Australia’s wealth gap widens as inequality reaches record highs
The saying that there are lies, damned lies and statistics is perhaps a reflection of the way statistics are misused by politicians and others rather than a critique of them.
After all, accurate measurement is vital in implementing strong analysis and good policies.
The value of good statistics is shown by the latest Household, Income and Labour Dynamics in Australia report (HILDA) which backs up many suspicions about what has been happening in Australian society.
The report has been produced by interviewing the same 17,000 people across more than 9,000 households every year since 2001 to find out trends across the population.
Some of the survey’s findings are wholly unsurprising, particularly the fact that men do a lot less work around the house than women and yet are quite happy for that situation to continue.
Other findings such as the decline in attendance for most organised religions and the despair felt by women about the burden they bear doing household chores and caring for sick and elderly relatives also back up common perceptions.
Economic inequality marching higher
To me one of the most interesting parts of the latest HILDA survey is the way in which economic inequality in Australia has increased over time.
Indeed, economic inequality in Australia has now reached the highest levels since the HILDA surveys began with more than half or 51.2% of respondents saying that their real income has fallen between 2021 and 2022.
The interesting wrinkle in the findings is that during the COVID-19 pandemic, the support governments offered to Australians actually helped to reduce inequality in 2020.
What followed on from that was two years in which inequality greatly worsened.
Living standards falling for middle and lower income groups
In 2021, there was a $7,542 difference between the mean and median individuals’ household equivalised income.
That rose to $9,472 in 2022, suggesting the gap between the middle and upper classes was growing more quickly.
Equivalised income is a measure of living standards, calculated by adjusting household income to account for the size and needs of the household.
Professor Roger Wilkins, lead author and co-director of the HILDA survey, found that after the initial equalising effect of the pandemic, higher incomes in Australia grew faster relative to middle incomes.
“At the same time, the relative growth of lower incomes has declined, which drives inequality up and makes it harder for poorer Australians to move into higher income groups,” said Professor Wilkins.
In other words, the rich got richer and the poor got poorer, the very opposite of what the Australian ethos of a fair go would suggest.
Gini out of the bottle
Another measure of what was happening is shown by the movement in what is known as the Gini coefficient – an ingenious measure which shows overall inequality in various societies.
In 2022, the Gini coefficient rose to 0.321 — the first time it has ever been above 0.31 in the entire history of the HILDA survey.
There are some possible reasons for this growing inequality, some of them demographic and others situational.
The statistically large baby boomer demographic have been progressively moving into retirement, which has shielded them from some of the variation within incomes and has exposed their relatively lower taxed wealth gained through property ownership and also through growing superannuation accounts.
This is a likely interpretation of the fact that non-elderly couples were the only family group to experience consistent growth in their median equivalised income since before the COVID-19 pandemic
Secondly, investments in both the share market and property were generally buoyant in the couple of years after the pandemic, also leading to greater capital earnings by wealthier households because of their greater exposure to these asset classes.
The Gini score ranges from zero in which everyone in society is equal and one where one person earns their country’s entire income.
While Australia scored its worst ever Gini score, we are still a relatively egalitarian society compared to many other countries around the world.
South Africa the worst for inequality while Slovenia reigns
Some of the other countries that are less equal than Australia as measured by the Gini score include all of the countries in southern Africa, with South Africa taking out the gold medal as the most unequal in the world, all of South America and most of North America, with the notable exception of Canada.
The worst countries following on from South Africa were Namibia, Suriname, Zambia, Sao Tome and Principe.
Perhaps surprisingly, we are more equal in economic terms then people in China and Russia although there are some better performers then us in parts of Europe.
In theory, communist countries should perform well on financial equality but these figures show that their rhetoric is perhaps not matched by the efficiency of their income redistribution.
Iceland, Sweden and Japan beating us
The Scandinavian countries and Japan score better on the equality stakes than Australia, with Slovenia the world’s most equal country and many of the former Soviet states also performing well on this measure.
Following on from Slovenia as the most equal country were the Czech Republic, Belarus, Moldova, the United Arab Emirates, Iceland, Azerbaijan, Ukraine, Belgium and Finland.
In some ways a good Gini score is a reflection of the success of the taxation system and other forms of redistribution of wealth, while poor scores often reflect the presence of an extremely wealthy elite such as very lightly taxed billionaires and oligarchs.
Of course, the interesting thing about statistics is how they are used.
It would be easy enough to say we could do better to produce a more equal society and study what had made those countries with a better Gini score than us successful.
However, a more likely political outcome might be to just shrug and say we are doing better than much of the world and do nothing.