In the recent mega blog discussion kicked off by Don Arthur, I ventured the opinion that “the truly remarkable thing is that the Gini coefficient of equivalised disposable income has only increased from 0.28 to 0.31 in the last 30 years of so.” Given the underwhelming response from other commenters to those words of wisdom I thought I might expand a bit on how I came to that conclusion.
Lets say for starters that we are back in the 1950s. We have five working to middle class families, with varying numbers of kids. Lets just suppose that all of the husbands work full-time in similar jobs in a local factory, or bank, or insurance office. All of the wives are ‘homemakers’ (dontcha love that word?), most having retired from work when they got married. In that world, equivalised disposable income is mainly affected by the number of kids in the family, but overall inequality in disposable income (the Gini coefficient) is relatively low.
Fast forward to today. All of the Dads still earn similar incomes, but probably in a wider range of jobs. In one of the families, Mum went off to university and got herself a degree and a well-paid full-time job. In another, Mum has a permanent part-time job, say as a teller in the local bank. The Mum in the third family works as a casual in a local supermarket, because she likes to be available when the kids come home and to take time off during the school holidays. The fourth Mum still believes that a mother’s role is at home as full-time homemaker and mother. And the fifth family has split up when the parents decided they didn’t love each other any more. That Mum has moved with the kids into public housing in a nearby suburb – she has a bit of a part-time job during school hours, but is mostly reliant on income support. Guess what’s happened to the Gini coefficient in this world, compared with the first?
Well, I’ll admit that that is a highly stylised account of some of the changes that have happened in Australia in the last 50 years and that there have been a lot of other changes overlaid on the top of these. But it’s pretty obvious isn’t it that even if the distribution of wages hadn’t widened, household income would be a lot more unevenly distributed these days than it used to be. And the other relevant point for me is that the increased inequality has come from people making free choices about their education, work and living arrangements.
So my question for those of you who believe that Australia’s level of income inequality is too high now is this – what would you do to reduce income inequality among this particular set of families?