A major objective in managing the Australian economy is to improve the standard of living of everyone in the community. About one in every nine (over 2.2 million) Australians live in income poverty today. According to the Australian Bureau of Statistics (ABS), the 90/10 ratio of disposable income was 4.21 in 2009/10 as compared to 1994/95 when it stood at 3.78 (Australian Bureau of Statistics, 2012). The government in collaboration with investors and non-governmental organizations is working to reverse the inequality in Australia.
Statistics on inequality
The ABS also reports that, in 2011, the median personal income of Australians was $577 while the median household income stood at $1,234. Factoring in adjustments due to inflation, the median personal income and the median household income were 7.5% and 4.3% respectively higher than they were in 2006 (ABS, 2012). Unlike in much of North America and Europe, income levels in Australia have increased over the last decade although the increment has not been consistent across the states (Habibis & Walter 2009).
It is clear that the fastest growth rate in median household income has taken place in the Northern territory as well as Western Australia. It may be concluded that the boom of the commodities may be the driving force to increase in household income.
Based on individual characteristics, it has been discovered that women are enjoying increased mean income in comparison to men. Between 2006 and 2011 women enjoyed 8.66% income increase while men had 4.48%. Despite men remaining on higher average income, a decrease has been noted in the gap between their earnings and that of women in the last five years (Australian census, 2012). Below is a representation of the above explanation.
Also, different cities have experienced inequality in income spread. A survey was conducted among the five largest capital cities in Australia. Sydney and Perth witnessed the highest median household incomes at $ 1447 and $ 1459 respectively in 2011 (Australian census, 2012). Melbourne and Brisbane were at $1333 and $1388 respectively with Adelaide being last at $1106.
The faded set of bars shows the ratio of the median income of the richest region of the city to that of the poorest part. We can interpret that despite Sydney having high income on average, there is no even distribution by geography.
Entirely, there is an overall rise in income inequality in Australia. This is a reflection of differences between regions and within the main cities.
Causes of inequality in Australia
Inequality is usually in terms of income spread among individuals or regions in a country. However, different forces are usually behind the inequality (Lawrence, 2011). Government is a major force influencing inequality in Australia following the various policies it has chosen to employ in its governance.
Taxation system
Tax is usually based on the income of an individual. The government has not yet developed an outstanding system that would be considerate of the level of income when imposing tax deduction to the earning of the individual (Greig & Lewins, 2003).
There have been massive debates on how taxation should be conducted since any way that has been defined before has left a certain group of people discontented. For a long span of time, Australian government has employed progressive income tax which has not been favorable to many people in the country. Some have suggested that the progressivity of the income tax need be reduced. This taxation system has not been favorable among low income earners since a lot of money is deducted on their low income compared to the insignificant figure which is deducted among high income earners (Broos, 2011). Therefore, the government must be ready to monitor the taxation system and replace it with the one that is economically friendly to all citizens.
Improved technology
The role of information technology in all sectors of work has been increasing at an increasing rate over the last three decades. Massive changes have been observed in the last one decade. This has led to a sharp increase in demand for highly learned or trained employees (Stilwell & Jordan, 2007). Therefore, many companies in Australia are searching for individuals who can perform under the advanced technology.
However, most people are not conversant with the new forms of technology. They do not have any idea of how they operate rendering them uncompetitive. This means that technology experts will have an upper hand in negotiation for outstanding salaries. The employer will have to be a little bit generous to them and pay them higher salaries in comparison to their colleagues. In return, there will be some individuals with higher income than others. This will result to inequality among citizens of Australia.
Weak rates of secondary school and university completion
This weakness in the education system of the country has had massive ill effects to income spread among individuals in the country. The public sectors, as well as the private sectors, are seeking for individuals who are fully qualified in terms of education for positions. Skills are required for competence at work. Following low graduation rates from colleges, there has been poor income spread among employees in Australia. This is because the few who are educated occupy high positions in companies with the less educated occupying minor positions. This brings in the job group issue where highly educated individuals are paid more than their colleagues who may not match their qualifications.
Skilled labor
Almost every company in the country is searching for outstanding individuals who can match competition from rival companies. It has become hard for companies to obtain these individuals with outstanding skills. Therefore, companies are competing in terms of compensation for the few individuals whom come their way. It is at this point that some employees are paid very high salaries compared to the little income that their counterparts may be earning (Whiteford, 2011). There are very few employees with the necessary skills of work, creating a room for income inequality among employees in Australia.
Change in employment patterns
Increased employment among married females is another factor causing income difference among citizens in Australia. Variations in patterns of employment of females in married couples have had an effect on the balance of distribution of wage and salary income among employees.
Effects of income inequality
Level of income in a society is extremely vital. Inequality in income distribution may have massive effects to the wellbeing of the society. It may lead to social, institutional, and economic effects.
There are several social evils which go along with inequality in Australia.
One of the most critical social ills in Australia is illegal drug use and mental illness. Australia has been in the headlines severally in connection to drug cases. Most young people in the country have turned to drug use to fight distress as a result of poor living standards which are as a result of low income. The main impact of drug use is mental illness which is a common case in the country.
Despite being a developed country poor health of the public is a concern in Australia. The government has not been able to deliver equal health services among its citizens. This is as a result of imbalanced distribution of public wealth.
High levels of imprisonment are the other effect of income and wealth inequality. This is because of increased cases of social evils like theft in the country.
Lower social mobility is the other problem that has covered Australia. This has been as a result of tarnished name of the country following poor treatment for foreigners. According to Silber, (1999) this has prevented members of other countries from visiting the country in search for jobs or other opportunities. This leads to poor relationship between the country and the rest of the world.
Solutions and recommendations to income inequality
For taxation, the government must develop a system that will be favorable to all citizens. The government needs to develop a more progressive taxation system that does not favor certain group of people. A flat taxation system may be imposed to ensure that citizens pay tax depending on their income. A reform on tax cuts may also be employed to make livelihood better for citizens of the country.
This will be motivational to individuals who may be wishing to open businesses, but they feared high tax. Low income earners will be able to save more while high income earners will have more money to invest in return increasing opportunities for employment.
The government may also look up to an outstanding education system, which will focus on exposing employees to necessary skills in employment. Necessary measures need be put in place to ensure that the highest number of students who enroll in universities graduate and in high level honors.
Through quality education, the bargaining power for employees will increase paving way for higher income among employees. Skilled labor means high output for a given company.
Patterns of employment should also be monitored to ensure that people are not employed in favor of their age or gender. This will create a balanced income among employees in the country.
Conclusion
Australia being among the most developed countries in the world, income and wealth inequality has been a key issue. The government has played a crucial role in making this issue real in the country. This has been possible through poor tax systems and the education system. These have led to social, institutional and economic ills to the country. However, the problem can be controlled following informed social and economic measures.
Graph of median weekly household income
Graph showing the differences in incomes between genders
Graph showing the Median Household weekly income across and within Australian Cities
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