The gap between Australia’s rich and poor is growing. The average disposable income of the top-earning 20 percent of households is now almost six times more than the lowest 20 percent.
Dr Nicholas Barry, Senior Lecturer in Politics, has written a book chapter for ‘Australian Politics at a Crossroads’, examining why income inequality is a policy problem in Australia.
“Since the 1970s, there has been greater inequality in wages and salaries, with high-income earners experiencing greater gains than low and middle-income earners,” Dr Barry explains. “Combined with job polarisation across households, the casualisation of work, and a fall in the percentage of full-time middle-income jobs, the result is a higher level of inequality.”
Although the impact of technological change on the nature of work has played an important role in these changes, Dr Barry says public policy has also been crucial in the growth of income inequality, particularly in areas such as industrial relations and tax policy.
“Industrial relations changes over recent decades have contributed to a decline in union membership and also made it more difficult for unions to bargain with employers, while tax cuts and other changes to the tax system mean that it is not reducing income inequality as effectively as it once did.”
“This suggests that the current distribution of income is not inevitable, but is strongly shaped by political decisions,” he says.
And while effective solutions are available, Dr Barry believes they are politically challenging in the current Australian landscape.
“We know from existing research that countries with high levels of union membership, longer periods of centre-left government and welfare states with a higher level of universalism, tend to have lower levels of income inequality,” he says.
“Australia has relatively low levels of union membership, lower rates of tax and a more residual welfare state, which means that the nation’s appetite for egalitarian political reform is limited.”
“This doesn't mean that higher levels of income inequality are inevitable in Australia,” he adds, “but it does mean that egalitarians will need to focus their efforts on political organisation – particularly around organised labour – to build a stronger movement for change.”
