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MELBOURNE INSTITUTE Applied Economic & Social Research
Eco Econo nomic mic ineq inequa uali lity ty in in Aus ustr tralia: alia: Tren ends ds an and d po poss ssible ible po poli licy y res espo pons nses es
Roger Wilkins
Friday, 21 July 2017
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“Australian statistics show that we are at the most unequal we’ve been in 75 years.”
Leader of the Opposition, Bill Shorten, speaking on ABC TV’s Q&A program, September 21, 2015.
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1970-71 1973-74 1976-77 1979-80 1982-83 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13
%
Income share of the top 1% Persons aged 15 and over
Top incomes in Australia – Tax records data
8.2% in 2014-15
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Overall inequality as measured by household surveys
0,27 0,28 0,29 0,30 0,31 0,32 0,33 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15
Gini coefficient - Equivalised income
ABS HILDA
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Relative income poverty
8 9 10 11 12 13 14 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 %
Proportion in relative poverty (less than half of median income)
ABS HILDA
SLIDE 6 What about the distribution of wealth?
0,60 0,61 0,61 0,62 0,62 0,63 0,63 0,64 0,64 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15
Wealth inequality (Gini coefficient)
ABS HILDA
SLIDE 7 Household annual disposable income per capita
38.000 40.000 42.000 44.000 46.000 48.000 50.000 52.000 54.000 2000 2002 2004 2006 2008 2010 2012 2014 2016
$
March 2017 prices - Quarterly seasonally adjusted series
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Earnings inequality
0,20 0,22 0,24 0,26 0,28 0,30 0,32 2001 2003 2005 2007 2009 2011 2013 2015
Gini coefficient - Weekly earnings of full-time employees
Males Males Females Females
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Policies to address economic inequality – a few principles
- There are many tools available (and required)
- Evaluate the distributional effects of all policies and institutions.
- Address inequality of opportunity and inequality of outcomes (It is not
enough to tackle inequality of opportunities)
- Prioritise tackling the economically inefficient sources of inequality
- In-kind income is an important consideration
- Don’t underestimate the importance of incentives or the benefits of a
market-based economy
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Some policies to address economic inequality
Improve progressivity of the income tax and transfer system
- Traditional mechanism, and has an important role to play
- Reduce various tax expenditures/exemptions (e.g., capital gains)
Reduce economic rents
- Especially those deriving from government actions – licensing, zoning,
regulatory activity, etc.
- Competition policy also a useful tool
Invest in public education and health systems
- Especially helpful for reducing inequality of opportunity
Broad-based land tax
- Easier and more efficient than a wealth tax
Treat gifts and inheritances as taxable income of the recipient
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Increase minimum wages
- Better to take steps to improve labour’s productivity and bargaining power
Introduce a Universal Basic Income (unconditional payment to all adults)
- A decent UBI would require much higher taxes (e.g., $20,000 UBI = $380 billion) and
would blunt the benefits of work
- Not very effective at reducing inequality (and may increase it)
- Also doesn’t appeal as a response to automation: Doesn’t seem to be a good idea to plan
for a world in which many or most do not work
- Taxing capital intensive production (a ‘robot tax’) is likely to be preferable
What I wouldn’t do
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MELBOURNE INSTITUTE Applied Economic & Social Research
Eco Econo nomic mic ineq inequa uali lity ty in in Aus ustr tralia: alia: Tren ends ds an and d po poss ssible ible po poli licy y res espo pons nses es
Roger Wilkins
