Rising inequality? A stocktake of the evidence

Commission research paper

This research paper was released on 28 August 2018 and its purpose is to contribute to an informed discussion in Australia by bringing together and taking stock of the latest and most complete evidence measuring the prevalence of, and trends in, inequality, economic mobility and disadvantage across Australian society.

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Rising inequality? A stocktake of the evidence . Text version follows.

Rising inequality? A stocktake of the evidence (Text version of infographic)

Australia has had sustained economic growth, but how have the benefits been shared?

In every decile, the average household has benefited from income growth in recent decades.

Graph shows growth of all ten decile (10% groupings) income groups. The bottom 10% of income earners were at the average growth of 2 per cent. The top 10% grew higher than the average. The remaining deciles grew at 2 percent or slightly less, reducing slightly for each lower decile with the exception of the bottom group.

Australia's level of income inequality is middle of the pack among developed countries.

Graph shows five countries and their relative inequality. Australia was in the middle slightly above the average. Of the five countries, in order of most inequality to least is the United States, United Kingdom, Australia, Germany and Denmark. Germany and Denmark are below the average.

Over the course of their lives people’s incomes change a lot

Diagram shows transition from Education to Work - to Family - to Retirement.

People move up and down the income ladder with life events.

Diagram shows the change of the top, middle and bottom income groups from 2000-01 to 2015-16.

Top income group
- 26% of the top remained at the top
- 15% of the top moved slightly down
Middle income group
- 12% of the middle moved slightly up
- 11% of the middle remained in the middle
Bottom income group
- 28% of the bottom moved slightly up
- 22% of the bottom remained at the bottom.

But it’s not all good news... poverty has remained stubbornly high

Graph shows that between 1988-89 and 2015-16, the relative poverty rate has hovered around 10%.

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Media release

Inequality — The long view, we've done better than we think

A Commission-initiated Productivity Commission report on inequality shows that the past 27 years of sustained growth have delivered significantly improved living standards for the nation and for most of us individually but that poverty remains unchanged.

'Inequality in Australia is a topic that draws diverse and competing views. Yet unlike economic growth, no single metric is going to be definitive.'

'While the perception often is that the glass is half empty, the most accurate picture that can be drawn from the data suggests that each generation is still better off than its predecessor, and that movements in inequality indexes are slight rather than serious,' Productivity Chair Peter Harris said.

The report brings together and takes stock of the latest and most complete evidence measuring the level of and trends in inequality, mobility and persistent disadvantage in Australia.

'It was important that we not just look at the distribution of income in assessing inequality, but consider wealth and consumption too. For example, many retirees live on low incomes, but have high wealth. And many young adults have higher consumption than income,' Commissioner Jonathan Coppel said.

The reports shows that Australia's tax and transfer systems substantially reduce income inequality and that relative to other OECD countries, Australia redistributes less income, but does a much better job of targeting this redistribution to low income earners.

The report also looks at economic mobility — the gauge of whether the rich always remain rich, and the poor always poor. A healthy level of mobility is an indicator of economic opportunity. Mobility in Australia is higher than in most OECD countries — there is widespread movement across the income levels; around 75% of people in the top income group had moved to lower income groups 15 years later.

But the rate of poverty in Australia is still about 9 per cent despite many years of economic growth, and persistent disadvantage for a proportion of people in this group remains unaddressed.

The Productivity Commission's report Rising inequality? A stocktake of the evidence can be found at www.pc.gov.au

National Press Club slides

Speech: Seven Stories from Rising inequality? A stocktake of the evidence

Cover, Copyright and publication details, Contents, Acknowledgements and Abbreviations
Executive summary
Chapter 1 About this study
- 1.1 What this study is about
- 1.2 An overview of what we do
- 1.3 The broader economic context
Chapter 2 Framework and approach
- 2.1 The conceptual framework
- 2.2 Operationalising the conceptual framework
- 2.3 Our analytical approach
Chapter 3 Income and consumption inequality
- 3.1 Trends in income and income inequality
- 3.2 The distribution of income in detail
- 3.3 The demographics of the income distribution
- 3.4 Comparing the distributions of income and consumption
Chapter 4 Wealth inequality
- 4.1 Trends in wealth and wealth inequality
- 4.2 Trends in the distribution of components of wealth
- 4.3 The demographics of wealth and income
Chapter 5 Economic mobility
- 5.1 How does mobility relate to inequality?
- 5.2 Intergenerational mobility in Australia
- 5.3 Life course mobility in Australia
Chapter 6 Economic disadvantage
- 6.1 How disadvantage relates to inequality
- 6.2 The prevalence of poverty
- 6.3 The demographics of poverty
- 6.4 How long does poverty last?
- 6.5 Material deprivation
- 6.6 Social exclusion
Glossary
References

R scripts and datasets

The R scripts and related files necessary to replicate most of the calculations and figures found within the Commission Research Paper are available below.

R is a freely available statistical programming language.

Download R software

To run the R scripts fully, the user must first obtain access to the following datasets:

ABS Basic CURFs for each of the Household Expenditure Surveys (HES) from 1988-89 to 2015-16

Apply to access ABS dataset

HILDA Survey Release 16 in general or restricted form

Apply to access HILDA dataset

In downloading the below scripts you are accepting the following conditions:

The Commission does not provide support to users of these scripts.
The Commission accepts no liability for potential errors in the scripts.
Users of the scripts, including users that derive new variations of the scripts, should acknowledge the Productivity Commission with words in an introductory or acknowledgements section or in a footnote to the effect of: ‘This work benefited from data analysis scripts developed at the Productivity Commission in the context of a paper entitled Rising inequality? A stocktake of the evidence (PC 2018)’
An appropriate reference for this publication is: Productivity Commission 2018, Rising inequality? A stocktake of the evidence, Commission Research Paper, Canberra.