Income inequality and mobility in Australia over the last decade Roger Wilkins Meeting of National Economic Research Organisations, OECD Headquarters, 18 June 2012
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 $, December 2011 prices Context: Sustained strong growth in household incomes Median annual equivalised disposable income, Australia (All persons) 43000 41000 39000 37000 35000 33000 31000 29000 27000 25000 HILDA Survey Australian Bureau of Statistics Income Surveys
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Income inequality 0.36 0.35 0.34 Gini coefficient - Equivalised disposable income ABS weekly 0.33 0.32 0.31 0.30 0.29 0.28
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Income inequality 0.36 0.35 0.34 0.33 Gini coefficient - Equivalised disposable income ABS weekly ABS 'consistent' annual series 0.32 0.31 0.30 0.29 0.28
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Income inequality 0.36 0.35 0.34 0.33 0.32 Gini coefficient - Equivalised disposable income ABS weekly ABS 'consistent' annual series HILDA Survey 0.31 0.30 0.29 0.28
Top incomes Tax and National Accounts data 11 10 9 Income share of the top 1% (Persons aged 15 and over) % 8 7 6 5 With realised capital gains Without capital gains 4
Income poverty 0.16 0.15 0.14 0.13 0.12 Proportion below half of median equivalised income 0.11 0.10 0.09 ABS (annual income) HILDA Survey 0.08
Drivers of changes in inequality Market income 0.49 Gini coefficient for equivalised 'market' income 0.48 0.47 0.46 0.45 0.44 ABS income surveys HILDA Survey 0.43
Drivers of changes in inequality - Earnings 0.45 0.44 0.43 0.42 0.41 0.40 0.39 0.38 0.37 0.36 0.35 Gini coefficient for annual labour market earnings (Employed persons) ABS income surveys HILDA Survey
Drivers of changes in inequality Government taxes and transfers 0.18 Effect of government income taxes and transfers on the Gini coefficient (Equivalised income) 0.17 0.16 0.15 0.14 0.13 ABS income surveys HILDA Survey 0.12
Drivers of changes Fiscal stimulus direct payments Effects of 2008-09 government 'bonus' payments delivered as part of fiscal stimulus - Equivalised income Percentiles Mean 10th 25th 50th 75th 90th Gini Income before bonuses 41,880 16,000 24,845 37,462 53,053 71,546 0.313 Income after bonuses 43,441 17,772 27,024 39,204 54,120 72,705 0.299 Effect of bonus payments 1,561 1,772 2,179 1,742 1,067 1,160-0.014 Source: HILDA Survey
Permanent income inequality 0.3 Gini coefficient for five-year equivalised disposable income 0.29 0.28 0.27 0.26 0.25 (Gini coefficient for annual income is approximately 0.31) 2001-2005 2002-2006 2003-2007 2004-2008 2005-2009 2006-2010 Source: HILDA Survey
(Intra-generational) Income mobility Shorrocks R Shorrocks R: Ratio of multi-year income inequality to a weighted average of single-year inequality values. It is interpreted as the ratio of permanent inequality to total inequality over a given period. If there is no transitory component to inequality, R = 1. If all inequality is transitory, R = 0 (i.e., everyone has the same permanent income). Five-year Shorrocks R for Theil index Australia US Germany UK (6-year) 2000-2004 0.83 0.85 0.77 2001-2005 0.78 0.77 2002-2006 0.78 0.85 0.84 2003-2007 0.79 2004-2008 0.78 2005-2009 0.79 2006-2010 0.77 Note: UK measure is not completely comparable. Sources: Australia: HILDA Survey; US and Germany: Bayaz-Ozturk, Burkhauser & Couch (2011) using PSID (US) and SOEP (Germany); UK: Jenkins (2011) using BHPS.
Five-year income mobility Mean change in percentile rank 2001-2002- 2003-2004- 2005-2006- 2005 2006 2007 2008 2009 2010 Non-elderly couple -4.6-4.9-5.2-4.5-5.4-4.5 18.8 Couple with children 1.0 0.8 0.2 0.3 1.5 1.7 17.2 Sole parent 4.0 4.5 5.4 6.5 4.8 5.7 17.4 Non-elderly single man 2.0 1.8 4.5 3.9 3.3 0.0 20.4 Non-elderly single woman 3.4 5.1 1.8 3.0 1.9 2.2 20.5 Elderly couple -3.3-3.7-2.6-5.0-5.8-5.4 15.7 Elderly single man -4.4-2.4-1.1-1.9-1.6-3.9 14.4 Elderly single woman -2.4-2.7-0.8-3.0-1.5-1.4 12.9 Mean absolute five-year change in percentile rank All persons 0.0 0.0 0.0 0.0 0.0 0.0 17.7 Source: HILDA Survey
Two-year mobility Mean change in percentile rank from one year to the next Average 2000-01 to 2006-07 2007-08 to 2008-09 2008-09 to 2009-10 Mean absolute change 13.1 12.7 13.0 Change by family type Non-elderly couple -0.2-2.0 0.5 Couple with children -0.3 0.9-1.0 Sole parent 1.8 2.5 0.8 Non-elderly single man 0.7 0.5 0.7 Non-elderly single woman 1.1 1.1 3.4 Elderly couple -1.0-2.9-1.3 Elderly single man -0.6-2.2 2.0 Elderly single woman -0.5-1.1 1.7 Change by initial quintile of the income distribution Bottom quintile 10.4 9.3 9.7 2nd quintile 4.2 4.6 4.6 3rd quintile 0.1-0.4-0.6 4th quintile -5.6-4.4-4.5 Top quintile -9.0-8.9-9.2 Source: HILDA Survey
2-speed economy? Mean change in percentile rank over five years Non-mining states Mining states Western Australia 2001-2005 -0.3 0.8 1.2 2002-2006 -0.4 0.9-0.5 2003-2007 -0.5 1.1 1.7 2004-2008 -0.4 1.0 2.8 2005-2009 -0.7 1.6 2.1 2006-2010 -0.6 1.5 2.1 Mining states: Western Australia and Queensland (about 30% of population) Western Australia is about 10% of the population Source: HILDA Survey
DEC. 1999 JUN. 2000 DEC. 2000 JUN. 2001 DEC. 2001 JUN. 2002 DEC. 2002 JUN. 2003 DEC. 2003 JUN. 2004 DEC. 2004 JUN. 2005 DEC. 2005 JUN. 2006 DEC. 2006 JUN. 2007 DEC. 2007 JUN. 2008 DEC. 2008 JUN. 2009 DEC. 2009 JUN. 2010 DEC. 2010 JUN. 2011 DEC. 2011 Some more recent evidence on household incomes 1.35 1.3 Real quarterly (seasonally adjusted) household disposable income per capita (indexed to 1 in December 1999) 1.25 1.2 1.15 1.1 1.05 1 0.95 Sources: ABS National Accounts (Cat.No. 5206.0), ABS Consumer Price Index (Cat. No. 6401.0) and ABS Demographic Statistics (Cat. No. 3010.0)
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(e) 2012-13(e) 2013-14(e) 2014-15(p) 2015-16(p) Australian Government Budget - Underlying cash balance as a percentage of GDP 3 2 1 0-1 -2-3 -4-5 Source: Australian Treasury Budget Papers, May 2012
Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Labour market is flat 7.5 7.0 6.5 Unemployment rate and employment-population rate, Australia (%) 64 63 6.0 62 5.5 5.0 61 4.5 60 4.0 3.5 Unemployment rate Employment-population rate 59 3.0 58 Source: ABS Labour force, Australia (Cat. No. 6202.0)
Mar-2002 Sep-2002 Mar-2003 Sep-2003 Mar-2004 Sep-2004 Mar-2005 Sep-2005 Mar-2006 Sep-2006 Mar-2007 Sep-2007 Mar-2008 Sep-2008 Mar-2009 Sep-2009 Mar-2010 Sep-2010 Mar-2011 Sep-2011 Mar-2012 Median house price, Australia (real, indexed to 100 in March 2002) 170 160 150 140 130 120 110 100 90 Sources: ABS House Price Indices (Cat. No. 6416.0) and ABS Consumer Price Index (Cat. No. 6401.0)
Summary Relatively strong household income growth has continued Inequality probably increased leading up to 2008, although magnitude is uncertain. To a significant extent the increase was because of a decline in progressivity of income taxes and transfers Inequality decreased temporarily in 2008-09, mostly because stimulus payments Income mobility appears to be relatively high in Australia, and does not appear to have been much affected by the economic downturn Looking forward, household income growth over the next few years is likely to be lower than has been sustained in recent years, but outlook for inequality is less clear