On the plus side wealth is more equally spread in Australia than in the US. Average net worth in 2005-06 was about A$563,000, or 66% higher than the median net worth of about A$340,000. In the US, by contrast, Federal Reserve research found that in 2007 average net worth was US$595,000, but median net worth was US$125,000, a difference of nearly five to one.
Not everyone in Australia has benefited from the boom. Those most likely to have missed out on sharing the good times are the unemployed, divorced, retired or people with an illness or a disability. And there are regional differences. Overall incomes have risen most in Western Australia because of the mining boom. In Tasmania and the Australian Capital Territory, incomes are more equal.
Drilling down even further reveals an increasing inequality within groups in society. By gender, age, occupation, industry, region and education – all groups have suffered rising inequality, observes Denise Doiron, an associate professor at the Australian School of Business. While top salaries were growing, those at the bottom were not growing, and middle-income earners wages were growing somewhat, show Australian Bureau of Statistics (ABS) figures. The rise in employment helped, but could not compensate for the uneven wage increases.
“People in management, in supervisory roles, financial planning, and those kinds of occupations have had huge increases in salary, much more rapid than other occupations, and that has meant the top incomes are rising very quickly,” Doiron notes. “Inequality has been growing more rapidly in the US, where employment is stagnating, even declining – and in the UK as well. Nordic countries have much more centralised wage determination systems, so they have tended to experience much flatter inequality trends.”
History reminds us that the factors producing higher or lower inequality can change in unpredictable ways, Whiteford points out. Inequality actually fell substantially in Australia between the 1940s and the 1970s.
While the cumulative picture since the 1980s displays an upward trend, it has been punctuated by periods in which inequality has fallen. That happened in the second half of the 1980s, the second half of the 1990s, in the early 2000s, and most recently in 2009 and 2010.
“These figures show that the common view of the past 30 years – that ‘the rich have been getting richer and the poor poorer’ – is not an entirely accurate description of what has happened in Australia,” Whiteford says. “Rising inequality has different causes in different periods.”
Techno-powered divide
While unemployment and poor economic performance makes inequality more of an issue in the US, some of the same forces are at work in Australia – such as globalisation and a decline in manufacturing. Australia’s high dollar has been a blow to local manufacturing, and there is pressure on factory jobs, which have a narrower distribution of wages than service industry jobs – these can range widely from highly paid bank executives to cleaners.
A new OECD report, Divided We Stand: Why Inequality Keeps Rising, links growing income disparities to technological advances, which have been more beneficial for workers with higher skills, thus driving wider wage dispersion. Robert H. Frank, an economics professor at Cornell University’s Johnson School of Management in the US, says computerisation has extended the reach of the most gifted performers among workers in every arena, combined with an increasingly open competition for their services.
The OECD report exonerates globalisation as a cause per se. For Australia, it argues the growth in inequality since 2000 has been driven by two forces in different periods: widening disparities of market incomes (gross earnings, savings and capital) between 2000 and 2004, and weakening redistribution (through tax and benefits) since 2004. These taxes and benefits now reduce inequality by 23%, which is about the OECD average. The report labels labour market changes as the key driver of inequality trends, noting, for example, that collective bargaining has replaced centralised wage fixing in Australia.
