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Sunday, 15 June 2014

Increasing inequality brings high social cost: report

Increasing inequality brings high social cost: report

Increasing inequality brings high social cost: report

The land of the fair go is disappearing, argues former Liberal leader John Hewson, on the release of a new report on wealth…

Former Liberal leader John Hewson has launched the Australia21 report at Parliament House today.
AAP/Lukas Coch

The land of the fair go is disappearing, argues former
Liberal leader John Hewson, on the release of a new report on wealth

The report
warns inequality is increasing rapidly in Australia, posing dangers to
community well-being, health, social stability, sustainable growth and
long-term prosperity.

Entitled “Advance Australia Fair?”, the report finds that in the wake
of a declining resources boom “there is a growing gulf between those in
the top range and those in the lower ranges of wealth and income

The wealthiest 20% of households now account for 61% of total household net worth. The poorest 20% account for only 1%.

“In recent decades the income share of the top 1% has doubled, and
the wealth share of the top 0.001% has more than tripled. At the same
time, poverty is increasing and many of those dependent upon government
benefits, including the unemployment benefit, have fallen well below the
poverty line,” according the report.

“If we do not pay attention to the problem of financial inequality, current economic circumstances are likely to make it worse.”

Written by Bob Douglas, Sharon Friel, Richard Denniss and David
Morawetz, the report from Australia21, in partnership with The Australia
Institute and the Australian National University, follows a roundtable
earlier this year.

It comes as the Abbott government’s first budget has been widely
attacked for being unfair, with the burden falling on lower and middle
income earners. It curbs the growth in pensions and family payments, and
critics say it will increase inequality.

For most of the last century, Australia was a relatively egalitarian country “and proud of it”, according to the report.

In the half century after World War One, incomes rose faster at the
bottom of the income distribution than the top. “By the end of the 1970s
Australia was one of the most egalitarian countries in the world.”

But from the mid-1970s, full-time wages for the bottom tenth of the
income distribution have grown only 15%, while full-time earnings for
the top tenth have increased by 59%.

Australia’s unemployment benefit is the lowest of OECD countries and
20% below the poverty line. Many government benefits “have barely kept
place with inflation over recent decades”, the report finds.

Australia is one of the lowest-taxing countries in the industrialised
world and its welfare spending as a proportion of GDP is among the
lowest in the OECD.

Large tax cuts and tax exemptions introduced by both sides of
politics in recent decades that disproportionately favoured the rich is
one factor contributing to the growing inequality of incomes and wealth
the report identifies.

“Other factors include globalisation, asymmetric access to rapid
technological change, changes in compensation practices for top
executives (including use of bonuses and stock options) and the
neoliberal economic policies that have prevailed since the 1980s.

“Another important contributor has been the increasing practice of
‘rent seeking’, whereby wealthy and powerful companies, organisations or
individuals use their resources to obtain economic gain at the expense
of others, without contributing to productivity.”

As remedial measures, the authors urge promoting “a national
conversation” about inequality, taxation reforms, fairer funding for
schools, more investment in early childhood development especially for
the disadvantaged, and setting all pensions and benefits no lower than
the poverty line and indexing them to average wages.

Other actions should include establishing more job creation programs
in priority areas, developing new models of employee management and
co-operative ownership of business, implementing the World Health
Organisation recommendations on the social determinants of health,
encouraging an inquiry by the Productivity Commission into the impact of
inequality on economic efficiency and growth, and establishing a
national research program to monitor progress of interventions.

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