Australia

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Overview of Trends of Economic Inequality in Australia

 

Has the dispersion of earnings been increasing in recent decades?Yes, top decile of earnings has increased from 175 per cent of median in 1975 to 215 per cent in 2012.
Has overall inequality increased in recent years?Yes, Gini coefficient has increased by 5 percentage points since 1981.
Have there been periods when overall inequality fell for a sustained period?Yes, overall inequality and top shares fell from early 1950s to end of the 1970s.
Has poverty been falling or rising in recent decades?Risen since 1981.
Has there been a U-pattern for top income shares over time?Yes, top gross income shares fell from 1921 to around 1980 and then began to rise, reaching pre-war levels before the 2007 crisis.
Has the distribution of wealth followed the same pattern as income?Yes, the share in total wealth of the wealthiest 1% of the population dropped more than threefold from 1915 to the end of 1970s before rising again till the onset of 2007 crisis. However, the rise was not sufficient to return to pre-war levels of concentration.
Additional noteworthy featuresRising inequality on all (observable) dimensions for past thirty years.

Sources and References

Sources for the historical data series:

Overall inequality: Gini coefficient for individual gross income from Hancock (1971, Table 4); Gini coefficient of equivalised disposable household income from Table S.5, Household income and income distribution, 2011-12, publication 6523.0 on website of Australian Bureau of Statistics, where we have taken account of the change in methodology in 2007-8 by calculating a figure for that year based on the change in the estimates obtained on the “former basis” (1.2 percentage points) from Table A7 of the 2007-8 report, and then subtracting the difference (1 percentage point) from the estimates for subsequent years (access the 2011-2012 original data here); linked at 1995 to series from Luxembourg Income Study (LIS) Key Figures; Gini coefficient for gross household income calculated from Ingles (1981, Table 9).

Top income shares: Share of top 1 per cent in total gross income from WTID, based on work of Atkinson and Leigh (2007).

Poverty: Percentage of individuals in households with equivalised (square root scale) disposable income below 60 per cent of the median from Luxembourg Income Study (LIS) Key Figures.

Individual earnings: From May survey, Employee Earnings and Hours (all employees) taken from Atkinson (2008, Appendix A, Table A.5), updated from reports for 2006 (Table 5), 2008 (Table 6),2010 (Table 8) and 2012 (Table 1) from website of Australian Bureau of Statistics, linked backwards at 1998 to series back to 1975 given by OECD (Atkinson, 2008, Table A.3).

Wealth: Share of top 1 percent in total household wealth from Katic and Leigh (2013, Appendix Tables, Table A1 and A2): 1915 observation based on national wealth survey (tabulations), inheritance tax series used from 1953 to 1978 (when the inheritance tax was abolished), and more recent observations based on national wealth surveys (micro data).

References:

  • Atkinson, A B, 2008, The changing distribution of earnings in OECD countries, Oxford University Press, Oxford.
  • Atkinson, A B and Leigh, A, 2007, “The distribution of top incomes in Australia”, Economic Record, vol 83: 247-261.
  • Hancock, K, 1971, “The economics of social welfare in the 1970s”, in H Weir, editor, Social welfare in the 1970’s, Australian Council of Social Science, Sydney.
  • Ingles, D, 1981, Statistics on the distribution of income and wealth in Australia, Research Paper no 14, Department of Social Security, Canberra.
  • Katic, P. and A. Leigh, 2013, “Top Wealth Shares in Australia: 1915-2012”, unpublished manuscript.
  • Saunders, P, 1993, “Longer run changes in the distribution of income in Australia”, Economic Record, vol 69: 353-366.