Income Inequality In Australia Research Articles

The impact of financial deepening on income inequality: Empirical evidence from Australia

AbstractThe present research paper is designed to explore the role of financial development indicators on income inequality in Australia using yearly data from 1980 to 2014. Our study also accounts for other potential determinants of income inequality such as inflation, per capita income and trade openness. Our results from Bayer and Hanck (2013) cointegration test confirm the long‐run equilibrium relationship across the models. Similarly, the long‐run estimates from the quantile regression models and non‐parametric approach indicate that the financial development indicators, foreign direct investment (FDI) inflows, inflation and trade openness have significant positive impact on income inequality in Australia. However, the growth in per capita income plays the opposite role. Given these findings, our study offers numerous policy and practical implications and adds an important value to the empirical literature on the nexus between financial development and income inequality.

Policy, Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?

Isolating the impact of policy, demographic shifts, and market volatility on changes in income inequality is of great interest to policymakers. However, such estimation can be difficult due to the complex interactions and evolutions in the social and economic environment. Through an extended decomposition framework, this paper estimates the effect of four main components (policy, demography, market income and other factors) on the year‐over‐year changes in income inequality in Australia between 2002 and 2016. This was a period marked by substantial policy, population, and economic shifts due to factors such as the mining boom, the global financial crisis and increasing immigration. The framework also incorporates a flexible non‐parametric market income model which captures demand‐side shock better than a standard parametric model. Our results suggest that market income was the primary driver of income inequality for all segments of the income distribution in Australia over the past 15 years. Policy factors, moreover, have had the largest net impact on reducing inequality overall, especially for lower income earners.

The impact of fiscal shocks on real GDP and income inequality: What do Australian data say?

This paper examines the impact of three fiscal policy shocks on per capita real GDP and income inequality in Australia during the period 1965–2014. A small structural vector autoregressive (SVAR) model is constructed for an open economy for contemporaneous identification and estimation purposes. Based on the evidence of one cointegrating vector among the variables, a structural vector error correction (SVEC) model is specified for the long run. Direct taxation, indirect taxation receipts and government spending are identified as permanent fiscal policy shocks. The convergent use of two different models (SVAR & SVEC) strengthens the credibility of the results. The results have three key policy implications. First, a reduction in direct taxation receipts increases per capita real GDP without increasing income inequality. Second, a reduction in government expenditure significantly increases income inequality. Third, the adverse effect of indirect taxation receipts on income inequality is greater than the redistributive effect of government expenditure, which questions the widely held fiscal policy strategy of using indirect taxation to finance redistributive expenditure.

Policy, Demography and Market Income Volatility: What Was Shaping Income Distribution in Australia Between 2002 and 2016?

Isolating the impact of policy, demographic shifts and market volatility on changes in income inequality is of great interest to policymakers. However, such estimation can be difficult due to the complex interactions and evolutions in the social and economic environment. Through an extended decomposition framework, this paper estimates the effect of four main components (policy, demography, market income and other factors) on the year-over-year changes in income inequality in Australia between 2002 and 2016. This was a period marked by substantial policy, population and economic shifts due to factors such as the mining boom, the global financial crisis and increasing immigration. The framework also incorporates a flexible non-parametric market income model which captures demand-side shock better than a standard parametric model. Our results suggest that market income was the primary driver of income inequality for all segments of the income distribution in Australia over the past 15 years. Policy factors, on the other hand, have had a moderate impact on reducing inequality overall, but a more critical role for lower income earners.

Income Inequality in Australia – Decomposing by City and Suburb

AbstractThere has been an increasing interest in the level and change in income inequality across much of the developed world. In Australia, this research has extended our knowledge by using new measures (for example wealth), longer time periods, and income inequality dynamics. One area for which we have relatively little recent evidence is on the spatial distribution of income inequality, especially at small areas of geography. Specifically, we look at the level of income inequality for the eight Australian capital cities in 2006 and 2011 (using relevant Census and survey data), as well as inequality between and within suburbs within those capital cities. A number of interesting findings emerge from the analysis. The most obvious finding is that there are differences across cities in the extent to which income is unevenly distributed. While this has been demonstrated in previous research, we were able to use new data and new techniques to show that the type of income which one uses has a small but noticeable effect on the spatial distribution of inequality. Differences in household sizes and the tax system change how income inequality is spatially distributed.

Rising wealth and income inequality in Australia and New Zealand: A radical social work critique and response

INTRODUCTION: Wealth and income inequality is increasing in most societies, including Australia and Aotearoa New Zealand, with detrimental social impacts. However, despite professional marginality, the renewal of radical social work critiques with their emphasis on structural issues highlight, the need for alternative practice responses.METHOD: We employed a critical and synthetic review of the literature to examine major trends in wealth and income inequality (both globally, and in Australia and Aotearoa New Zealand) and the social work responses to increasing economic inequality.CONCLUSIONS: Resurgent wealth and income inequality has reached new crisis points in both countries but individualising analyses and programmes render most social work responses complicit with neoliberal governance. These responses do little to reduce inequality. Alternatives promoting economic equality can be found in radical social work approaches.IMPLICATIONS: At a minimum, effective radical responses to economic inequality must advocate critical social analyses in social work education and practice, including fostering practitioners' capacity for critical reflection, policy practice and political activism.

Housing costs, poverty and inequality in Australia

Housing costs have long been recognised as a factor contributing to poverty, and poverty researchers have estimated poverty using income before and after deducting housing costs. This paper examines the treatment of housing in the literatures on poverty and housing and applies the before and after housing costs approach to examine the extent of both poverty and income inequality in Australia and how they have changed since the early 2000s, focusing on the role of housing costs in the periods before and after the global financial crisis (GFC). Account has been taken of changes in the income measure used by the Australian Bureau of Statistics in its household income surveys as these have been shown to have a marked impact on empirical estimates. The findings indicate that taking account of housing costs leads to greater increases in both poverty and inequality between 2003–2004 and 2007–2008 and to smaller reductions in both since the GFC in 2007–2008.

Measuring Income Inequality in Australia

AbstractThis article surveys the Australian data sources suited to the study of income inequality. Strengths and weaknesses of the data sources are discussed and a brief overview of inequality trends is presented. While there are several suitable data sources, each source has limitations for the purposes of ascertaining both the level of inequality at a point in time and trends in inequality over time. Drawing together the collective findings of the alternative data sources in part addresses the limitations of individual data sources, but there nonetheless remain significant sources of uncertainty about inequality levels and trends in Australia.

Evaluating the Evidence on Income Inequality in Australia in the 2000s

Published ABS data from the Survey of Income and Housing (SIH) show a substantial increase in income inequality between 2001 and 2010. However, almost all of the increase occurred over a period when changes in survey methodology and income concept were occurring. I present results of analysis of the SIH unit record data, as well as independent evidence provided by the Household, Income and Labour Dynamics in Australia Survey. On the basis of this analysis, I conclude that the SIH overstates the growth in income inequality, even when the income variable examined is notionally consistently defined across surveys. The extent of overstatement is, however, uncertain. Furthermore, it is likely that the picture provided by the SIH data in 2010 is more accurate than the picture provided by the SIH data in 2001 – that is, the ABS is now better measuring income in its household income surveys. Therefore, measured inequality at the start of the decade was too low, rather than measured inequality at the end of the decade being too high.

Male Earnings Inequality, Women's Employment and Family Income Inequality in Australia, 1982-2007

This paper uses cross-sectional data to examine the relationship between the growth in earnings inequality among men, changes in women’s earnings and changes in family income inequality in Australia between 1982 and 2007-08. Male earnings inequality increased substantially across this period, as did women’s participation in paid work. Our analysis shows that both impacted on family income inequality, which rose by a relatively small amount. We also show that the impact of changes in women’s employment and earnings on family income inequality changed over the study period. During the years associated with the Hawke-Keating Labor government (1982 to 1995-96), growth in women’s earnings pushed family income inequality higher. However, during the tenure of the Howard government (1995-96 to 2007-08) the pattern reversed, with continued growth in women’s earnings contributing a moderating influence on family income inequality. These findings deliver new evidence on the importance of trends in family formation and the correlation of husbands’ and wives’ earnings to the evolution of family income inequality. They also show the potential effects of a range of policy initiatives on this evolution.

Evaluating the Evidence on Income Inequality in Australia in the 2000s

Published ABS data from the Survey of Income and Housing (SIH) show a substantial increase in income inequality between 2001 and 2010. However, almost all of the increase occurred over a period when changes in survey methodology and income concept were occurring. I document these changes, present results of analysis of the SIH unit record data, and present independent evidence on income inequality trends using the HILDA Survey, tax records and National Accounts. I conclude that the SIH overstates the growth in income inequality, even when the income variable examined is notionally consistently defined across surveys. The extent of overstatement is uncertain, however, reflecting ambiguity about the nature and extent of changes to the distribution of household market income.

Statistical Inference and Changes in Income Inequality in Australia

This paper studies the changes in income inequality in Australia between 1986 and 1999, using the Gini coefficient and Theil's inequality measure. Individuals are divided into various subgroups along several dimensions, namely region of residence, employment status, occupation and age. The change in inequality over time, between and within these subgroups is studied, and the bootstrap method is used to establish whether these changes are statistically significant.

Income inequality trends in the 1980s and 1990s.

This article describes trends in income inequality in Australia during the past two decades, primarily using the income distribution survey unit record tapes released by the Australian Bureau of Statistics for 1982 and 1996–97. There has been little change in national overall inequality during this period. But this lack of overall change at the national level disguises two major trends.

Consumption and Income Inequality in Australia

Consumption may be a more appropriate measure of household well‐being than income or earnings. Using four ABS Household Expenditures Surveys collected between 1975 and 1993, we compare trends in consumption and income inequality among Australian households. We find that consumption is much more equal than income. While there were significant increases in both income and consumption inequality, consumption inequality rose by much less. One interpretation of the results is that some income inequality in Australia reflects transitory fluctuations which households can smooth,‘and that part of the growth in income inequality reflects an increase in these transitory fluctuations.

The Population Sub‐Group Income Effects on Inequality: Analytical Framework and an Empirical Illustration

A method is developed to examine the population sub‐group income effects on inequality using the generalized Theil indices. The proposed method is illustrated by computing the effects of marginal changes in the occupation‐specific incomes on per capita income inequality in Australia based on data for 7197 sample households relating to the 1988‐89 Household Expenditure Survey conducted by the Australian Bureau of Statistics (ABS). The study shows that the growth of (distribution neutral) per capita income in four occupations, namely, unemployed and pensioners, trade‐persons, machine operators and laborers, is inequality reducing whereas the growth of per capita income in all other occupations is inequality augmenting. The occupation‐specific income effects on between‐group inequality are, however, stronger than those on within‐group inequality. These findings are invariant to the choice of alternative distributional weights used in the generalized Theil indices.

The Suffering Middle: Trends in Income Inequality in Australia, 1982 to 1993–94

This article analyses labour force trends, household composition and income inequality between 1982 and 1993–94, principally using unit record tapes for the two years produced by the Australian Bureau of Statistics. The results suggest that earnings and private income inequality increased during these 11 years. However, increasing progressivity in the income tax and, in particular, the government cash transfer system fully offset this growing market‐based inequality. Summary inequality measures thus suggest that the distribution of disposable (post‐tax/transfer) and equivalent disposable income was much the same in 1993–94 as in 1982. However, this apparent stability disguised real income gains at the top and bottom of the income spectrum and losses for the middle 50 per cent of Australians.

Measuring Poverty and Income Inequality in Australia

Measuring Poverty and Income Inequality in Australia

Income Distribution and Social Policy Under a Reformist Government: the Australian experience

For most of the past decade, the Australian Government has developed its social policies within the framework of a consensual incomes policy. While this has led to a fall in the real average earnings of Australian workers, until 1990, the employed workforce grew at nearly the fastest rate of all OECD countries, and female labour force participation increased markedly. At the same time, there were constraints on public expenditure, under which eligibility for social security payments was restricted. This was accompanied by targeted increases in benefit levels for low income families with children, as part of an explicit programme to reduce child poverty. These and other policies have been characterised as indicating that the Australian Labor Party has followed economic rationalist policies, similar to those of Conservative governments in the UK and other English-speaking countries. Using a micro-analytic simulation model, this article provides estimates of trends in living standards, poverty and income inequality in Australia between 1983 and 1990, and assesses the extent to which Australia has had a ‘New Right’ government.

Income Inequality in Australia in an International Comparative Perspective

AbstractEarlier comparative work on income distribution has tended to suggest that Australia is characterised by less income inequality than other industrialised economies. Concerns about the quality of the Australian data used in such comparisons have led to the need for more detailed assessment of the situation. The Luxembourg Income Study has been a focus for this work by bringing together microdata sets for a range of countries and reorganising them to conform to standardised concepts and definitions. This paper builds on earlier work undertaken as part of the Luxembourg Income Study by including Australia in an international comparative analysis of income distribution and redistribution. The Australian data are those from the 1981–82 Income and Housing Survey, with income tax imputed onto the data file. Results are presented for the gross and net income distributions between both families and individuals in seven countries. A common set of equivalence scales is also used to adjust for differing family needs. The results indicate that, using several summary measures of inequality, the distribution of income in Australia is less equal than in four of the other six countries studied. Earlier research which placed Australia high on the international league table of income equality is thus not confirmed by the results.

Analyzing Income Distribution in Australia*

This paper contains an analysis of the sources of income inequality in Australia, based on data from the ABS income survey for 1978‐79. The analysis proceeds by progressive decomposition of the population into component groups differentiated by characteristics such as sex, age, employment status and occupation. At each stage of the decomposition, total inequality is partitioned into contributions from within and between the component groups, as measured by the Shorrocks Iq index. The importance of the characteristic in question as a source of inequality can then be assessed. While the results of the analysis are described in some detail, the emphasis of the paper is primarily methodological.