Michael Costello also focused on the ABS figures in yesterday’s Australian. The ABS stats covered the period 1994-2001. However, as a former Kim Beazley Chief of Staff, Costello naturally focused on the 4 years of the Howard government, and came up with some fairly spectacular numbers. I suspect they’d be even more spectacular if you included the last 2 years as well, because I’ve seen no recent sign of abatement of the Gordon Gekko syndrome (as witnessed by the irritating proliferation of home renovation and auction frenzy lifestyle TV shows). Costello says:
The bureau figures showed that during the four years to 2000-01, the incomes of the top 20 per cent of Australians have grown seven times faster than those of the bottom 20 per cent that’s right, seven times faster and 50 per cent faster than middle income earners. During those four years the income of that top 20 per cent went up by $109 per week and of the bottom 20 per cent by $3 per week.
On the other hand, just about everyone’s income has risen in real terms, so poverty in real terms (as opposed to Henderson Poverty Line relative ones) hasn’t increased. So is there anything to worry about? Why shouldn’t the rich get richer a hell of a lot quicker than the poor? Isn’t it just churlish envy to object? In part maybe that’s true. However, this is where those happiness studies come in, purporting to show that more money and possessions don’t make us happier. I’ve taken issue previously with the way people like Clive Hamilton deploy such research. However, there’s at least one aspect where I think they tell us something important. They indicate that the reason people (at least generally) aren’t made happier by increasing wealth is because most of us assess our material satisfaction relative to others around us. It’s the “keeping up with the Jones’s” syndrome expressed statistically, combined with “further fields are greener” dissatisfied yearnings.
If we assume the correctness of the happiness studies in that respect, then the fairly dramatically increasing inequality reflected in the latest ABS figures is leading quite directly to an increase in net unhappiness levels in society. Taken to extremes it could eventually lead to serious social divisions, tensions and even violence. A strictly utilitarian approach to government policy might suggest we should actually do something about it. On the other hand, as I observed in a post a couple of days ago, the competitive pressures of a globalised economy arguably leave very limited scope for mitigating gross inequality through the tax system. I’d prefer to see it done through a range of non-tax measures including a revamped industrial arbitration system, where the AIRC would have a renewed mandate to take a more active role in wage fixing, and be charged with looking more seriously at gross income inequality. One possible innovation might be that, in assessing employer protestations of inability to pay wage claims of ordinary employees, the AIRC would be required to look at the record of the enterprise or industry in awarding pay rises to its senior executives.