Why Has Economic Inequality Increased in Australia since the 1970s - Essay Example

Major Essay Name Institution 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? Introduction From 1960s most of the developed and developing nations have undergone some inflation of the in-country economic inequality. The thriving income gap in Australia has overlapped with the time of growing introduction of nations to globalization through increasing flows of goods, services, capital and labor through the international borders. Economy inequality is defined the economic gap between the rich and the poor in a country. This paper will be using the available resources to which have attempted to unearth the underlying factors which have resulted to the increase in the economic inequality in Australia and the various consequences associated with these factors. Factors contributing to the economic inequality in Australia Generally, there are various causes of economic inequality in Australian country. They are discussed as follows: 1. Wages and salaries It is worth noting that that the major crucial source of the household earnings is from the wages and salaries. In the period of 2009-2010, approximately 61 % of all the families did have wages and salaries being their major sources of earnings, with the government pensions and allowances becoming the next most essential, at 25 % (ABS, 2011). For the households of the working ages, earnings (together with self-employment) were accounting for more than 90 % of all the market earnings (Whiteford and Redmond, 2013). It is thus the distribution of income that is probably to be the major aspect that drives the inequality trends, though it is essential to be aware that the circulation of earned income is affected not only by inequalities in the wage rates, but also more importantly by the access to the earnings and number of hours of work. The rising inequality in the 1980s and 1990s seems to be much affected by the recessionary downturns. (Bradbury, 1992) The alterations in inequality, as from 1981 to 1982 and between 1988 to 1989, measured by use of the micro-simulation, in establishing the effect changes in the labor force position. He discovered that the rising in unemployment rates in the 1982-1983 recessions definitely amplified the economic inequality; this was then followed by duration of a recommendable economic regaining, but whereby the remunerations of employment evolution were majorly enjoyed by households in the midst of the income circulation. (Saunders, 1992) The early 1990s economic recession did increase the economic inequality, basically by lowering the income shares of the 2nd to 5th deciles, who are adversely affected by higher percentage of unemployment. Figure 1: Trends in real incomes at decile points in Australia, mid-1990s to late 2000s (Whiteford, 2013) In this sense, it is essential to note that Figure 1, it is clear that in the duration of the GFC actual income did fall for the 2nd to 5th deciles, though the general inequality declined as a result of the rise in the earnings of the poorest decile linked with the pension rise in this duration of time. A latest analysis (Austen and Redmond, 2012) also pointed to the essence of employment and income for drifts in inequality amongst income units of the working ages. Figure 2: Trends in income inequality in different income components among working Age households, Australia, 1982 to 2007-08 (Whiteford, 2013) Figure 2 above is showing trends in income inequality between various components of the market earnings, which is measured through the concentration coefficient for each earnings aspect in the whole distribution of the one-use income. The Inequality of any earning could be perceived as the product of the inequality of the wages rates per hour toiled and inequality in hours toiled, mostly affected by those income units whereby there exist very few or zero hours toiled. What is noted is that for the first portion of this duration of time the distribution of female earnings became the most unequally dispersed income sources in the general household distributions, as a reflection of the fact that those women who had the highest earnings seemed to be the allies of men who had the highest earnings. From the mid-1990s, though, the effect of female earnings has seemed to minimize inequality, basically since the development in women’s earnings began to be beneficial to the lower income families (Austen and Redmond, 2012). The general market inequality trends are reflecting the increasing economic inequalities in the earnings amongst the early 1980s and the late 1990s-2000 and the declining inequality in the incomes after this, with the major aspect turning out to be the changes in the factor of employment instead of the changes in the wage rates. The economic Inequality in earnings from capital was usually highly volatile during this duration and appears not to have had a serious effect on the economic inequality amongst the working-age families, nevertheless has amongst pensioners and retired families (Whiteford, 2013). 2. Earning disparities Figure 3: Minimum wage, Australia, 1985 to 2011 (Whiteford, 2013) From the Figure 3 above, it is evident that from 1985 the minimum wages have been falling from 65 % to 54 % of the median wages. In the year 1985 the Australian country had the top minimum wages in the OECD comparative to the median, while in the year 2011 it was the 6th highest. In the year 2010 the 90/10 ratio for the full-time males and females workers was the 16th least ratio of the 28 OECD nations, a significant fall down in the OECD ranking, from the 11th least in the1990s and 13th in 2005 (Whiteford, 2013). . Figure 4: Trends in wages dispersion, Australia, 1975 to 2010 (Whiteford, 2013). From 1975 to 2010, the minimum wages did rise by 10 % in actual terms, and the 10th percentile wages did rise by 14 %. Real wages development was much more at the higher earnings levels – the median also increased by 38 % in real terms and the mean by 50 %; whereas the 90th percentile wages was 72 % more in real terms (Whiteford, 2013). Figure 4 above is showing the resulting changes in wages dispersion from the year 1975. The 90/10 ratios for the full-time non-managerial staffs has risen from approximately 2 to 1 to more than 3 to 1. The rise of inequality was somewhat higher in the top half of the earning distributions than under the median. The 50/10 ratios did increase starting at 1.35 to 1 to 1.63 to 1, increasing by 21 % ; although, the 90/50 ratio enlarged significantly from 1.50 to 1 to 1.88 to 1, increasing by 25 % cent (Whiteford, 2013). The variations in earning dispersion might be resulting to either of the changes in the structures of employment or in comparative rates of remunerations for various types of employees. His chief discovery was that the broadening dispersion of the earnings is basically as a result of the alterations in the structure of labor demands in favor of more skilled job opportunities. The comparative rates of the pay for a main occupation group, appears to have barely speckled over the last 25years’ (Keating, 2003). 3. Employment, unemployment and underemployment The general employment to the total inhabitants ratio had dropped from 57 % in the early 1980s to as low as 54 % in the mid-1983, though latter increased back to almost 60 % in 1990. The decreasing male full-time portion of that employment was corresponding with an increased female employment ratio, mostly part-time employments. The economic recession in the early 1990s led to the falling of the whole employment rate from 60 % to lower than 56 % by the year 1993, though a long duration of economic stabilization led to the reversal of this, with the employment rate having a peak of 62.9 % prior to the GFC, and afterwards reducing to some extent to about 61.5 % (Whiteford, 2013). To a substantial degree, the percentage of the families’ joblessness amongst the households which have children is associated with low employment rate amongst the sole parent households. The section of households which have children taken care of by a single parent somehow did double from 1980 to 2004, from 12.2 % to 23.4 %, and later fell to 20.9 % in 2008 (Whiteford, 2009). The section of teenagers below 15 years at present living in a single parent family at about 17 % is only more than the OECD average (in comparison with the 25 % in the USA, for instance), but the Australian country possesses the sixth least employment rates for the single fathers and mothers in the OECD (OECD, 2013b). 4. Education disparity Also education disparity has also led to the economic inequality in Australia. A student coming from a lower socioeconomic background is less probably to get a Year 12 or equivalent qualifications. In 2009, Year 12 achievement rate for students from the lower and medium socioeconomic upbringings were reported to be 56 and 62 % correspondingly, likened to 75 % for students coming from the high socioeconomic upbringings. In 2010, the university education admission rates for the students coming from the low socioeconomic upbringings was about half (17 %) that of the students brought up in high socioeconomic families (35 %) (Review of Funding for Schooling, 2011). Individuals who have achieved Year 12 are much probably to work in a 'white collar' job as opposed to those who hadn’t. Also, in the year 2009, individuals of age 20-64 years who did have individual gross weekly earnings in the highest quintile seemed to be far more probable to have achieved Year 12 (70 %) as compared to those who didn’t (30 %). The increasing in hourly earnings from the increasing educational achievement by a year is in this order: 8-11 %, with the leading increments being left for the grade 12 achievement and Bachelor degree achievement (Leigh, 2008). The consequences of economic inequality Several researches have shown that, there is a relationship between the family’s earnings and the social life of its members. It is very common to have an individual who has lower income being very much stressed and eventually has to indulge in some health behaviors like alcohol abuse and smoking with the perception that the financial constraints would be forgotten momentarily (Stand et al., 2011). Aboriginal and Torres Strait Islander Australians, as a result of the economic inequality, have an extremely lower rate of the Year 12 admission than the non-Indigenous Australians. In the year2008, less than 1/3 of the Indigenous teenagers had achieved Year 12 in comparison with 3/4 of non-Indigenous 20-24 year old individuals. From 2002 to 2008, there existed a smaller, but not quantitatively significant, improvement in the magnitudes of the Indigenous individuals aged between 20 and 24 years having Year 12 (from 28 % to 31 %) (Whiteford, 2013). One of the consequences of earning disparity is crime and Imprisonment. Various researchers have reported that the crime rates are directly related with the high rates of income disparity (Leigh et al, 2009). For instance, the detention of the Indigenous Australians is a serious point of concern. In June 2009, the age standardized detention rates for the Indigenous inmates was 1,891 for every 100,000 mature Indigenous inhabitants in comparison with the 136 non-Indigenous inmates for every 100,000 mature non-Indigenous residents. 25 % of all inmates in Australia in the year 2009 were entirely Indigenous (ABS, 2012c). It is clearly evident that though the acquisition of education, one maximizes the chances of securing high paying job (Graham & Paul, 2010). It is also clear that one’s level of education increases the amount of wages in a field whereby the high demand for employees is highest (Johnson, 1997). Therefore, those with lower levels of education are likely to earn very little wages whereas those with higher levels of education would be earning more. This eventually would result to the widening of the income gap between the less educated and the highly educated individuals and this amount to the increase in the economic inequality in Australia. It is clear that, those individuals who are employed feel more financially secure can afford good health insurance, better lifestyle and more opportunities to have better education for themselves and their children. Contrary to this, the unemployed and the underemployed individuals are always suffering more from low or no salary, financial insecurity, fearing to loose positions, and less quality of life (Henry, 2002). Conclusion The available literature has unearthed some of the factors which have led to the increase in the economic inequality in Australia. These include: the wages and salaries, earnings disparities, Employment, unemployment and underemployment and the education disparity. These factors have consequences in the Australian community in the sense that the economic inequalities has brought about many social problems like smoking, alcoholism, crimes and imprisonment. Also those who aren’t employed or under employed suffer from financial insecurity and always fear to lose their positions. The less privileged people are advised to look for ways of compensating for the economic inequality since this is a worldwide phenomenon. Such methods include attaining the necessary education so that they would be able to secure well-paying jobs. Whenever a family has one of its members earning some good amount of money to cater for the elementary basic wants, such households would eventually be able to have their members attaining the essential education. This would help some of these households from the financial crisis. 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