and slower economic growth. Our central proposition in Fair Share links income distribution and economic growth.
Why growth depends on balanced distribution
Western capitalism has always run on a fairly narrow distributional path. If the distributional balance gets too far out of kilter in either direction the threats of inadequate aggregate demand and weak growth are likely to emerge.
As we saw in the 1970s, pursuit of excessive wage increases risks stagflation, resulting in inadequate investment and rising unemployment. On the other hand, and as is happening now, a significant shift towards wage stagnation and increased income inequality risks slower growth through inadequate demand and consumption.
Hence, it is the distributional shifts, in pursuit of higher wages in the 1970s and more recently in favour of capital and the highest-income groups, that have largely been responsible for the difficulties in both epochs in maintaining growth in the advanced capitalist economies.
Our theory thus suggests that the problems of stagflation in the 1970s were not as far removed from today’s problems as one might think. The root cause of the problems across both eras has essentially been distributional changes.
Some analysts argue that regulatory and other changes have altered the relative power of those involved in competing claims, with workers and wage levels, in particular, losing out. Others, such as Lindsay and Teles, argue returns are skewed by oligopolistic competition, rent-seeking and other forms of market power and powerlessness (see also Cameron Murray and Paul Frijters’ Games of Mates on Australia).
We acknowledge both of these changes but argue that the biggest changes in income distribution have come from technological changes that have hollowed out middle-income jobs, while any relative labour shortages have tended to be skill-biased. These two factors are the main drivers of increased income polarisation.
Furthermore, to the extent that trade-union power matters, we think changes in the industrial and occupational structure of the workforce, in response to technological change, have largely been responsible for reduced trade union membership and the loss of bargaining power.
What should governments do about this?
In response, governments should aim to boost wages and redress growing income inequality. Any such strategy will be most effective if it focuses on responding to the technological changes that are the prime cause of rising inequality. As Thomas Piketty concluded in the most significant analysis of inequality published this century:
To sum up: the best way to increase wages and reduce wage inequalities in the long run is to invest in education and skills.
We argue therefore that education and training need to be boosted to help workers cope with changing markets and job opportunities. This approach can be expected to boost both aggregate demand and supply. Direct measures to boost lower incomes may also be needed to improve the social safety net for those who miss out.
More generally, the successful continuation of the open-economy model, and indeed the sustainability of capitalist democracy, will depend upon the successful resolution of competing claims. In particular, this requires a fair sharing of the gains from increased economic production and a tight link between wages and productivity growth.
It is certainly clear that the supply-side, neoliberal policies of recent decades have largely run their course in many advanced economies. Too often the starting premise of the supply-side agenda is that the role of government should be minimised through further deregulation and tax cuts. However, the nature of many of today’s problems requires government to be more interventionist rather than less, while still maintaining the key strengths of an open, liberal, market economy.
The new focus of policy must be on the demand side. The failure to reasonably share income and educational opportunities is creating a highly volatile mix of unhappy “losers”. Hence, we see a growing political backlash, the rise of right-wing populism and extremism, Brexit, Trump etc.
The backlash against globalisation and economic restructuring is real and growing. It poses a threat to economic development and to liberal democratic capitalism.
All this has led commentators such as German sociologist Wolfgang Streeck to refer to “the crises of democratic capitalism”, featuring “an endemic and essentially irreconcilable conflict between capitalist markets and democratic politics”. Perhaps so, yet capitalist democracies have managed to do much better in the past, especially during the post-war golden age of the 1950s and 1960s.
What does this mean for Australia?
Even today some countries are handling the situation better than others, suggesting politics and policies can make a difference.
Australia is a case in point. In recent decades reforms to improve market flexibility in Australia have underpinned one of the longest expansions in capitalist history. At the same time the wage share in Australia in 2015 was about the same as in 1990 and a bit higher than in 1960.
In addition, Australia has possibly the most efficient redistributive system of all the advanced economies. Under the Hawke and Keating Labor governments’ Accord with the trade unions, the social wage increased substantially faster than other incomes.
Thus, it is imperative for Australia that it adopts a more growth-oriented income distribution. Key elements include wage-supporting measures and ensuring people are better equipped to change the organisation of existing jobs and, in many cases, move to the higher-skilled and well-paid jobs that technology is often creating.
A new agenda is needed. We have to recognise that economic growth inevitably involves economic transformation, based on innovation and technological change. Thus, contrary to the assumptions many economists make, it is highly probable that economic growth will impact on the distribution of incomes. This of itself can create future problems for the sustainability of that growth.
The bottom line, economically and politically, is that governments need to be prepared to promote demand as well as supply. Increasingly, we can no longer escape the distributional issues at hand. The winners will need to help the losers through more effective support and a degree of redistribution – especially if things get worse through ongoing wage stagnation and rising resistance to the perceived inequities of the present economic system.
Income inequality has dropped slightly in Australia, largely driven by a fall in incomes for the richest 20% of the population, according to the latest Australian Bureau of Statistics (ABS) Survey of Household Income and Wealth.
The richest 20% of the population have seen their real disposable incomes (adjusted for the number of people living in the household) fall by nearly 5%, or close to A$100 per week. Most other households have seen no real increase in their incomes over the two years since the previous survey was released.
Our recent public debate over whether inequality is rising or falling ran into the problem that the two most important sources of data were showing different trends. The ABS survey continues to show a higher level of income inequality than the HILDA survey, but the latest trends now look more similar.
Possibly the best characterisation of the latest ABS figures is that they show inequality remains higher than at any period before 2007-08, but in the short term it is unclear what to expect.
As you can see in the following chart, there has been a slight fall in income inequality between 2013-14 and 2015-16, with the Gini coefficient for “Equivalised Disposable Household Income” falling from 0.333 to 0.323. The Gini coefficient is a measure between zero (where all households have the same income) and one (where only one household claims all the income).
Equivalised Disposable Household Income is the total income of the household from all sources including social security payments, minus direct taxes, and then adjusted for the number of people living in the household. For example, a household of a couple with two children under the age of 15 is assumed to need 2.1 times the income of a household of a single adult to achieve the same standard of living.
So what explains these most recent trends? At this stage, it’s difficult to be definitive. It should also be borne in mind that it has only been two years since the last survey, the overall change is not large, and so we should be cautious in unpacking the trends.
But it is worth noting that this small reduction in income inequality has come at the same time as a small fall in both median and mean disposable incomes for Australian households.
The average taxes paid by households have also risen slightly in real terms (adjusted for inflation) since 2013-14, while the average social security benefits have stayed the same in real terms. This masks a significant drop in the real level of family payments (such as the family tax benefit) received by households, and increases in age pensions and “other payments” (overseas pensions and benefits, partner allowance, sickness allowance, special benefit, war widow pension (DVA), widow allowance, and wife pensions etc.).
However, where there does appear to be large changes are in the sources of income for households. If we compare incomes between the 2013-14 and 2015-16 surveys, we find that the only group that has enjoyed real increases in incomes are those whose main source of income is social security benefits. But these have risen by only A$6 per week, or about 1.3%, and they remain by far the lowest income households in Australia, with their average incomes remaining less than half of all other household groups.
Households who mainly rely on wages and salaries have seen their average real disposable incomes fall by about A$17 per week, or about 1.4%.
The biggest declines are among those who mainly rely on self-employment income from unincorporated businesses – usually a small business which has not incorporated as a registered company – and people whose main source of income is “other”.
“Other” includes many things, such as income received as a result of ownership of financial assets (interest, dividends), and of non-financial assets (rent, royalties), as well as from sources such as incorporated business income (i.e. companies), superannuation, child support, workers’ compensation and scholarships.
This group is fairly small – about 8% of households, but they are both the group with the highest and most unequal incomes and by far the highest level of net worth (assets minus liabilities). Their average incomes have fallen by around A$93 a week in real terms, or around 8%, but their median real incomes rose by around A$11 per week, suggesting that the loss in income was concentrated among higher income households in this group.
This group in 2013-14 had by far the highest level of income inequality with a Gini coefficient of 0.474. This has fallen to 0.423 in 2015-16. But because a lot of this income comes from the stockmarket, we can expect it to be more volatile.
The group who appear to have lost by far the most, however, are households whose main source of income is unincorporated business income. This is an even smaller group – around 4.6% of all households in 2015-16. Their real average incomes have fallen by more than A$160 per week, or around 16%. They also have a high level of inequality within their group, with a Gini coefficient of 0.353 in 2015-16, down from 0.389 two years previously.
But the overall change in income inequality is not large, and it does not significantly change Australia’s international ranking.
Writing in the Australian yesterday, Nick Cater of the Menzies Research Centre asserted that Australia is “one of the most equal and socially mobile nations on earth”. But even with the slight reduction in inequality, we are slightly above the OECD average, and there are around 20 OECD countries who are likely to have lower levels of income inequality than Australia.
Overall, the data shows a relatively small change in incomes for employee households and for households whose main source of income is social security payments. Together, these account for 87% of all households in Australia.
The reduction in overall income inequality in this period is therefore explained by the falls in income for the self-employed and for the “other” group – the group with the highest incomes and wealth.
Understanding what exactly has been happening for these groups and why will require further time and analysis. The volatility of the income sources for these groups is another reason to be cautious about projecting future trends.
Recent commentary on levels of inequality exposes the myth that Australia is an egalitarian society in which the privileges of birth have little currency.
Focusing on inequality in the distribution of incomes ignores an equally important dimension of inequality: wealth. Wealth is much more unequally distributed than income. Therefore, ignoring wealth inequality skews perceptions of social inequality.
Perceptions of the levels of income and wealth inequality are derived from our day-to-day experiences. This means that not mixing with people from the other end of the wealth distribution can colour our perceptions of inequality.
The lack of official data on the wealth holdings of Australians hampers research into trends in wealth inequality. Between 1915 and 2003-04, there is almost no official wealth data to examine.
In 2003-04, the wealthiest 20% of Australian households held 58.6% of total household wealth, and the poorest 20% of households held just 1.4% of total household wealth. In 2013-14, the wealthiest 20% of households held 61% of total household wealth, and the poorest 20% of households held just 1% of total household wealth.
These figures indicate that wealth inequality increased over the decade to 2013-14.
The table below details trends over time in various measures of wealth inequality. The P90 to P10 ratio compares the wealth of households at the 90th percentile with that of households at the tenth percentile. A larger ratio indicates greater levels of inequality.
In 2003-04, households at the 90th percentile held 45 times as much wealth as households at the tenth percentile. In 2013-14, households at the 90th percentile of the distribution held 52 times as much wealth as households at the tenth percentile. This indicates that wealth inequality increased in that decade.
Using the mean and median household wealth figures, it is possible to calculate the ratio of median to mean wealth.
The closer this ratio is to one, the lower the level of inequality. In 2003-04, the ratio was 0.63. In 2013-14, it was 0.57. This also indicates that wealth inequality increased.
The distribution of household wealth also varies between Australia’s state and territories, and by location within states and territories.
Households in the ACT recorded the highest mean household wealth (A$890,100). Households in Tasmania recorded the lowest mean household wealth ($595,600).
When these figures are disaggregated by location into capital city households and households located in the rest of the state, the largest wealth gap occurs in New South Wales. The mean wealth of households in Sydney was $971,700, whereas the mean wealth of households in the rest of NSW was $534,700.
The median-to-mean-wealth ratios show wealth was most unequally distributed in Brisbane and Perth.
Forbes’ lists of billionaires (in $US) show that the number of billionaires living in Australia increased from two to 26 between 1987 and 2014.
Having an increasing number of billionaires would not be an issue if all Australians’ wealth was increasing at a similar rate. However, if the gap between the wealth of the billionaires and that of the average residents increases dramatically, there is likely to be discontent.
A world where a few people have most of the wealth motivates others who are poor to strive to earn more. And when they do, they’ll invest in businesses and other areas of the economy. That’s the argument for inequality. But it’s wrong.
Our study of 21 OECD countries over more than a 100 years shows income inequality actually restricts people from earning more, educating themselves and becoming entrepreneurs. That flows on to businesses who in turn invest less in things like plant and equipment.
Inequality makes it harder for economies to benefit from innovation. However, if people have access to credit or the money to move up, it can offset this effect.
We measured the impact of this by looking at the number of patents for new inventions and then also looking at the Gini coefficient and the income share of the top 10%. The Gini coefficient is a measure of the distribution of income or wealth within a nation.
How inequality reduces innovation
From 1870 to 1977, inequality measured by the Gini coefficient fell by about 40%. During this time people actually got more innovative and productivity increased, incomes also increased.
But inequality has increased in recent decades and it’s having the opposite effect.
Inequality also means the market for new goods shrinks. One study shows that if incomes are more equal among people, people who are less well off, buy more. Having this larger market for new products, incentivises companies to create new things to sell.
If wealth is concentrated among only a small group of people, it actually increases demand for imported luxuries and handmade products. In contrast to this, distributed incomes means more mass produced goods are manufactured.
What’s been driving inequality since the 1980s is changes to economies – countries trading more with each other and advances in technology. As this happens old products and industries fade while new ones take their place.
These changes have delivered significant net benefits to society. Reducing trade and innovation will only make everyone poorer.
The declining number of people in unions has also contributed to inequality, as workers lose collective bargaining power and some rights. At the same time, unions can adversely affect innovation within firms.
Unions discourage innovation when they resist the adoption of new technology in the workplace. Also if innovation creates profits for firms but some of these are taken up by higher wages (lobbied for by unions), these reduced profits provide less incentive for firms to innovate.
Where workers’ jobs are protected, for example with union membership, there’s often less resistance to innovation and technological change.
Giving people access to credit could change this
Most countries have much higher levels of inequality than the OECD average. This combination of high inequality and low financial development is a major obstacle to economic prosperity.
When financial markets work well, everyone gets access to the amount of credit they can afford and can invest as much as they need. We found that for a nation with a credit-to-GDP ratio of more than 108%, low income earners are less discouraged by not having a share of the wealth. There’s less of a dampening affect on innovation.
Unfortunately, most countries (including many in the OECD) are far from this threshold. In 2016, the credit-to-GDP ratio averaged 56% across all countries, and only 28% for the least developed. Until 2005, Australia was also below this threshold.
This means governments should look at providing more people with more access to credit, especially to the poor, to stimulate growth.
For financially developed nations like Australia, increased inequality actually has less of an effect on innovation and growth. So tackling inequality might not be as easy as increasing access to credit.
Spending and taxing are already historically high and growing inequality makes it harder to further raise taxes. Countries like Australia are not unequal societies in the sense of having significant barriers to people improving their income.
Australia is a relatively egalitarian nation. In 2016, the top 1% owned 22% of the wealth in Australia, compared to 42% in the USA, and 74% in Russia.
Governments in more developed nations can instead try to maintain a stable financial sector to improve growth or by training and education.
Opposition Leader Bill Shorten has often argued that inequality in Australia is the worst it has been in 75 years.
Leaving aside whether that is or isn’t correct, there is a bigger, more pertinent political question: is it inequality itself, or the perception of inequality, that fuels so much of the contemporary mistrust of politicians and political systems?
The growing legitimacy of inequality is a serious problem, even among market advocates like the IMF and World Bank, which seek to confine the fix to more equitable distributions of wealth. They fail to recognise the strong possibility that the push on inequality comes from wider perceptions that the system is so unfair it creates distrust of those in power and their main alternatives, so the damage is social rather than material.
Commentator Ross Gittins has argued that the collapse of the “neoliberal consensus” is as apparent in Australia as it is in Donald Trump’s America and Brexit-ing Britain. Yet the data here do not reveal the serious poverty it brings with it.
The local focus on inequality has very much been more on tax rorts and the presumed sins of the rich than on the poor, either on or off welfare. This looks to be the basis of Shorten’s next policy bid for power, which he promises to release via inequality policies at the New South Wales ALP conference this weekend.
Shorten’s targeting of the voters’ desire for the “fair go” by claiming inequality in Australia creates a “sense of powerlessness that drives people away from the mainstream so creating a fault line in politics”.
His emphasis on the wider effects of inequality suggests he recognises it as a symptom of wider issues, rather than a single economic cause of problems. However, if his proposals are primarily focused on increasing tax takes, he is not tackling the wider damage, such as system distrust, that is widely evident.
He is not alone in this limitation; it dominated the debates on his proposals. The immediate responses from Treasurer Scott Morrison and several economic commentators disputed whether the Gini coefficient (a measure of how wealth is distributed in a society) supported the claims of rising inequalities. They ignored the many other indicators, such as that workers’ share of income is at its lowest level in a half-a-century.
The complex data shown in The Conversation’s factcheck come down mainly on Shorten’s side. These varied sources show the problem of defining what counts as inequality. Are voters very aware of income differentials? Or do most judge inequality by tightening budgets and everyday hardships such as rising utility bills?
It is in fact these perceptions of wider inequality as unfairness that affects how we relate to those in power. These are toxic effects that need to be fixed, not just through adjusting tax or individual payments.
There is considerable evidence that inequality is increasing and, importantly, that it is affecting the views of possible voters. The long-running Australian Election Study in 2016 found voters showed both increased distrust of politicians, and income concerns. More than half – 55% – supported incomes being redistributed versus 19% who did not. There have been other recent polls that show the lack of trust of the mainstream parties.
Who do you trust? Increasingly the answer seems to be: nobody.
After a year when voters worldwide thumbed their noses at mainstream politics and the elite, a landmark annual survey has found trust in major institutions is eroding at a rapid rate. And the effect is particularly pronounced in Australia.
The 2017 Trust Barometer by Edelman, the world’s largest PR outfit, has documented an “implosion of trust”. It found that Australians believe their entire political system is failing and they harbour deep fears of immigration, globalisation and changing values.
We need to consider whether values are the basis of beliefs about inequality. My thesaurus offers eight synonyms of the word: four simply describe it, while four signal negative feelings and perceptions: discrimination, unfairness, inequity, disproportion. None expresses inequality as a material or monetary difference. This indicates how often inequality connects with growing distrust of mainstream parties.
So is inequality a significant but limited indicator of wider issues that need attentions? The current special issue of Australian Quarterly features articles on this topic. The journal’s opening remarks state:
Inequality is arguably the catch-cry of our times, but, when you pick it apart, what does it actually look like in the Australian context? Is it economic, is it political; is it tax breaks for big business, or the everyday homelessness of our capital cities; is it the rot crumbling the sanctified pillar of the ‘fair go’, or has it become a convenient catch-all so broad as to be meaningless?
If this is so, the question will be whether Shorten’s policy options stay within the narrow confines of fairer taxes. If they do, it may be too simply economic to interest voters – unless he creates a broader vision of a trustworthy (fairer) Australia.
The Census breaks the country up into 349 geographic regions (named in quote marks below), some of which cover more than one major town and some of which group related suburbs within cities. We examined 331 of these regions, excluding those containing fewer than 1,000 households.
The data show there are high levels of income inequality within these regions. A simple way to measure this is to look at the ratio of income between those who are well off (the top 20% within a region) and of those who are relatively disadvantaged (the bottom 20%) in the Census data. In Australia the weekly household income for the top 20% (A$1,579 per week) is 3.5 times the income of the bottom 20% (A$457).
The “Melbourne City” region has the most unequal incomes in Australia, where the top 20% have an income that is 8.3 times as high as those in the bottom 20%. “Adelaide City” (ratio of 5.5) and the “Sydney Inner City” (4.8) also have quite high levels of inequality.
Two of the poorest regions in the Northern Territory also have very high inequality. These are the vast region that encircles Darwin, called “Daly, Tiwi, West Arnhem” (ratio of 5.2) and the “East Arnhem” region (5.3).
However, there are regions with varying income levels, that also had relatively low inequality ratios. The region of “Molonglo”, in South Canberra (ratio of 2.2), “West Pilbara” in Western Australia (2.4) and “Kempsey, Nambucca” on New South Wales’ north coast (2.5) all have low levels of inequality.
For our analysis, we used equivalised household income. Equivalisation is a technique in which members of a household receive different weightings, based on the amount of additional resources they need.
The Australian Bureau of Statistics assumes that the first adult in a household has a weighting of 1, each additional adult a weighting of 0.5, and each child a weighting of 0.3. Total household income is then divided by the sum of the weightings for a representative income.
Incomes across Australia
For the whole of Australia, the equivalised median household income (the income in the middle of the distribution) is A$878 per week. The region with the lowest median income was “Daly, Tiwi, West Arnhem” in the Northern Territory, at A$510 per week.
However, several regional areas like “Maryborough, Pyrenees” (northwest of Ballarat in Victoria), “Kempsey, Nambucca” (NSW), “Maryborough” (between Bundaberg and the Sunshine Coast in Queensland), “Inverell, Tenterfield” (in NSW’s Northern Tablelands) and “South East Coast” in Tasmania all had median incomes of A$575 per week or less.
At the other end of the distribution, households in leafy suburbs of North Sydney – “Mosman” (NSW) had a median income of A$1,767 per week. Areas like “South Canberra” (ACT), “Manly” (in Sydney’s east) and the mining-dominated “West Pilbara” (WA) all had median incomes of A$1,674 or more per week.
We also looked at the extremes of the distribution. We define high income as those households with an income of A$1,500 or more per week. This equates to about 22% of the population. We defined low-income households as having an income of less than A$400 per week (about 14% of households).
Around 40% of households in the “Daly, Tiwi, West Arnhem” region were classified as being in poverty compared to around 6% in “North Sydney, Mosman” region. Conversely, around 60% of households in this region were classified as having high income, compared with only 6% of households in “Kempsey, Nambucca”.
How segregated are we within regions and cities?
While government policy is often delivered at the regional level, people live their lives at the local or neighbourhood level. However, the relatively disadvantaged and the upper-middle class are often segregated within these regions.
Richard Reeves of the Brookings Institute argues the segregation of the upper-middle class in Australia means this group “hoards” the benefits in the region they live in. Among the location advantages he lists are: access to the best schools, opportunities to network with the wealthy and powerful and the ability to disproportionately accrue capital gains on housing assets. To avoid this kind of “opportunity hoarding”, the rich and poor would need to be evenly spread within a region.
A simple way to look at this is through a “dissimilarity index”. In essence, this measures the evenness with which two groups are spread across a larger area. It ranges from zero to one, with higher values indicating a more uneven distribution and zero indicating complete mixing.
Looking at the distribution of the high income. Across Australia, the dissimilarity index has a value of 0.27. This means that around 27% of high-income households would have to move neighbourhoods to make the distribution completely even.
This varies quite substantially by region. “Far North” (encompassing Cape York in QLD) has a dissimilarity index of 0.42. “Auburn” (in western suburbs of Sydney, NSW) and “Playford” (on Adelaide’s northern fringe) also have quite large values.
Our richest regions tend to have the most even distribution of the wealthy, with “North Sydney, Mosman”, “Molonglo” and “Manly” having values of 0.06 or less.
“East Arnhem” has a very high level of concentration of low income individuals by neighbourhood, with a dissimilarity index of 0.70. The next two highest regions (“Katherine” and “Alice Springs”) are also in the Northern Territory, with index values of 0.53 and 0.55 respectively.
We can also compare the measures we used, to find out how they relate to each other. The following figure shows that the richest regions tend to be those with the highest level of income inequality.
However, as inequality goes up, there tends to be a greater concentration of low income households by neighbourhood (there’s also less of a concentration of high income households).
Have and have nots
It’s true that the level of income mobility is higher in Australia than it is in the US. However, Australia also has prominent examples of economic policies that disproportionately benefit the upper-middle class, such as the capital gains tax discount and superannuation tax incentives.
Australia also has a geographically concentrated income distribution, with the rich living in neighbourhoods with other rich people. The poor are also more likely to live in close proximity to people who share their disadvantage.
If Richard Reeves is right, and the spatial segregation of high and low income households reinforces inequality across the generations, then policies that encourage the mixing of different social classes in the same neighbourhood and region should be a way forward.
This article was put together with research assistance from Hubert Wu, Australian National University and Harvard University.
We hear a lot about inequality in Australia but the true picture is much more complicated than the headlines usually suggest.
The data indicate that wealth inequality has grown but is lower now than before the global financial crisis (GFC). And while the personal incomes of the very rich have gone up, overall household income inequality has barely shifted since the start of this century.
Economic inequality refers to the extent to which material well-being differs across people – how rich are the rich, how poor are the poor. But there are different ways to be rich, and different ways to be poor.
Income inequality is about the gap between people with high incomes and low incomes. Wealth inequality, on the other hand, looks at the gap between people with high net worth (for example, a lot of houses, stocks or other assets) and people with low net worth (few or no assets). People could have very similar incomes but be at opposite ends of the scale when it comes to their wealth, for example.
In practice, attention typically focuses on income inequality, although it is also important to consider wealth inequality.
Despite this increase in inequality of personal incomes at the top, measures of overall inequality of household incomes (as opposed to personal incomes) show relatively little net change this century.
One way to track this is to look at the Gini co-efficient, a commonly used measure of inequality that ranges from zero to one. Zero means total equality, with everyone on the same income. A Gini coefficient of one means complete inequality, the equivalent of one person having all the income.
HILDA survey data show that Australia’s Gini coefficient was 0.303 in 2000-01 and 0.296 in 2014-15. In other words, it has barely shifted.
The ABS income survey shows a small increase from 0.311 in 2000-01 to 0.333 in 2013-14, but this increase can be attributed to changes made by the ABS between 2003-04 and 2007-08 to the definition and measurement of income:
Being a longitudinal study, the HILDA Survey also allows us to consider inequality in incomes measured over longer intervals than one year. Incomes can fluctuate from year to year, and so we may get an exaggerated picture of income inequality if we examine only annual income. Some people who appear poor in one year may in fact have high incomes in other years and so, overall, are not really poor.
The HILDA Survey indeed shows that inequality of income measured over five years is lower than inequality of annual income. However, of some concern is that measures of inequality of five-year income have been trending upwards since the early 2000s — although the increase is very slight.
While that’s been happening, however, the labour market has become more unequal.
Wage inequality is typically thought of in terms of inequality in earnings per hour worked, while labour market inequality more broadly could be thought of as inequality in total (annual) earnings across all persons in the labour force.
On the surface, it is remarkable that the large rise in labour market inequality has not — at least, not yet — translated to large increases in income inequality.
The reasons for this are complex, but an important contributor has been the relative concentration of employment growth in low-income households.
Another potential reason why increased wage inequality has not translated to increases in income inequality is our system of progressive income taxes and transfers. However, this seems largely to not be the case in the 2000s in Australia, since the tax and transfer system actually became less redistributive (was doing less to reduce income inequality) over this period.
So while the tax and transfer system has probably moderated the effects of increased wage inequality on income inequality, it has not completely neutralised it.
3. Wealth inequality grew – but is lower now than in the years leading up to the GFC
In terms of wealth, both the ABS income surveys and the HILDA Survey indicate that wealth inequality grew strongly in the years leading up to the global financial crisis (GFC).
The HILDA Survey, which has collected detailed wealth data every four years since 2002, shows that the wealth required to be in the top 1% of the wealth distribution increased by 140% in real terms between 2002 and 2006. This was a period in which both house prices and the share market were rising strongly.
However, wealth inequality appears to have moderated slightly since the GFC, with the wealth required to be in the top 1% actually 9% lower in 2014 than in 2006. This appears to primarily derive from weaker share market performance. The ASX200, for example, was approximately 20% below its October 2007 peak in late 2014 (and even now is still over 10% below the peak).
Perception and reality
In light of the minimal changes in overall income inequality this century, and the evidence that wealth inequality is lower now than in the years leading up to the GFC, it is perhaps surprising that public perceptions appear to be that inequality is growing strongly.
Perhaps also important is that household income growth in Australia has slowed since 2008-09, and indeed has essentially stalled since 2011-12. In part, this reflects slowing wage growth, but also important has been relatively weak growth in employment, and in particular full-time employment.
For example, the forthcoming HILDA Survey Statistical Report will show that, at December 2015 prices, the median “equivalised” household income – that is, household income adjusted for household size – was A$46,031 in 2011-12 and was still only A$46,007 in 2014-15.
This stagnation in average living standards is arguably likely to lead to greater focus on the fairness of the income distribution.
Blogger incarcerated after writing about conversion, criticizing Islamic judiciary.
LOS ANGELES, January 28 (Compass Direct News) – Five months after the daughter of a member of Saudi Arabia’s religious police was killed for writing online about her faith in Christ, Saudi authorities have reportedly arrested a 28-year-old Christian man for describing his conversion and criticizing the kingdom’s judiciary on his Web site.
Saudi police arrested Hamoud Bin Saleh on Jan. 13 “because of his opinions and his testimony that he had converted from Islam to Christianity,” according to the Arabic Network for Human Rights Information (ANHRI). Bin Saleh, who had been detained for nine months in 2004 and again for a month last November, was reportedly being held in Riyadh’s Eleisha prison.
On his web site, which Saudi authorities have blocked, Bin Saleh wrote that his journey to Christ began after witnessing the public beheading of three Pakistanis convicted of drug charges. Shaken, he began an extensive study of Islamic history and law, as well as Saudi justice. He became disillusioned with sharia (Islamic law) and dismayed that kingdom authorities only prosecuted poor Saudis and foreigners.
“I was convinced that the wretched Pakistanis were executed in accordance with the Muhammadan laws just because they are poor and have no money or favored positions, which they had no control or power over,” he wrote in Arabic in his Dec. 22 posting, referring to “this terrible prejudice in the application of justice in Saudi Arabia.”
A 2003 graduate in English literature from Al Yarmouk University in Jordan, Bin Saleh’s research led him to an exploration of other faiths, and in his travels he gained access to a Bible.
“My mind was persistently raising questions and desperately seeking answers,” he wrote. “I went on vacations to read about comparative religion, and I got the Bible, and I used to give these books to anyone before going back to Saudi, as going back there with such books is considered an unforgivable crime which will throw its perpetrator in a dark jail.”
After reading how Jesus forgave – rather than stoned – a woman condemned for adultery, Bin Saleh eventually received Christ as savior.
“Jesus . . . took us beyond physical salvation as he offered us forgiveness that is the salvation of eternal life and compassion,” he wrote. “Just look and ask for the light of God; there might be no available books to help you make a comparative study between the teachings of Muhammad (which are in my opinion a series of political, social, economical and human disasters) and the teaching of Jesus in Saudi Arabia, but there are many resources on the Web by which you might get to the bosom/arms of the Father of salvation. Seek salvation and you will reach it; may the Lord keep you from the devil’s pitfalls.”
With the Quran and sayings of Muhammad (Sunna) as its constitution, Saudi Arabia enforces a form of sharia derived from 18th-century Sunni scholar Muhammad ibn Abd Al-Wahhab that calls for the death penalty for “blasphemy,” or insulting Islam or its prophet, Muhammad. Likewise, conversion from Islam to another faith, “apostasy,” is punishable by death, although the U.S. Department of State’s 2008 International Religious Freedom Report notes that there have been no confirmed reports of executions for either blasphemy or apostasy in recent years.
Saudi Arabia’s ruling monarchy restricts media and other forms of public expression, though authorities have shown some tolerance for criticism and debate since King Abdullah bin Abdul Aziz Al Saud officially ascended to the throne in 2005, according to the state department report.
A spokesman for the Saudi Arabian embassy in Washington, D.C. would neither confirm the Jan. 13 arrest of Bin Saleh nor comment on the reasons for it.
Writing that both Islam and Saudi Arabia promote injustice and inequality, Bin Saleh described himself as a researcher/writer bent on obtaining full rights of the Christian minority in Saudi Arabia.
He noted on his now-banned Web site (“Masihi Saudi,” at http://christforsaudi.blogspot.com) that he had been arrested twice, the first time in Beirut, Lebanon on Jan. 18, 2004. The U.N. High Commissioner for Refugees office there had notified Saudi authorities that he had been accepted as a “refugee for ideological persecution reasons,” he wrote, but a few days later intelligence agents from the Saudi embassy in Beirut, “with collusion of Lebanese authorities and the government of [former Prime Minister] Rafik Al-Hariri,” turned him over to Saudi officials.
After nine months of detention in Saudi Arabia, he was released but banned from traveling, writing and appearing in media.
He was arrested a second time on Nov. 1, 2008. “I was interrogated for a month about some articles by which I condemned the Saudi regime’s violation of human rights and [rights of] converts to Christianity,” he wrote.
During a Saudi-sponsored, inter-faith dialogue conference at U.N. headquarters in New York involving representatives from 80 countries on Nov. 12-13, according to ANHRI, Saudi authorities released Bin Saleh, then promptly re-arrested him after it was over.
His November arrest came a little less than a year after political critic Fouad Ahmad al-Farhan became the first Saudi to be arrested for Web site postings on Dec. 10, 2007; Al-Farhan was released in April 2008.
In August 2008, a 26-year-old woman was killed for disclosing her faith on a Web site. Fatima Al-Mutairi reportedly had revealed on Web postings that she had left Islam to become a Christian.
Gulfnews.com reported on Aug. 12, 2008 that her father, a member of the religious police or Commission for Promotion of Virtue and Prevention of Vice, cut out her tongue and burned her to death “following a heated debate on religion.” Al-Mutairi had written about hostilities from family members after they discovered she was a Christian, including insults from her brother after he saw her Web postings about her faith. Some reports indicated that her brother was the one who killed her.
She had reportedly written an article about her faith on a blog of which she was a member under the nickname “Rania” a few days before her murder.
At least five hurt as rioters stone, burn structure after inauguration of extension.
ISTANBUL, November 26 (Compass Direct News) – Thousands of Muslim protestors on Sunday (Nov. 23) attacked a Coptic church in a suburb of Cairo, Egypt, burning part of it, a nearby shop and two cars and leaving five people injured.
Objecting to a newly constructed extension to the Coptic church of St. Mary and Anba Abraam in Ain Shams, the huge crowd of angry protestors gathered outside the church at around 5 p.m. following a consecration service for the addition earlier that day.
Chanting, “We will demolish the church,” “Islam is the solution” and “No God but Allah,” according to Helmy Guirguis, president of the U.K. Coptic Association, rioters pelted the church with stones and burned part of the structure; priests and worshipers were trapped inside, and five people were injured.
“It was a terrifying moment,” said lawyer Nabil Gobrayel, who was inside the church at the time. “They were shouting ‘holy slogans’ like, ‘We will bring the church down,’, ‘The priest is dead’ and ‘The army of Muhammad is coming.’”
Police slow to arrive were not prepared for the scale of the protest. Angry Muslims swarmed to the area from a two-kilometer radius, and although estimates varied, some suggested as many as 8,000 people gathered.
Rioters’ stones broke the structure’s windows, and a nearby shop and two cars belonging to Christians were set on fire.
Reinforcements for the overwhelmed security forces did not arrive until two hours later and were then engaged in clashes with the mob until the early hours of Monday (Nov. 24) morning.
Armored vehicles brought in riot police, who used tear gas to disperse the crowd while fire services aided their efforts with water cannons.
A United Copts of Great Britain statement suggested that police were slow to arrest perpetrators in the early stages of the demonstration but did eventually detain 41 people around midnight.
Of the 38 Muslims arrested, 30 were quickly released “under the pretext of being minors,” according to the United Copts statement. Three arrested Christians, however, remained in prison without charges.
United Copts also reported that Wael Tahoon, a police officer, was said to be involved in instigating the attacks.
A source told Compass that Pope Shenouda, head of The Holy Synod of the Coptic Orthodox Patriarchate of Alexandria, ordered that prayers at the church site be stopped.
According to Gobrayel, the church will be closed for two months while officials consider its future.
Opposition from Outset
The newly constructed extension stands on the site of an old factory that was demolished 18 months ago, when the land was purchased using funds raised by donations from the congregation.
When building began, church members were surprised to find that construction of a mosque also started just across the street.
During construction of the church addition, Muslim radicals insulted and harassed workers, issuing death threats and urinating on the structure’s walls.
At 10 a.m. on Sunday (Nov. 23), the morning of the consecration service, the adjacent mosque began broadcasting verses from the Quran at high volume.
According to witnesses, the imam of the mosque justified the unusual broadcasts by saying that they were in celebration of the Muslim festival of Eid. Christians said this would be highly irregular, however, with area parishioners maintaining it was done to provoke them.
Church leaders had obtained the necessary permits for building the extension, Coptic leaders said, but protestors said the addition was not licensed for prayer and worship.
Christians have found obtaining church building permits from Egyptian authorities rife with obstacles, with many applications never granted.
“The National Assembly cannot make a decision for 15 years about building projects for churches,” said lawyer Naguib Gobrail. “Every time they say, ‘This session we can discuss this project,’ but the session ends and we see nothing. Everything is only a promise.”
In a recent editorial, Youssef Sidhom, editor-in-chief of Egyptian weekly Watani, addressed the inequality of regulations that govern the building of places of worship.
“It now appears obvious that the government has no intention whatsoever of placing the long-awaited bill for a unified law for building places of worship on its agenda,” he wrote. “For four consecutive rounds [of Parliament], the bill has remained shelved despite the need for it to ward off so called sectarian problems that erupt every so often.”
Advocacy group Voice of the Copts issued a report on Monday (Nov. 24) that, a day before the attack on St. Mary and Anba Abraam, Muslim radicals ambushed a wedding party at a church just 10 minutes away.
A man and woman interrupted the ceremony shouting obscene remarks, according to Voice of the Copts, and when angered wedding guests ushered them outside, the Copts were set upon by a gang of people waiting in a shop across the road. Two were severely injured.
While Christians account for varying estimates of 10 to 15 percent of Egypt’s population and date back to the first century of the faith, churches are still seen as foreign bodies and, in the words of the Ain Shams rioters, an “infidel’s worship house in an Islamic Land.”