A topic that the New York Times visits from time to time is that of income inequality. In the United States, the gap between the highest and lowest earners has been increasing over the last 80 years or so. A recent article returns to this theme and provides further insight into the trend. It cites research from the new book “Unequal Democracy” by Larry M. Bartels, which indicates that income inequality has increased far more under Republican presidents than under Democrats.
The table below shows average annual changes in income in the US from 1948 to 2005 across a spectrum of wage earners. (This is done by dividing the data into percentiles; for example, 40% of the population earns less than the 40th percentile wage and 60% earn more). Over this period, under Republican presidents high income earners (95th percentile) saw their income grow an average of almost 2% each year, while the wages of low income earners (20th percentile) grew by less than 0.5% each year. In contrast, under Democrat presidents, there was much less variation across the income spectrum and low income earners in fact saw slightly higher rates of income growth than high income earners. Under Republicans the income gap widened, while under Democrats it tended to contract.
Annual Average US Income Growth 1948-2005*
This inspired me to attempt a similar analysis (with a bit of prodding from a regular Mule reader). Unfortunately, the Australian Bureau of Statistics (ABS) have only surveyed income distribution over an 11 year period from 1995-2006. Over all but the first year of this period, the Liberal/National Party coalition was in power and John Howard was Prime Minister. This makes a comparison of income inequality under Coalition and Labor Governments impossible. However, it does allow us to see whether or not income inequality increased under the recent Coalition Government as it did in the US under Republican presidents. The table below shows the average growth** in real weekly earnings of Australians (where “real” means adjusted for inflation). Income data is taken from the ABS Household Income and Income Distribution survey, and the inflation adjustment used the ABS Consumer Price Index (CPI) to express wages in terms of their equivalent in 2006 dollars.
Australian Weekly Income 1995-2006*
While this period was a time of strong economic growth for Australia, wages failed to keep up with inflation across most of the income spectrum (only the 30th and 40th percentiles saw their wages increase in real terms). While the lowest earners (10th percentile) did see the biggest decline in real earnings, there was in fact very little variation across the percentiles. Below is a graphical representation of real wages for each of the percentiles, which reinforces a picture of very stable wages across the population over the course of the Howard years.
Australian Income Percentiles 1995-2006*
While the data is too limited to make conclusions with much statistical significance, it does appear that the Coalition, our (rough) equivalent to the Republicans, have not pushed up income inequality in Australia.
If anyone knows of a longer data series, let me know and I’ll extend the analysis.
* All figures are adjusted for inflation.
** The figures are compound annual growth rates.