By Joe Montero
Despite all the media hype about something of a jobs boom and a sound economy, it happens that this hasn’t materialised into aa better life for most Australians. This isn’t surprising, since the talked about improvements area a mirage.
Saying that the situation is worse than claimed isn’t knocking for the sake of it. Knowing the truth is essential to finding what must be done to improve the situation.
Research at the University of New South Wales confirms that there has been a steady rise in wealth inequality over the last 20 years. The study found that the richest 20 percent have 6 times the wealth as the middle 20 percent and 90 times the wealth of the bottom 20 percent.
But the figure for the richest 20 percent is heavily skewed towards the richest 5 percent. They have more than twice than the rest of the cohort.
These findings need a clarification. The study says that income inequality has shifted less than wealth inequality. Wealth includes assets owned. One of the relevant details is that the top income bracket holds 82 percent of all investment property. This is a reality that puts to rest the image of the “mum and dad investor” being the mainstay of property ownership.
The wealthy have advantages that enables them to pay far less tax on their nominal income, and they enjoy further advantages in benefiting from government subsidies and allowances. The 80 percent get their income from wages or Centrelink payments. Those on the highest incomes get theirs through returns on their investment.
Consideration should also be given to the that that the wealth on the 80 percent is distorted by superannuation cover. Rather than an increase in wealth, this should be regarded as saving for retirement, to fill the gap caused by the downgrading of the age pension. Include this and the gap is wider still.
Returning to income. Wages have still been in decline for the past 2 decades and more. a virtual non movement in the last quarter doesn’t mean the situation is looking up. The ongoing pattern hasn’t changed.
The above graph shows the discrepancy in income in 2022. This has not changed in any meaningful way in 2023.
Real wages, or what they can buy, have declined even further in both relative to the biggest incomes and in absolute terms. In terms of dollars in the pocket, there had been a small growth of 0.8 percent in June quarter. Much of this is attributable to the minimum wage increase. This was eaten up by inflation. In real terms then, wages remained worse than stagnant, and at the lowest level in 20 years.
Another way to look at it is through the share in the growth of the economy. The graph below compares the pre COVID performance with other countries and regions. Australia shows the greatest inequality.
The major reason is the greater weakness in the bargaining strength of unions and most importantly, the transformation from full time and secure work to part-time and insecure work for a large part of the workforce. This has created a reserve of cheap labour, used to keep overall wages down. This sort of work also disguises the real rate of unemployment.
Those depending on Centrelink payments are in a worse position. Increases in these payments have been a joke and well below the poverty line.
The obvious way to establish a far more equitable balance in income distribution is to encourage Wage growth, provide Centrelink payments to where they will provide a reasonable standard of living, and to impose higher taxes on the top end.
Achieving a fairer distribution of the nation’s wealth requires, above all else, the provision of affordable housing on a scale that will make a difference.
The measures mentioned to improve the distribution of income and wealth haven’t been taken by government and there is no sign government intends to in the foreseeable future.
This points to the necessity of a broad community campaign to fight for and eventually win these changes.