Wealth inequality
Australians likes to think as an egalitarian, and in the past, Australian believed that they had an equal distribution of income as well as wealth. Since the year 1970, individuals have been dealing with the issue linked to the conservative understanding that has associated to the shortage aspect instead of attaining positive way of handling wealth. Economic inequality is a wide topic of economics that majorly focus on the distribution of wealth in the country. This paper focuses on the reason, which leads to the rise in the economic inequality in Australia since the year 1970s. In most of the OECD, the income inequality level has been increased in past 20-30 years and Australia is one of the countries who have registered the growth in the economic inequality (Whiteford, 2013). This argument is supported with the different reasons, which include deliberate policy, a shift in the income from wages to profit, and many others. Thus, this has been found that there are different real problems that are essential to be addressed.
The economic inequality in Australia is difficult to be measured as it remains complex for the long run but the measurement of the inequality is required by the country so that they can analyse the economic situation of the country. This has been found that Gini coefficient is majorly used with the motive to measure the inequality that varies between zero and one. This has been found that if everyone in the country has exactly the similar income then it would be approx. zero, which is faultless equality. However, on the other side, suppose in case, one of the household had all the income then it will get equal to one that reflects the complete inequality. According to the current statistics for the OECD countries, from the year 2010, it is clear that the country is considered as 11th utmost unsatisfactory of 34 members of OECD (Whiteford, 2014). The country has briefly been below the OECD average Gini Coefficient: like as the boom in mining that initiated in the year 2003.
The evaluation of Australia’s economic inequality becomes essential dye to which in the year the 1980s, the ABS (Australian Bureau of Statistics) has shown the consistent high-quality survey of income of Australian household. According to the latest survey that was conducted was in the year 2011-12. The below-given image reflects the accurate responses that were covered in the survey.
Skill-Biased Technical Changes
(Source: Whiteford, 2014)
The research has been done by economists David Johnson and Roger Wilkins who originated that Gini Coefficient has improved by 0.27 in the year 1981-82 around 0.30 in the year 1997-98. Afterward, ABS statistics about the official income reflect that Gini coefficient has improved to approx.0.34 just earlier the GFC (global financial crisis) in the year 2008, then fell to approx. 0.32 in the year 2011-12 (Whiteford, P. (2011). This supports the argument that economic inequality is increasing since the 1970s century. Further, there are different reasons due to which the rise in economic inequality has been registered in the economy of Australia. Some of the reasons are discussed through the light on the concept that economic inequality increased in Australia since the 1970s.
Wealth inequality: – Wealth inequality is considered as one of the major and foremost reason due to which economic inequality has been registered. From the past numerous years, the figures on the distribution of wealth were even thinner than comprehensive statistics majorly on the distribution of the income. Australian Bureau of Statistics (ABS) reflected that the richest 20% of the families in Australia are present with an average net value of approx. A $2.2 million per family in the year 2011-12 which is measured for more than approx. 61% of the total household net worth (Australian Government, 2018). In addition, the lowliest 20% of the household in Australia are measured for 1% of total household with the net value and had an average of the net value of approx. $31,000 per household. This analysis shows that the wealthiest 20% of Australian household is able to maintain the net value that was 68 times as high as least rich 20%. However, contrasting this statement 20% of the Australian households stated with the highest disposable income which is approx. five times better off than the poorest of approx. 20% (Knight, 2015). This clearly shows that the Australian economy is clear with the fact that wealth is much more inequitably dispersed in Australia than income.
Skill-Biased Technical changes: – This factor influences distribution of the market income that affects the economy of Australia. The increased income inequality is influenced by the skill-biased technical changes that have been promoted by the rise in globalisation (Sheil and Stilwell, 2016). The changes are majorly witnessed in the production technology as they favour most of the skilled individuals because of their education, capabilities, and experiences rather than the unskilled individuals. The rise in the demand has brought the rise in skilled individuals. These skills were valued by the production companies and units due to whom they started offering high wages to them. This leads to decrease in the demand for the unskilled labour in the country (Chesters and Watson, 2013). In addition to this, the rise in the technology has shifted the need for the labour intensive strategy and companies started sourcing the products from the other markets. This entire situation contributed to the rise in the income of skilled people and unskilled people were not able to receive a high amount in terms of salaries (Watson, 2016). In addition to this, the demand for unskilled labour has reduced with the decrease in their salaries. Thus, this shows the major gap between the salaries of skilled and unskilled people. This gap gives rise to inequality in terms of the economy of Australia.
Wage Disparities
This has been found that wage disparities are considered as serious issues with different OECD, the Australian labour market deteriorated from the year the 1970s onward. The labour market of the company has changed a lot since the year 1970s. The graphical presentation given below reflects the unemployment rate from the year 1978 to 2012 according to the analysis of ABS (Whiteford, 2013).
(Source: Whiteford, 2013)
This has been found that since the year 1970 to the year 1990s rise in the unemployment opportunities were clearly observed in the Australian economy that was the negative sign as this will increase the gap between the inequalities present in the economy of Australia. In addition, the Australian Bureau of statistics reflects that there is a tremendous rise in the unemployment rate that shows that the country is not able to manage economic equality so far from the year 1970 (Coelli and Borland, 2016).
In Australia, the level of income inequality has improved which has ultimately brought the rise in the difference in the incomes of market. The changes in tax and welfare regimes have increased effect that has been experienced in the present market outcomes. The high in tax rates and increased in the level of generosity majorly on employment and social assistance has significantly brought the rise in the inequality among the market between the year 1979 and 2004. This has been found that in the year the 1990s that the inequality in the market inequality increased which shows that the tax and welfare programs were failed in decreasing the polarization effect (Atkinson, 2015). The analysis shows that the lowering or reducing the personal taxes generally for the higher incomes lead to the major issues of the unemployment benefits. This is further supported by the issues of the rising in the inequality in Australia. The researcher has an argument on the fact that tax is considered as the major contributor as if the taxation on the income of the Australian has been frozen than the rich people will become richer and poor will get poorest. Thus, this clearly states the economic inequality that is present in the economy of Australia.
Economic crisis: – The economic crises, which took place in the year 1974-75 actively, contributed to the inequality in Australia. At the end of the crisis, the trade unions of Australia demanded the new wage structures for them that were quite high even more than the agreed rate. The government not only brought the changes in the wage structure but with this, they also brought the changes in the tax policies. Thus, the analysis shows that the government of Australia reduced the statutory tax rates were declined in the year 1983 to 46% and in the year 1996 to 36%. Thus, this has been found that the fluctuations in instructions that were implemented in corporate tax lead to the major influence on the effective and corporate tax weakening (Chatterjee, Singh and Stone, 2016). However, the decline in the tax was one of the reason due to which the inequality of the economy increased.
Tax and Welfare Regimes
Further, this has been found that with the rapid economic growth in the late 1980s due to incautions lending by the deregulated banks brought the rise in the interest rate due to which the people were not able to pay off the loans. The interest rate increased with the motive to slow the economy and to reduce the trade deficit that leads to the 1990-92 serve economic recession. GFC leads to the major financial and corporate collapses, which affects the business and economy of the country. In addition to this, the inflation rate fell in Australia that leads to the situation in which the money flow was less in the market (Whiteford, 2015). However, this made the Australian banks cautions about the flow of money in the market. This made the policy makes receptive to GFC stimulus in the year 2008.
The above given are some of the reason which proves the argument that the economic inequality of Australia has been increasing since the year 1970s. Australian government need to take the accurate steps that help the country to maintain equality in the economics of the country. This can be done with the help of low unemployment, bringing the rise in the level of the social security, managing the labour market with the minimum wages and the higher marginal tax rates for the income earners (Morelli, Smeeding and Thompson, 2015). The government should invite the FDO which will help them to manage unemployment and with this, the companies should give importance to the home employees first rather than the foreign employees. Thus, this will help the country in managing the unemployment rate with the labour market. Along with this, the labour market will help in managing the wages that will further contribute in managing the taxes that will manage the inequality of Australia economy.
At the end of the essay, this can be said that society or the economy of the country never remains the same and equal all the time that it can be a horizon for disadvantages and they are difficult to increase. The standard actions of economy might take residence high economic power with motive to hand off the corporate owner majorly when it originates to the relation of employees. The government of Australia is supposed to take some substitute and simplify the positive and profitable actions of the corporate that majorly targets the defence of corporate property owner from the injurious activities of employee’s. The above discussion includes the major factors that have subsidized to the growth in the economic dissimilarity in Australia after year 1970. These factors include wealth inequality, skill-biased technical changes, tax and welfare regime and economic crisis. The deep analysis of these factors shows that the government is still facing inequality in the economy.
References
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