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Australian census: not quite the US, but income gap widens

The Occupy movement in the US has brought into sharp focus the level of income inequality that exists in society. For example, in 2009 the top 10% of households in the US had an income that was about 11.5…

The Occupy movement highlighted income disparity across the world. AAP/Dean Lewins

The Occupy movement in the US has brought into sharp focus the level of income inequality that exists in society.

For example, in 2009 the top 10% of households in the US had an income that was about 11.5 times as high as the income of the bottom 10% of households (the so-called 90/10 ratio). In many ways it is surprising to an outside observer that there is not even more popular anger about how income is distributed there.

Income inequality in Australia is not anywhere near as high as it is in the US. However, it does appear to be rising. According to the ABS) the 90/10 ratio of disposable household income was 4.21 in 2009/10 compared to 3.78 in 1994/1995.

The release of initial data from the 2011 census allows us to pick apart this income distribution by where a person lives as well as their individual, family and household characteristics.

According to the ABS, median personal income in 2011 was $577 and median household income was $1,234.

After adjusting for inflation, median personal income was 7.5% higher than it was in 2006, whereas median household income was 4.3% higher. Unlike much of Europe and North America, income in Australia has increased over the past half-decade.

As documented in the following figure though, this increase has not been consistent across states.

Percentage change in (real) median weekly household income, 2006 to 2011 2006 and 2011 censuses

Quite clearly, the fastest rate of growth in median household income has occurred in the Northern Territory and Western Australia and it is tempting to think that the commodities boom is driving most of the increase in household income.

We will have to wait till labour force data on the census is released later in the year to check how income has grown across different occupations and industries. However, with an increase in income of 10.3%, the ACT isn’t that far behind these resource-rich states. Looking out our windows at the ANU, there aren’t too many mining trucks rumbling along Northbourne Avenue.

Looking at individual characteristics, we can see that there has been a faster increase in mean income for women (8.66% between 2006 and 2011) than men (4.48%). Although men on average still have a higher average income than women, there has been a slight decrease in the gap between the sexes over the past 5 years.

Ratio of male to female weekly mean income by age bracket, 2006 and 2011 2006 and 2011 censuses

As interesting as these national-level or State/Territory statistics are, it is unlikely that when most people want to gauge their own income they go to the ABS website. Instead, they probably use other informal means. This includes:

  • Through social networks (virtual or otherwise);
  • Through the media;
  • In the workplace; or
  • From other people in the area or neighbourhood in which they live.

The 2011 Census gives us a chance to look at the income distribution from the last of these perspectives. Unlike sample surveys, censuses allow us to replicate someone looking around them at others in their neighbourhood or area and seeing what the income distribution looks like.

As the following figure shows, income isn’t distributed evenly across or within our large cities. The first set of bars gives the median income for each of the five largest capital cities (and their surrounding suburbs). Sydney and Perth had the highest median household incomes in 2011 (at $1,447 and $1,459 respectively) with Adelaide having the lowest ($1,106). Melbourne and Brisbane fall somewhere in between ($1,333 and $1,388 respectively).

Median household weekly income across and within cities - 2011

The second set of bars gives the ratio of the median income in the richest part of the city to the median income in the poorest part. Here, we can see that although Sydney has quite a high income on average, this is not evenly spread by geography.

Median income in North Sydney ($2,111) was more than twice as high as median income on the Central Coast ($1,003). There were disparities in other cities (for example between Inner Perth and Mandurah) but they weren’t nearly as large.

Income data from censuses and other surveys suggest that while Australians have on average experienced significant income growth since the 2006 census, concerns about income inequality are still valid.

Overall income inequality is rising in Australia, with this phenomenon reflecting differences both between regions, and within major cities. These numbers can’t tell us how the man on the street feels the effects of this inequality, but they do suggest that the situation in Australia is not yet as dramatic as that in the US.

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7 Comments sorted by

  1. Justin Murray

    Researcher

    Excellent article, thanks for the anlysis.

    BTW, you two must have excellent vision to see Northbourne from the ANU, given the shortest distance is 257m (from Marcus Clarke looking down Barry Drive)

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  2. Dale Bloom

    Analyst

    A widening income gap is now occurring in the majority of OECD countries, a sign that globalisation has not worked, or has not been properly managed.

    The income gap in the US is now so great, there appears to be a marked reduction in the number of people in the middle class, and the majority of people could fall into a lower class. Almost 48% of income earners in the US are now low income earners, or living in poverty.

    I don’t think extra income has much meaning without comparing it to an increase in cost of living. For example: Queenslanders are earning $111 more per week than in 2006, but rent has increased $100 per week, and a mortgage has increased about $130 per week.

    http://www.brisbanetimes.com.au/queensland/snapshot-of-a-state--what-the-census-says-about-queensland-20120621-20pz5.html

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    1. Nicholas Biddle

      Fellow at Australian National University

      In reply to Dale Bloom

      Hi Dale. You are right that cost of living matters. Although rent and mortgages may have gone up, prices of other things have gone down. We did adjust for changes in CPI in our analysis, though of course that is not a perfect measure. And, from the point of view of inequality analysis, expenditure items aren't distributed evenly across the income distribution or by location.

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    2. Dale Bloom

      Analyst

      In reply to Nicholas Biddle

      It is possible that some things have reduced in price, but what also has to be considered is accumulated debt. State government debt seems to have increased in QLD, NSW and VIC.

      That debt has to be eventually repaid through increased taxes, or spending is cut. So in that context, accumulated government debt should be included in an equation to determine if the average person’s wages have actually increased or decreased

      It seems to be a system whereby the rich get richer, while the middle class and poor get poorer, and the middle class and poor are also left to pay off accumulated government debt (and/or bank dept as in the US).

      I think that is now the norm wherever globalisation is being practised in OECD countries.

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    3. Emma Anderson

      Artist and Science Junkie

      In reply to Nicholas Biddle

      1. Define cost of living.

      On the ground, it would seem that when property prices go up, so does the cost of products & services, and this is even if the manufacturing/wholesale component has gone down. Net result, inflationary pressure, end consumer pays more. Not just for food, but utilities, medicine, education, transport. Even without accounting for property prices, transport and utilities have gone up at the end consumer level (this is regular and over a number of years). Use more utilities…

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  3. jim morris

    logged in via email @yahoo.com

    As a sixty year old 'dole-bludger' who is desperate for a job but does volunteer tutoring I'd like to point out to the people who insult me that I'm surviving on about $12,000 per year while our glorious Governor General gets $28,000 just for clothing allowance and no-one seems to notice that she is the super-parasite.

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