An Economic Inequality in Australia - Essay Example

ssаy Аbоut Аustrаliа Name Institution Date Еssаy Аbоut Аustrаliа Question 3. 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 Australia is known as one of the World’s countries that has had a long as well as proud equality tradition. However, in the recent decades, the benefits that come with strong economic growth have been identified as disproportionately flowed to the rich in Australia. The decline of resources boom has led to the growth of the gap that exists between those at the top and those at the low level of wealth as well as income distributions (OECD, 2011). When talking of economic inequality, it is the disparity that exists among the populations of a country as a result of income, wealth, opportunity and education levels differences among other inequalities. This essay is aimed at discussing the reasons as to why economic inequality increased in Australia since the 1970s. The essay will also describe the consequences that have been experienced in relation to quality of life by populations in Australia. To begin with, economic inequality in Australia is traced from the presence of egalitarianism challenge that has been present even in the past years. In Australia, the pillars of egalitarianism include; high home ownership, high wages, as well as low unemployment. This position has been difficult to achieve due to the existence of high unemployment rates and low income earners are not able to afford housing (Whiteford 2014, p.1). It is evident that, Australia was a country that was relatively egalitarian for most of the last century (Thompson 1994, p.43). Within the half of the century and especially after the World War 1, there were faster rising of incomes at the bottom level of the income distribution that the top level. This was experienced until the end of 1970’s and egalitarianism in Australia was decreasing (Ward 1977, p.21). Starting from the mid 1970’s, the bottom tenth wages in the income distribution has been realised to have grown only at 15%. The earnings of the top tenth within the income distribution has been realised to have grown by 59%. Additionally, the recent decades show that, the share of income for the top 1% has increased double while the share of wealth for the top 0.001% has also increased more than triple. The share of the top 0.0001 who are the richest one millionth has increased by quintuple. According to Leigh (2013, p.57), the average wage for CEOs in the year 2009 was more than a hundred times the average wage. There has been a disparity in income growth for the Australian populations which is unfair and has contributed to the increase of economic inequality. The unfairness of Australian incomes has been identified to be counterproductive to the long term growth as well as prosperity of the country (Ostry 2014, p.13). Economic inequality in Australia has increased as a result of increasing poverty. It is evident that, those citizens who depend on government benefits with unemployment benefits inclusive have been found to have fallen far below the poverty line. 20% of the people at the bottom level of the income distribution usually rely on government payments (OECD 2011). This includes three quarters of the government’s income. In Australia, the government benefit is the lowest among the other organisations for economic co-operation and development nations. Many of these government benefits do not keep pace with the increasing inflation for the past decades since 1970’s. Research shows that, in Australia, one in every six children lives in poverty. The unemployment benefit in Australia has also gone down 20% below the poverty line. Currently, 20% are the wealthiest households in Australia represent 61% of the entire household net worth. In this case, every household in this group usually have $ 2.2 million net worth on average. On the contrary, 20% are the poorest household in Australia represent only 1% of the entire household net worth. Every household in this group usually have $ 31,205 net worth on average (Australian Bureaus of Statistics 2013, p.8). This is evidence that, economic inequality is on the increase. Increased economic inequality in Australia has been experienced as a result of increasing poverty levels of the majority populations. Poverty in Australia continues to be a plain reality since many of the populations do not have the capacity to afford the things that majority of the people within the same society do take for granted. Poverty is well define by low level financial capacity whereby people cannot afford basic needs like housing, food as well as clothing (Ritakallio 2003, p.81). Poor populations are not equal to the rich in terms of health affordability, nutrition and homelessness. Poverty increases economic inequality due to lack of decent life that people can achieve when out of poverty. According to Mandela (2005, p.1) there is need to overcome poverty in our society as a fundamental human right, justice, dignity and respect for human life. Economic inequality in Australia has also increased due to the tax system used in the country. It is evident that, Australia is one of the countries within the industrialised World that has the lowest taxing rates. The welfare spending of the country is also a proportion of the Gross Domestic Product and it is at its lowest within the Organisation for Economic Co-operation and Development (OECD 2011, p.12). There is evidence that, within the past one decade, the revenues of the commonwealth government of Australia has gone down from 26% of the gross domestic product to 23%. This has resulted to government revenues being insufficient in meeting community needs and requirements in terms of income support, health, physical structure as well as health. It is also evident that, increased economic inequality in Australia has been contributed by the large tax cuts as well as tax exemptions that were introduced by the two sides of the government within the past three decades. These tax adjustments were seen to be disproportionately since they favoured the rich and not the poor. For the last thirty years, the economy of Australia has experienced many changes such as reduction of protective tariffs that are high on imported good, removal of some non-tariff barriers, the financial services sector deregulation, increase state and federal government branches efficiency, privatisation of industries that are government owned, deregulation of the labour market, reforming the tax system and floatation of the Australian Dollar (Whiteford 2010, p.529). These changes led to retrenchments of people from some groups while favouring other categories. As a result of these changes in the Australian economy, there was increase in unemployment that was significant in various periods. Reinforcement of these changes was evident in families of the negative trends that led to increased joblessness among households whereby adults did not have paid employment. Economic inequality was evident with specific groups having sources of income while others did not have. Throughout this period, the country has experienced economic inequality trends at relatively different periods. In early 1980s up to the mid-1990s, the Australian economy experienced relatively slow increases in real incomes that were accompanied by falling and rising inequality periods, with an overall of economic inequality that was slowly increasing. In period of late 1990s, Australia experienced an increase in real incomes as well as fast increases in economic inequality (Whiteford 1994, p.239). At the beginning of the new century, economic inequality was increasing slowly with other periods when economic inequality was falling with the increase in real incomes. From the year 2003 up to the global financial crisis, Australia experienced a period of fast increases in the real disposable incomes among the populations. However, during this period the country also experienced increased income inequality. The reason is that, trends in income as well as economic inequality are usually affected by changes to ABS income surveys. During these periods, it is evident that, the trends of increased economic inequality vary between the periods and are from different causes. The main cause of economic inequality that is identified in Australia during this period was accessibility to earnings (OECD 2011, p.8). There was inequality in wage rates for full time workers which increased throughout the period. Gender wage gaps were also evident and were on the increase since the year 2004. Increase in economic inequality was also experienced as a result of inequality in family income that was experienced in the periods that had rising women employment (Saunders 1992, p.3). Additionally, family composition changes as well as the demographic structure of the Australian population have been identified as reinforcing trends of increased economic inequality. Other factors such as; globalisation, changes in the practices of compensating top executives, asymmetric accessibility to fast technological change, as well as the neoliberal economic policies that have been in existence from 1980s are also other causes of increasing economic inequality in Australia. Dawkins & Kenyon (1999, p.82) argues that, globalisation serves to force governments in adopting neoliberal policies of reforms that are market oriented. This occurs as a result of countries failing to respond to financial crisis as well as the reduced efficiency of the Keynesian macroeconomic policies. This generates greater economic inequality within the labour market outcomes. It is also important to note that, the increased practice of rent seeking has been increasing economic inequality in Australia whereby companies and individuals that are wealthy and powerful make use of their resources for the purpose of obtaining economic gains at other people’s expense without contributing anything to productivity. The increase in economic inequality in Australia has had many consequences for the quality of life of citizens. Economic inequality is contributed to inequality in income and income is considered to be one of the basic determinants of daily living of populations. It influences the daily living conditions of people in all aspects with which they live, are born, are working and their age. Populations without income security or those living below the standard income level are faced with many challenges of life and their living standards are adversely affected (Wilkins 2014, p.63). It is important for people to understand that, income security plays a big role in the economic as well as social well-being of people in terms of health, self-worth and trust. Income gives people prestige from purchasing power. Inequality in incomes contributes to social classes where some people are more prestigious than others (Obama 2013, p.1). Research shows that, increased levels of economic inequality in Australia due to varying income levels has led to the increase of status barriers among the populations of the nation. This reduces empathy and togetherness in societies. It also raises the feelings of social exclusion, stress as well as insecurity. In the end a society which is more fragmented is created. Increased economic inequality in Australia has been identified with unequal accessibility to quality housing, healthcare, education as well as nutritious food. Groups with low income do not have the capacity to afford a livelihood that is conducive and offers better physical as well as mental health (Richardson 2012, p.3). These groups are found to hold jobs that are of lowly paid and precarious. This creates greater health risks of cardiovascular as well as mental illnesses. The increase in economic inequality has increased stress levels of housing for low income earners in Australia. The reason is that, these group of citizens spent more than 30% of their income on accommodation in form of rent (Australian Bureau of Statistics 2013, p.5). The cost of housing is also increasing for the Australian population and it is highest to the highest earning Australians. This has been propelled by the current tax system in Australia that has impacted negatively in the affordability of housing. The increase in economic inequality has led to tax breaks including negative gearing as well as capital gains that increase the cost of living for citizens. According to Australians for affordable housing (2014, p.5) tax exemptions are found to encourage the making of speculative investments by investors in the housing market. Investors are seen to be in competition with first home buyers as well as push up house prices. Benach & Muntaner (2007, p.276), the increase in economic inequality affects the quality of life of citizens by weakening the regulatory protection of their working conditions, job losses, work hour flexibility, financial security as well as paid family leave. Conclusion The increase in economic inequality in Australia since 1970s has been a great challenge for the whole nation. Continuous measures of dealing with challenges of increased economic inequality need to be taken to ensure the stability of the nation and the wellbeing of its citizens. References Australian Bureau of Statistics (ABS), 2013, Household Wealth and Wealth Distribution, Australia, 2011–12, Cat no 6554.0, 21 August. Canberra. Australians for affordable housing, 2014, Australia’s broken housing system. http://housingstressed.org.au/wp-content/uploads/2011/09/Australias_Broken_ Housing_System.pdf Dawkins, P, & Kenyon, P, 1999, Globalisation and labour markets: implications for Australian public policy, Paper presented at the 28th Annual Conference of Economists, La Trobe University. Benach, J, & Muntaner C, 2007, Precarious employment and health: developing a research agenda. J Epidemiol Community Health, Vol.61, Iss.4, pp.276-277. Leigh, A, 2013, Battlers & Billionaires: the Story of Inequality in Australia. Collingwood Vic: Redback. 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