The launch this week of his new book Battlers and Billionaires: The Story Of Inequality in Australia, by parliamentarian and economist Andrew Leigh, raises a question about whether the issue of growing inequality should and will receive serious attention in the lead-up to the Federal election.
Leigh, who was parliamentary undersecretary to the prime minister in Julia Gillard’s government and lost the post in Kevin Rudd’s reorganisation, has made a particular study during his academic career of the structures of civil society and the distribution of incomes.
The book presents a highly readable account of the way income distribution in Australia has changed in recent decades, and possible consequences. Since the 1980s, the gap between those at the top of the income tree and those at the bottom has increased significantly.
Indeed, since 1980, Australia has seen 13% of household income gains go to the top 1% of the population. The consumption of consumer goods, housing and luxury cars has followed the trend.
Does this matter? What’s wrong with growing inequity of wealth distribution? And what can be done about it anyway?
Leigh sees inequality as a socially corrosive force undermining the egalitarian spirit that has been one of the positive defining characteristics of Australian society. He argues that unequal wealth demands attention from our political system and that there are a variety of ways in which it can be addressed.
In their 2009 book “The Spirit Level”, British epidemiologists Richard Wilkinson and Kate Pickett analysed financial inequality and its impact on health and well-being in 23 developed countries and in the 50 American states.
They present scatter diagrams and regression lines of the relationship between financial inequality (as measured by the ratio of the incomes of the top 20% of earners to the bottom 20% of earners) and a wide range of health and social outcomes.
Wilkinson and Pickett’s studies reveal strong correlations between health, well-being and mortality data, and the inequality indicator, but little or no relationship to absolute levels of wealth per capita.
The implication is that, at the level of income enjoyed by rich countries, it is not the absolute level of income that influences our social well-being but how our level of income compares with the income of others.
They conclude that countries and states that have less acute stratification of incomes enjoy better health, greater trust, less violence, less social dislocation and greater communal harmony.
The relationships that hold with these international data are even more convincing when the same measures are applied to individual American states. The United States has the distinction of being among the most unequal of the nations considered in the Wilkinson and Pickett analysis. Japan and the Nordic countries are the most equal.
The authors conclude that although increasing gross domestic product per capita is important for improving the health and well-being of developing countries, rich countries have now reached the point where it does not improve health and well-being. But in their view improved financial equity is highly likely to do so.
They also offer plausible causal mechanisms for the relationship, including shame, envy and stress for the ways inequity may be producing the differences they observe. The larger the gap between rich and poor, it seems that the less cooperation and empathy is available to either group.
A national debate
Andrew Leigh and many of his economic colleagues have real doubts about the validity of the conclusions reached by Wilkinson and Pickett. But they agree that growing inequality is not a good thing.
Leigh has undertaken rather different analyses to those of Wilkinson and Pickett, which lead him to doubt that restoring the balance of incomes would necessarily have the dramatic health and social benefits that they claim.
Nevertheless, he agrees with the need to constrain income differentials and to conduct randomised trials of the impact on health and social well-being of prospective changes in the distribution of incomes.
So how might this all play out in the coming election?
There is no doubt that national policies during the last 20 years have resulted in a more unequal Australia. On the Wilkinson and Pickett scale, we are the fifth most unequal of the 23 rich countries in their analysis.
And our health and social outcomes sit comfortably on their regression lines with comparatively high levels of mental disorder, suicide, lack of trust, mortality, communal violence, teenage pregnancy and a composite indicator of social ill-being.
But would income redistributive policies alone be enough to move our health and social statistics closer to the Japanese and Nordic optima? Could the preoccupation of the Coalition with deregulation of labour markets and market solutions make matters worse? And could the Australian Labor Party, with its traditional concern for equity and redistribution, make things better?
Leigh’s book offers a well-timed stimulus for a serious debate about the toxic effects of Australia’s growing income inequality. Wilkinson and Pickett’s research also raises questions, which neither side of politics can ignore.
Whether we are concerned only about restoring the good feelings of egalitarianism or tantalised by the audacious claim that by changing the distribution of wealth we could improve a slew of health and social outcomes, the income equity issue is now squarely on the national agenda.