Mapping Opportunity: a national index on wages and income

(QESP Editor’s Note: The following is the Executive Summary of a  January 2018 report from The McKell Institute. The full report is available at https://mckellinstitute.org.au/app/uploads/Wages-UPDATED.pdf)

Executive Summary

At the heart of Australia’s society and economy is the idea of the ‘fair go’: the notion that, if we work hard enough, we will be able to get ahead no matter our gender, ethnicity, or our post code. But in recent years, the fair go has been under threat, particularly as wage and income inequality has widened, leaving more Australians behind.¹

Access to wages in Australia has been facing a relative decline in the past few years which has led to growing income inequality across the states. It is widely accepted that the opportunity to earn wages is a key determinant of social mobility and therefore, the obstacles facing individuals in earning fair wages and income is something that must be addressed. With a growing middle class being one of the ?agship signs of a prosperous economy, the declining middlle class with the few at the top becoming richer and the poor getting poorer is an alarming indicator of Australia’s increasing inequality and a threat to the ‘fair go’ ethos that this nation has embraced for decades. Real wage growth is facing stagnation and the opportunities for earnings are gradually diminishing.

Over the past few years, across electorate divisions, the vast disparities in access to earnings has led to negative social outcomes and declining economic indicators and has had costly effects on the Australian economy. It is said that if only 10 per cent of people win when the economy does well, only ten per cent of people will care if the economy does well.² Rising inequality is a threat to any economy’s growth and sustainability as stated by key economic institutions like the IMF and World Bank.³

In looking at income inequality in Australia and mapping out the access to wages across electorates, a variety of determinants can be identi?ed that in?uence the access to earnings for individuals. These different factors are explored in detail in this report and the inequalities that stem from the access to these resources will be fed into a model that will seek to display the disparity in wages and access to earnings across federal electorates in Australia.

Part one of this report talks about the state of wages and income inequality in Australia today. It identi?es common measures and indicators of income inequality and compares Australia with other advanced nations in the OECD. Part two identi?es the challenges facing Australia’s access to earnings for the middle class, and identi?es the changing nature of the economy and workforce. It explores the effects of technology and automation on the nature of jobs and looks at the indicators of poverty and ?nancial stress for low income households today. Part three of the report delves deep into the variables that have been used in the calculation of the econometric model and uses academic literature and empirical studies to illustrate the correlation between these variables and an individual’s access to earnings.

Finally, Part four displays the results of the model with the electorates ranked from 1-150 according to their access to wages and opportunities available to earn income.

Earnings and the opportunity to fair wages are a crucial factor in social mobility for any society and form the basis for economic growth and advancement among individuals. As the nature of our society has changed from a primarily manufacturing and/or secondary sector economy to a tertiary and/or service/technology economy, the skill set required by employers have changed accordingly. The results obtained through this index display, unsurprisingly, that higher skilled workers especially those adept with technology and computer literacy earn comparatively higher than their peers who are less skilled in this sector. Additionally, educational attainment and employment history together with employment status of parents and the electorate in general, have a high in?uence on the employability and earnings of the individual.

All these critical ?ndings will be explored in this report and corroborated by the ?ndings of the model. It is critical that the Government, policy makers, educational institutions and businesses come together to increase social mobility and provide equal opportunity for earnings to everyday Australian

References

1. Biddle, N & Markham, F, ‘What Income inequality looks like across Australia’, viewed 5 November 2017: http:// theconversation.com/what-income-inequality-lookslike-across-australia-80069.
2. Swan, Cooney et al 2016, Inequality: The facts and the future, Chi?ey Research Centre Inclusive Prosperity Commission, viewed 15 July 2017: http://www.chi?ey. org.au/Inequality-the-facts-and-the-future.
3. Ibid.