Income Inequality in Australia is Already Out of Hand

I put forth this piece of writing with a series of questions I intend on answering, the questions serve as a way for the reader to follow along as best as humanly possible. It also helps me remember what I’m trying to get at with each point. I explore the statistics we know about inequality in Australia, following on from that I discuss the negative impacts income inequality can have and finally I discuss both what has been done and what can be done to address income inequality in Australia. This is simply an opinion article based on a few studies and news reports I read on this issue and is in no way a be all end all, please comment with any questions, queries or complaints you have, I’d love to hear your thoughts.

What do we know about the rising inequality in Australia?

Wages are barely keeping up with inflation, let alone matching labour productivity growth. This graph shows the result: a steady fall in workers’ collective share of the pie, there has been a sharp decline in workers compensation as a percentage of overall GDP since the 1980s-1990s, to where in 2017 we have reached lows that we haven’t seen since the 1960’s.

The rate of wage growth in Australia is trending downwards, as this graph shows Australian wage growth has dropped from a top of 4.3% in growth to a measly 2.1% over a 10 year period (2008 – 2018). Ross Gittins, an economic journalist recently noted “Low inflation is usually a symptom of weak growth in economic activity and, in particular, of weak growth in wages”.

Australian’s at the top make as much money in a fortnight as the lowest 5% earn in an entire year of working, according to the report from the Australian Council of Social Service and the University of NSW.
• In real terms the top earners are making roughly $11,682 a week, while the lowest are earning $436.
Between 2003 – 2015, the average wealth of the richest 20 per cent of households rose by 53 per cent, while that of the least wealthy 20 per cent of households fell by nine per cent.
• To put it simply, the richest homes now have an average of $2.9 million in wealth, while the least wealthy have about $30,000.
All the while, Australia has the fifth highest number of people in the world with wealth exceeding $US50 million ($A65 million), at 3000 people.

Lastly, we know that Australia’s current Prime Minister has said “that income inequality was not getting worse in Australia”… Except we know that isn’t true, this one figure from the International Monetary Fund (IMF) suggests otherwise. From that we can deduce that either he is either blind, dumb r purposely missleading the country to support his agenda.

Why is inequality a net negative on society?

Firstly, we must look at the social division this creates between the haves and the have nots, resentment begins to boil over and this will eventually lead to an overall less homogeneous culture and some studies suggest an increase in criminal activity. Box (1987, p. 93) and Farrington et al. (1986, pp. 335-56) both found somewhat similar results, they claimed “their results revealed that unemployment had an instantaneous effect on criminal involvement but that the effect was much more pronounced among socially disadvantaged groups.”

Furthermore, the negative impacts on the economy must be explored. Like how a society is affected when very few people have their hands on the vast majority of the wealth, or how the very poorest have less opportunity to effectively participate in the workforce or gain the necessary skills to do so – economic prosperity overall becomes less likely. Dr Anne Holmes of the School of Business at UNSW Canberra writes, “two pressing economic issues today are: the need to lift productivity and the need to promote growth while avoiding financial instability of the kind that culminated in the global financial crisis. It is possible that inequality reduces labour productivity. It is also possible that it is a brake on growth and can lead to economic instability.”

What has been done?

Plenty of policies can be enacted by the government of the day to decrease inequality and therefore reduce the negative impacts of it. However, I think its more important to look at what has been done in the past before exploring what can be done in the future.

These policies include, the pension boost in 2009 (Under Labor Leader, Kevin Rudd), the controversial (at the time) stimulus package of 2007, which gave Australian households up to $950 both played an integral role in the reducing income inequality and in the latter case staved off a recession after the GFC. The enaction of a Federal body to regulate minimum wage in 2007 is another example of a policy which positively impacted income inequality. Moreover, the commencement of free healthcare for everyone under what we now call “Medicare” on the 1st of February 1984, has led Australia to become one of the best countries in terms of health outcomes on a global scale. The Labor government under Bob Hawke first enacted this policy in order to cover every one, this allowed people to have the best healthcare possible despite how little money they had. There are many more positive policies that have been enacted, however what I wanted to highlight was the importance that we don’t necessarily need to increase the welfare/doll payments to the less fortunate to decrease income inequality, despite that obviously being an effective means of doing so, as I’ll explain later.

What can be done?

Preserving and expanding income supports like Newstart benefits and expanding public services over time are essential for reducing Australia’s inequality. Australians should not accept increased inequality as an inevitable by-product of growth, as increased social security payments and fewer tax loopholes for the rich could help bridge the gap between the rich and the poor. A federal jobs guarantee is a program in which people looking for work are connected to local work opportunities, identified by local governments and community groups, paid at a living wage, with all the leave and salary benefits of secure work. It’s necessary because years of deregulation, privatisation and cuts to our public service have led to governments reframing unemployment as a personal failing, rather than the fact that there's simply not enough paid, full-time work. The latest labour force statistics show that there're only 201,600 private sector jobs being advertised for the 725,200 people looking. Increasing social housing is another way to alleviate pressure from hard working Australians who are finding it hard to pay the bills, keep food on the table for them or their family and contend with the rising cost of living. Another hotly contested policy, called Universal Basic Income, which guarantees every person a weekly wage regardless of how much they work, this would take away the need for Centrelink reporting (which in itself is flawed and rapacious), this is contested because there are pros and cons to this both of which signal that more debates and more studies need to be done before anyone can say with any certainty that this should or shouldn’t be implemented.

Despite this particular topic being placed last on the list of what can be done, I don’t want to understate its importance, UNIONISATION. More people need to become part of their union and government policies need to subsidise union memberships or make it easier for groups of people to form unions at their workplaces. Isaac starts by noting that union membership in Australia has fallen from about 50% of all employees in the 1970s to the present 15%. This is one of the lowest rates in the OECD. A very distinguished professor of labour economics and former Industrial Relations Commission deputy president, Joe Isaac, argues that this loss of membership and the reduced authority of the Fair Work Commission has weakened the bargaining power of organised labour in Australia. Employers are now able “to determine no wage increase or an increase less than their profits would warrant, with less resistance from workers and unions”. It's funny how there seems to be a positive correlation between lack of unionisation and lack of wage growth in Australia.

You will notice that most of these ideas are relatively left in the grand scheme of things, as Australian politics gets pushed further and further to the right (at the behest of the establishment and large corporations), I aim to push the discourse in the other direction as best as I can because I genuinely believe that the these left policies are the way we can progress as a society and create a more just world for everyone in it.

Why hasn’t this already happened?

You may have thought I brought up some good points and to you, it might beg the question of “why can’t this just happen already?!” Going forward it is important to understand that a lot can be done to care for those who have had trouble supporting themselves, a lot can be done to change our tax system to adequately deal with changes to social security, Medicare and overall standard of living for every single Australian – however, there will be powerful people against changing these rules because it will negatively impact their bottom line, because of a simple fact THE RICH WILL HAVE TO PAY MORE IN TAXES. With that comes fearmongering, disinformation and attacks on the people who provide a platform for so called “radical” left wing policies, by the very people who own our corporate media, by our very rich politicians and by the brainwashed few that recite corporate talking points to their detriment to their own selves.

Let's play a fun little game, in which percentile are you in (AUD):

References:

Australia’s one per cent gets richer as wealth inequality grows
https://www.sbs.com.au/news/australia-s-one-per-cent-gets-richer-as-wealth-inequality-grows
To tackle inequality, we must start in the labour market
https://theconversation.com/to-tackle-inequality-we-must-start-in-the-labour-market-105729
Greens will push for $75 Newstart increase as Howard weighs in
https://www.theguardian.com/australia-news/2018/may/10/greens-will-push-for-75-newstart-increase-as-howard-weighs-in
This is what policymakers can and can’t do about low wage growth
https://theconversation.com/this-is-what-policymakers-can-and-cant-do-about-low-wage-growth-101025
Inequality in Australia Report
https://www.acoss.org.au/wp-content/uploads/2018/07/Inequality-in-Australia-2018_supplementary-report.pdf
TLDR: https://www.acoss.org.au/inequality/
Libs' economy not working for Aust: ALP
https://www.sbs.com.au/news/libs-economy-not-working-for-aust-alp
Some economic effects of inequality
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook44p/EconEffects
Economic Adversity and Crime, Page: 5
https://aic.gov.au/file/6228/download?token=0S96Sjmp
Federal Jobs Guarantee
https://www.getup.org.au/campaigns/job-guarantee/join-the-call-for-a-federal-job-guarantee/join-the-call-for-a-federal-job-guarantee