A debate about inequality in Australia is long overdue. But we shouldn’t be talking about it the way the left and the Labor Party want to. A discussion only about economic inequality misses the point. A person’s income or wealth is the endpoint of a process that starts with the opportunities individuals are presented with throughout their life. Inequality of opportunity, the social mobility of individuals and families, and intergenerational equity are the things we should be arguing about. However, because these are big and difficult issues it’s easier for politicians to just demand higher taxes.
If Scott Farquhar moved from Sydney to live instead in San Francisco the left would get what it wants – economic inequality in Australia would be reduced. Farquhar is the 37-year-old billionaire co-founder of Atlassian who’s just purchased John B Fairfax’s “Elaine” estate at Point Piper for a reputed $75 million. Farquhar living in the United States wouldn’t make a single Australian wealthier but the left would be satisfied because the country would be more equal.
It’s easy to cherry-pick arbitrary data points to prove or disprove claims about economic inequality. On the one hand, Andrew Leigh, Labor’s shadow assistant treasurer is right. Since 1980 the income share of the richest 1 per cent of Australians has doubled. (And that increased income is taxed by the government at nearly 50 per cent.) But on the other hand the most comprehensive survey of Australian families’ income and wealth from the University of Melbourne reveals that economic inequality has remained largely unchanged for the last decade and if anything has probably declined.
The Global Wealth Databook compiled by Credit Suisse is the most authoritative analysis on global household wealth. It’s 2016 edition said this about Australia: “Wealth inequality is relatively low in Australia… Only 11 per cent of Australians have net worth below $US10,000. This compares to 22 per cent in the UK and 35 per cent in the US… The proportion of those with wealth above $US100,000, at 55.8 per cent, is the fifth highest of any country, and almost seven times the world average.” Put another way, by any standard the vast majority of Australians are very well off.
While opponents of inequality are quick to complain, they’re slow to say how much more equal they’d like to force society to become. Poor countries are more equal than rich countries. In India 96 per cent of adults have a net worth less than $US10,000 ($12,572). The quickest way to make Australia more economically equal would be to have a recession.
The current discussion about inequality reveals how politicians no longer talk of growing the nation’s wealth – what they want to do is redistribute it. No mainstream MP would dare say Australia should aspire to have more 37-year-old billionaires.
If the left ever wanted to move beyond it’s yearning for ever-more punitive taxation, there’s scope for a constructive conversation about evidence such as the reality that in rich developed countries the poor are most likely to be young, unmarried, unemployed, and with low educational achievement. Those are the people that government should be concentrating on helping, but in Australia it’s an entire cohort of people largely ignored by public policy because both the ALP and Coalition think young people will usually vote Labor or Green.
The role for government in reducing inequality is obvious. Everything possible has to be done to make it easier for the unemployed to get a job and for bosses to employ the unemployed. Labor’s employment spokesman Brendan O’Connor gave the game away this week when talking about the income gap between “the very rich” and “middle and working class families”. Families with no work don’t rate a mention. The sort of inequality that erodes the fabric of communities can’t be measured in dollars. The starkest and most damaging kind of inequality is between someone who experiences the dignity and fulfilment of a job and someone who doesn’t. The real sort of inequality we should be talking about is between the 12 million Australians in work and the 726,000 Australians who want employment but can’t get it.
(Image: The Australian Financial Review, 2017)