Wednesday, September 18, 2013

Income inequality

On Monday's QandA David Williamson got away with this statement;

But I think all the naval gazing about the ins and outs of factions and that ignores the fact that the Labor Party has to find a direction to go in, to stand for something and they didn't at this election. I think the obvious thing that they need to stand for is the fact that Australia is becoming one of the more unequal countries in the world in terms of the Gini Index, which measures inequality. They are way out. Australia, US and UK are very unfair societies and Labor is supposed to be standing up for fairness but they run a mile.

This concerned me greatly - especially when Father Bob tweeted it as a fact that Australia was as unequal as the US and UK.

The Wikipedia article on this is very useful because it includes the measurement of the Gini Coefficient from the World Bank, the CIA World Fact Book and the OECD (the first two report as a percentage, the third as a ratio).  The OECD reports both before and after taxes and transfers.  The closer to 100% (or 1) the more unequal a society is. 

Let's just record the values for each of the US, UK and Australia using these four measures in order

US - 45, 45.0 and 0.486, 0.378
UK - 34.0, 40 and 0.456, 0.345
Aust- 30.5, 30.3 and 0.468, 0.336

So on the World Bank and CIA data Australia is much less unequal than the US and UK.

The OECD data is more interesting - before transfers Australia falls between the US and UK, but after transfers is more equal than both (which means our taxes and transfers do a better job of  addressing inequality).

Using the OECD data it is correct to say that after transfers Australia is now more unequal than it was in the nineties, and this is cause for concern.

It is also an interesting fact that while before transfers Australia is more equal than France and Germany, that situation reverses after transfers. 

On the basis of the data it is wrong to assert that Australia is becoming one of the more unequal countries in the world.  It is even wrong to say it of the developed world.

It is fair to say that the trend after transfers has been heading in the direction of more inequality, but one could add that currently by GDP per capita (in $US) Australians are the 5th best well off people on the planet.

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