Economic Inequality in Australia since the 1970S - Essay Example

WHY HAS ECONOMIC INEQUALITY INCREASED IN AUSTRALIA SINCE THE 1970S? WHAT HAVE BEEN THE CONSEQUENCES OF THIS INCREASE FOR THE QUALITY OF LIFE IN AUSTRALIA? By (Name) Presented to (Name of Professor) (Name of Institution, City, Sate) (Date) Why has economic inequality increased in Australia since the 1970s? What have been the consequences of this increase for the quality of life in Australia? Since the inception of the epoch of 1970s, many OECD nations have experienced increasing inequality among individuals (Wong & Picot 2001, p. 171). A vast majority of the prosperous, western democracies have been portraying inequality patterns in their income data. Income inequality refers to the gap between what people actually obtain and what they are likely to obtain if incomes were shared equally (Ternowetsky 2000, p. 16). In most of developed nations, income inequality declined during the era prior to and immediately after the Second World War all through to the 1970s. Nevertheless, a majority of these economies subsequently experienced an epoch during which economic inequality increased significantly. As compared to other wealthy economies, economic inequality within Australia remains relatively high. Subsequent to an epoch of decrease in income inequality between 1920s and early 1970s, the nation of Australia experienced a significant growth in income disparity during the mid 1970s (Meagher & Wilson 2006, p. 220). Various determinants are responsible for the rise in inequality in Australia in the 1970s, such as unionization, immigration, unemployment, trade, and minimum wage. Wong and Picot (2001, p. 171) defines two aspects that are likely to have led to the rise in inequality within Australia. To begin with, economic inequality has resulted from the high extents of unemployment. Besides, the broadening wage dispersions were a principal cause. Australia is among the wealthy economies that experienced massive decrease in income shares among the top populace after the Second World War. The decline did extend from the era after the First World War all through the 1980s. During the year 1974, which marked the termination of post-war boom, the income share attained its peak. Afterward, it dwindled for the initial term of Fraser government, prior to going up again due to the boom occurring between 1979 and 1981. The utmost decline in wages share took place during the initial years of Hawke government, that is, between 1983 and 1991. Further substantial drop off took place during the last years of Howard government as well as during the worldwide financial crisis (Lavelle 2006, p. 297). In Australia, amendments in rates of unionization accounted for considerable percentage of increase in inequality in the 1970s. Leigh (2003, p. 4) explicates that alterations in union solidity are accountable to approximately 30% of rise in variation of male wages from 1986 to 1994 as well as 15% of rise in variation of female wages. Economic inequality within Australia has its origin in the economic calamity, taking place between 1974 and 1975 (Whiteford 2013, p. 14), which blew up subsequent to re-election of Whitlam government. During that period, the government policy did sway rowdily from Keynesian spur to severity amidst harsh struggles over the policy. During the preceding few years, the trade unions inside Australia had prevailed over pay increases, but price rises were proving to be out-of-control, thus alarming businesses. Accordingly, the society started to polarize stridently. The strong, well-organized trade union of Australia tried to defend employments as well as to attain wage rises that would enhance their authentic value whilst the government embarked on efforts to contain the wages. Political crises did channel the economic inequality in Australia. Australia has sunk in brutal political crises, which resulted in political impasse lasting for seven years. This emerged when the businesses, unions, and government marshaled with the aim of defending their interests. To begin with, Whitlam Labor faced political crisis in 1975 when its efforts to contain wages while restoring profit levels did rouse resentment with trade unions that were its principal organizational base. The voters belonging to the working class started to break out from the government, as the government proved incompetent in dealing with economic crisis. The business allied coalition, which opposed the parliament, initiated campaigns to expel the government from power, and it managed to block the passing of the state budget via parliament in 1975 (Griffiths 2011, p. 19). Accordingly, the governor general dismissed the state government. Street protests and mass strikes exploded with the aim of defending Whitlam government, with a general strike being averted by Australia’s supreme union organization ACTU. During the state election, which took place in December 1975, a majority of the strong conservative party members assumed office. Among their principal agendas included lessening inflation, reducing taxation, predominantly for high-income earners and businesses, and reducing government spending, predominantly on education, public housing and health services. This agenda was channeled toward raising income inequality, an aspect that aroused conflict with trade unions. The era of Fraser government was characterized by continuous, polarized clashes with trade unions owing to various issues, such as anti-union laws, failure of fuelling the financial system to reduce unemployment, and attempts to condense real wages while cutting on government spending. However, the conflict, hostility, and political impasse between the trade unions and the government did not manage to solve the fundamental economic crises, thus demanding a shift to more fundamentals to resolve the economy. The impasse ended in 1983 when a novel labor government assumed office. Consequently, the economy was restructured, but it merely benefitted businesses and individuals on high income. The welfare regime of Australia is accountable to the rise in income inequality during the 1970s. The welfare regime is characterized by government afforded benefits, minimum wage practices and policies, social housing, and government philosophy. Whilst the Australian government offers age, disability, unemployment, and sickness benefits among other benefits, it remains low on housing assistance. Moreover, the nation’s welfare regime has altered over time. From 1983 to 1996, the federal welfare system became more targeted. For instance, the Keating and Hawke Governments embarked on efforts to respond to crisis in affordability of housing among low-income households through introduction of funding to private residents as opposed to boosting subsidy for municipal housing (Beer & Forster 2001, p. 17). Besides, the social security and income support systems tend to be provided with strict qualification criteria based on assets and income. Accordingly, this has increased the economic disparity between varying income populations. The consequences of increase in economic inequality for the quality of life in Australia Economic inequality did profoundly affect life in the major cities of Australia. Pivotal implications comprised of absorption of population within small proportions of large cities, low density of economic activity and populations inside urban regions, deep-rooted patterns of community segregation, and change in housing processes, predominantly public housing provision and tenure structure (Beer & Forster 2001, p. 8). The cities in Australia portray diverse patterns of housing segregation basing on the socio-economic and income status. During the 19th Century, suburbs allied to the working class cropped up adjacent to docks and factories, while the upper and middle class populations inhabited more pleasant coastal regions. The manufacturing industry suburbanization and the establishment of communal rental housing did reinforce social divisions. Moreover, the structure of urban households changed significantly from early 1970s. The conventional nuclear family that comprised a majority of the urban services and urban houses before the 1970s became the minority, comprising of merely 40 percent of the households within major cities (Beer & Forster 2001, p. 9). Besides, the proportion of single-parent families as well as persons and couples living alone rose significantly. Moreover, occupancy rates dwindled considerably. For instance, Sydney has recorded a decline in occupancy rate from 3.2 people in 1971 to 2.6 people in 1991 (Beer & Forster 2001, p. 9). Housing tenure represents a significant feature of social polarization within the cities of Australia. Subsidy patterns and benefits allied to home ownership tend to enhance relative economic power of purchasers and homeowners. In Australia, disadvantage remained concentrated within specific regions of housing markets. Moreover, the high extent of home ownership shifted to privately funded welfare, which operated as an accumulation of wealth while condensing housing costs. The economic inequality led to changes in the quality of life as unemployment rates rose considerably (Baum & Duvnjak 2013, p. 12). The period from 1980s to 1990s saw the government of Australia embrace global processes to change the economy, which aimed at hastening the initiation of a novel economic order. The government progressively reduced tariff protection on top of auxiliary trade barriers. This stipulated compelling industries to be globally competitive to prosper and survive within the new-fangled global economy, although with lesser workforces. Besides, the government did deregulate the nation’s financial system. The most perceptible impact of these globalization policies were felt within the employment sector, as there was a massive loss of employment within the manufacturing industry. Indeed, during the 1950s, 1960s, and 1971, the manufacturing industry had the highest proportion of workforce, an aspect that had resulted in speedy expansion of cities. Hence, the launch of the novel policies translated into enormous job losses, which took place from 1971 all through to 1991 (Beer & Forster 2001, p. 10). Accordingly, export of transformed manufactures rose considerably. This translated into provision of more costly goods within Australia. However, with loss of employment, many people could not afford the costly products. Hence, the living standards among the low-income populace attained a constant dwindle. Conversely, employment within the business, property, and finance service industries assumed a rise. Hence, the cities were dominated with service economies as opposed to manufacturing economies. The change in industry structures resulted in rise in part time jobs, increased rates of unemployment, and increased participation of female workers in paid jobs. The changing employment structure interacted with diverse extents of suburbanization to produce intricate spatial restructuring. The uneven spatial restructuring posed major implications allied to social inequality. People leaving schools deemed it hard to find jobs, or when they did, these were poorly paid informal employments within the retailing industries. The results were high rates of joblessness, low incomes, and reduced rates of participation within the labor force, which continued to increase the gap between the high-income and low-income populace. As explicate, Dietze, Jolley Chikritzhs, Clemens, Catalano and Stockwell (2009, p. 2) income inequality has a high affiliation with various social and health outcomes. Hence, major demographic changes remained manifest within the cities. There were increased rates of divorce as well as increased proportions of single parenthood. Moreover, within the low-income populace, various implications including increased mortality, violent crime, and reduced life expectancy remained perceptible. Conclusion Within the modern economies, wealth and income inequality has risen considerably. This is highly allied to the increasing income levels among the highest income populations as contrasted to the lowest income populations. Moreover, the diversity in profits within the employment sectors remains liable. Besides, wages tend to decline within some employment sectors. Australia is one of the nations that portrayed a significant income inequality since the 1970s. Various factors remain fundamental to this occurrence. The economic retardation emanating from international financial crisis formed the root cause of the problem. Other factors include globalization, government processes and policies, national welfare regime, and economic changes. Furthermore, government policies endeavored at redistributing income have proven ineffective. References Baum, F, & Duvnjak, A 2013, ‘The politics of poverty in Australia,’ Social Alternatives, vol. 32, no. 1, pp. 12-18. Beer, A, & Forster, C 2001, ‘Global restructuring, the welfare state and urban programmers: Federal policies and inequality within Australian cities,’ European Planning Studies, vol. 10, no. 1, pp. 7-25. Dietze, P, Jolley, D, Chikritzhs, T, Clemens, S, Catalano, P, & Stockwell, T 2009, ‘Income inequality and alcohol attributable harm in Australia,’ BMC Public Health vol. 9, no. 70, pp. 2-9. Griffiths, P 2011, ‘The creation of income inequality: The impact of government policies in Australia and other OECD economies,’ Zhongnan University of Economics and Law. Lavelle, A 2006, ‘The boom, the left and capitalism,’ Journal of Australian Political Economy, No. 61, pp. 296-320. Leigh, A 2003, ‘What affects inequality? Evidence from time series data,’ Prepared for presentation to the Australian Social Policy Conference. University of New South Wales, Sydney. Meagher, G, & Wilson, S 2006, ‘Richer, but more unequal: perceptions of inequality in Australia 1987-2005,’ Journal of Australian Political Economy, No. 61, pp. 220-243. Ternowetsky, GW 2000, ‘Taxation statistics and income inequality in Australia: 1955-56 to 1974-75,’ Journal of Sociology vol. 15, no. 16, pp. 14-24. Whiteford, P 2013, ‘Australia: Inequality and prosperity and their impacts in a radical welfare state,’ Social Policy Action Research Centre. The Australian National University. Wong, G, & Picot, WG 2001, ‘Working time in comparative perspective, volume 1,’ Michigan, W.E. Upjohn Institute. Read More