Quick link: OECD on inequality in Australia

The OECD has released a new report on inequality, encompassing Australia.

Matt Cowgill summarises the findings at We Are All Dead:

  • From the mid-1980s to the late-2000s, the incomes of the top decile of Australian households grew by an average of 4.5% per year, by far the fastest income growth enjoyed by high income earners in any OECD country. The average annual growth for the top decile in OECD countries over the period was 1.9%.
  • Low income Australians also saw relatively strong growth from the 80s to the 2000s, growing at an average of 3% per year. Interestingly, the only countries in which low income earners saw stronger gains were Portugal, Ireland, Greece and Spain.
  • Overall inequality in Australia, measured by the Gini coefficient, is slightly higher than the OECD average, though I wouldn’t put too much stock in the small difference between us and the average.
  • We achieve less of a reduction in inequality inequality via taxes and transfers than we did a decade ago.
  • “Labour market trends have been a key driver of inequality in Australia.”
  • The share of income going to the top 1% has roughly doubled since 1980 (which we already knew from Andrew Leigh’s work), while the taxes paid by high income earners have fallen.

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14 responses to “Quick link: OECD on inequality in Australia”

  1. Ambigulous

    That’s interesting about Portugal, Ireland, Greece and Spain … was part of the rise in modest incomes there due to government transfers (pensions etc.) which are now deemed “unaffordable”?

    Has Australia’s relative strength been funded by export industries?

  2. Katz

    What Ambigulous said.

    Additionally, Howard mastered the practice of funding transfer payments to his “battlers” from taxes on the mining sector.

    During the Howard ascendency, bribery was an important component of Australia’s political economy.

  3. billie

    Read Peter Acton’s tongue in cheek letter in The Age. http://www.theage.com.au/national/letters/glad-to-keep-a-friend-in-view-20111207-1oj31.html

    I think that Baillieu is an nepotistic eco vandal with the following actions
    – appointing a brother-in-law head of VicForests
    – granting [free] grazing leases in Alpine National Park to another brother-in-law
    – draconian laws re-siting of wind farms to protect the view of his relatives holiday farms

  4. TerjeP

    More tax cuts for poor people! Let’s aim to lift the tax free threshold to $50k. That would be a good start.

  5. Down and Out of Sài Gòn

    Let’s see how we go with the Clean Energy Bill 2011, TerjeP. I believe the tax free threshold is lifted to 16K per annum. I think that’s going to be a good thing.

  6. Chris

    Down and Out of Sai Gon – with the existing LITO we already effectively have an a tax free threshold of $16k, but I believe that they are raising it further. Given that its compensation for price rises in other areas its a bit of giving with one hand and taking with the other though by exchanging lower income tax for higher consumption taxes.

    Possum’s analysis on some of the OECD data and why we in Australia should stop whining is worth a read.

    But it’s also true that our poorest 10% of households experienced faster income growth than any country other than Spain and Ireland (who are now quickly reversing that growth with their economic woes) , and faster income growth than the top 10% of wealthiest households in *every other country*.


    As I think Howard once said working families in Australia have never had it better. But you’re not allowed to say that as a politician :-)

  7. spog

    Chris @ 6 – it depends on what kind of working families. For example, if you have youth allowance students subject to the parental income test, then probably yes, it’s never been better. If you just have a few younger kids, then things have got worse over the last few years due to freezes on various bits of the family payments package.

    There are some examples of the latter over at ravebydave

  8. Chris

    spog @ 7 – that data is over a very short period of time and its for single income families only – the current government would like to encourage more people into the workforce and their policies reflect that.

  9. spog

    Chris @ 8 (sounds like a radio program!) – it’s the bit on the freezing of family payments that’s relevant, and that applies to all families, not just single income ones. And yes, it is over a short period, but it does illustrate that (perhaps) the “golden age” of family payment largesse (onwards and seemingly ever upwards) has moved on.

    After all, not only has there been a package of (temporary but still current) freezes, but the rate setting mechanism has been de-coupled from wages.

  10. Chris

    spog @ 9 – I think that golden age is over. With this government its more likely that the money will be diverted to tax relief for low income earners.

    btw those graphs are really quite interesting – would be great to see more of them looking at other income/children configurations as well. The disposable income graph puts into perspective how effectively tax and welfare payments even out differences in income too. Eg a family on $150,000 have about 1.8 times the disposable income of a family on $50,000. Which is still a big difference, but not as big as some might expect.

  11. Chris Borthwick

    For political purposes, the point is that Australia’s lower income earners are still being paid off on the implicit bargain; the rich get richer faster, but the poor also benefit – everybody gains. Yes, you could make the argument that the boost to the rich was unnecessary and we’d have grown anyway, but you’d find nobody was listening. In the US the bargain (or the coincidence) hasn’t been kept, and people are getting shitty, and are starting to blame the top 1%. Fine by me, but these figures illustrate why that’s not going to be a real goer here.

  12. John D

    I haven’t got the link but I remember doing some calcs based on articles by Mega George pointing out that the % of GDP going to wages and minimum wage as a % of average was dropping. The calcs suggested that, if both these percentages had remained where they were in the sixties, someone on the minimum wage would have been 40% better off than they are now. (Now was some time in the Howard era.)
    In addition there has been this dramatic rise in unemployment casualization of work since the sixties. Both are adding to the stresses of being near the bottom of the pile. To my mind one of the key factors here has been the collapse of the communist threat. While governments and employers were scared of communists under the bed they would never have let things reach the point they have now.

  13. Chris

    John D @ 12 – from the OECD Australian summary

    As in most other countries, the divide in hours worked between higher- and lower-wage earners in Australia is growing, confirming a trend seen in most OECD countries. Since the mid-1980s, annual hours of low-wage workers fell from 1300 to 1100 hours, those of higher-wage workers remained stable at around 2300 hours.

    So for the lower wage earners its not just wages but available work hours which is the problem. Though I’d guess the latter is at least partially causing the former.

  14. jane

    @3, it is encouraging to see that nepotism is alive and well in Baillieu’s Victoria.

    After all, one must have sympathy for rellies whose views are being spoiled by those pesky windmills and who better to be in charge of Victoria’s forests than a trusted rellie whose views are in lockstep with yours?

    And let’s face it, leaving perfectly good grazing land for those native bludgers is a disgrace and should be a hanging offence. I’m sure Mr Baillieu’s brother in law will be a wonderful custodian of the high country