September 26, 2019

CEO Update - September 2019

When we are arguing about whether or not the “inequality” narrative is misleading, it detracts from us talking about the real heart of the issue, writes Professor Kristy Muir.

Almost 18 months ago I had a detached retina that required some fairly invasive surgery and lots of follow-up appointments. Every time I go to see my very talented surgeon, I join tens of people waiting to see the eye specialists in the retina clinic. When I walk into the room, I usually bring the average age down by almost half. Sometimes another younger person is also in the room. We could have a long conversation about the age differential in the room and how that changes over time and why, but if we spend too much time talking about this, we’re distracted from the real story – people’s sight and how we save, maximise and/or improve it. 

I feel a little bit the same about the argument on inequality in Australia and whether it is going up or down. While we spend a lot of time talking about how to interpret whether rates are rising or stable, we’re distracted from dealing with the elephant in the room and the heart of the issue – entrenched disadvantage.

Recently the Guardian published a piece about the Australian Bureau of Statistics not wanting to “draw attention” to the wealth inequality results, but rather focused on developing a “good media story” about income inequality. 

The ABS headline that “inequality is stable” was, at best, lacking an important descriptive word - “income” - and, at worst, misleading. The ABS was only reporting on income; not the other important measure of inequality: wealth.

As Sheil and Stilwell covered in The Conversation, ABS wealth data is "not a picture of stable inequality” but rather growing wealth inequality. In 2003-04 the top 20% held 59% of the nation’s wealth. By 2013-14 they held 62.1% and by 2017-18, it was 63.4%. Over the same time period, “The wealth share of every other quintile fell.”

The ABS admits that “there is greater inequality in the distribution of wealth than income.” The net worth of the top 20% of households is a staggering 93 times that of the lowest 20%. In dollars, that’s a mean net worth of $3.2m per household for the top 20% (up from $2.9 million in 2015-16) compared to just $35,200 for the bottom 20%. This leaves the top 20% controlling more than 60% of all household wealth.

Income inequality has remained largely stagnant because of the lack of wage growth across the country over the past five years. This does not take away the fact that the top 20% of households' mean income is nearly five times more than the lowest income households and Australia ranking 22nd on the OECD’s income inequality indicator.

But, let me stop with the income and wealth inequality statistics for a moment.

While we are arguing about whether wealth inequality or income inequality has gone up or down, we are taking our eyes off the bigger issue: entrenched disadvantage.

Approximately three million people in Australia (13.2%) live below the relative poverty line (50% of median household disposable income), including 739,000 children (17.3% of all children). That’s around 1 in 8 adults and over 1 in 6 of our children (Poverty in Australia 2018). 

Over the past two decades, while we have had unprecedented consecutive years of annual economic growth, these poverty rates have affected at least 1 in 10 adults and at least 1 in 7 of our children (since 1999 poverty rates have fluctuated between 11.5%-14.4% for adults and 14.3% and 18.6% for children). 

We have failed to address entrenched disadvantage. Our freezing of social security rates, such as Newstart, have not helped. For many people living in poverty (53%), social security is their main source of income (compared to 7% of people whose main source of income is wages). It is important to note though that 38% of all people in poverty live in wage-earning households. Therefore entrenched disadvantage is a problem for people living in households with and without jobs. 

As we enter October and get closer to anti-poverty week, we need to take a close look at what entrenched disadvantage means for people experiencing it and our society more broadly. We also need to look beyond the economic indicators to understand quality of life and how we’re progressing as a society. To do this, the Centre for Social Impact has teamed up with the Social Progress Imperative and will be launching the Australian Social Progress Index in November as part of Amplify Social Impact

Irrespective of arguments about inequality rising or falling, the reality is that life is supremely tough for those at the bottom. We need to see clearly what that looks like from an individual, family, community and society perspective and stay focused on working together to address it.

 Professor Kristy Muir

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