Income inequality - a cause for concern?

In Australia the degree of income inequality is increasing. That's what the data tells us, although frustratingly 2012 is the last year for which we have reliable data.

That data shows that the Gini-coefficient for Australia has risen by a greater degree than in all but two other OECD countries. This in a period when, by the same measure, around half of OECD countries saw a more even distribution of income, but with a slight rise in inequality on average.

A survey reported in The Guardian says that most Australians feel that inequality has become worse and that it harms society by creating social division.

The chart gives a summary of Australia's income and wealth.

Recall that income is a flow concept, it shows how much money households receive each month or year, whereas wealth is a stock concept, it shows the assets households have accumulated over time. The two are related as unequal distribution of income will generally mean that wealth will accumulate to high income households who can afford to save, while poorer ones cannot.

How to deal with income inequality is a matter of debate, as is the idea of what a 'fair' distribution of income is. The survey shows there is little agreement on how to proceed, although typically for Australia they do agree someone other than themselves should bear the burden. Perhaps surprisingly there is significant opposition to an estate duty (inaccurately called an inheritance tax in the article) which taxes you when dead, rather than when alive. It has much to recommend it.

The Guardian reports the survey here

The goal of income distribution is downgraded in importance in the 2017 VCE study design, but is still very relevant. IB students can be asked an essay question on this in Paper 1 and policy measures are an essential part of that.