It’s not uncommon to hear people in our society grumbling about excessive welfare payments to those on lower incomes nor to hear the opposite claim that “the rich are getting richer and the poor are getting poorer.”
Data just released by the Australian Bureau of Statistics shows that neither of these assertions is true. It shows total after-tax income for households adjusted for inflation and household size. It includes all sources of income whether that be investment income, wages, or some form of pension or welfare payment.
1. Those in the top 20% of income earners, even after they have paid their taxes, on average earn four times more than the bottom 20%, which is where the majority of those whose primary source of income is welfare are located. Moreover those in the top 20% have 40.8% of the nation’s household income as opposed to those in the bottom 20% holding just 7.5%.
2. The income of all segments has been growing. Remember the data factors out inflation. Every quintile shown is earning more in 2013-14 then they were in 1994-95. So it is not true that the poor have been getting poorer, at least not in absolute terms. What has been happening is the growth in incomes of the rich has outstripped the growth in incomes of the poor. So what we can say is that poorer are getting richer but the rich are getting much richer.
3. The greatest beneficiaries of the global financial crisis were the richest 20% of the population, from whose ranks ironically came the architects of the system that came crashing down.
Australia is one of the few countries that has managed to constrain the growing gap between rich and poor, primarily through government policies that have kept employment rates high (remember the wads of cash handed out by the Rudd government at the height of the GFC? It was the fact that people went out and spent that money that kept employment levels high and stopped the income trend for the lower deciles going backwards) and a tax and transfer system that redistributes income more equitably than many other countries.
Nonetheless we too are falling prey to the growing gap between the richest and the poorest in our community. This should alarm us, for there is a substantial body of research that shows inequality is detrimental to the well-being of all of us. It lowers economic growth rates, sees those at the bottom receiving poorer quality services including education, and creates the type of resentments that fuel the rise of populist nut jobs like Donald Trump and Pauline Hanson.
So if you’re up at the top of the tree, the next time you hear about an increase in the pension or the minimum wage, or one of those scandalous exposes of the tiny number of people rorting the system, perhaps think twice before complaining. You have four times as much in your pocket each week as those at the bottom end of our society and the potential for them to rort the system pales into insignificance compared to the tax minimisation anomalies that you’re able to avail yourself of.
And for those of us in middle deciles, be concerned about the growing gap between rich and poor but perhaps do so from a sense of thankfulness that we live in a society where, despite the fact that some are getting richer at a faster rate, the vast bulk of us have all been getting better off.