Low earners ‘making ground on high-flyers’

Low-income earners are making gains after inflation while those on top incomes are going backwards, a survey has found.

Low-income earners are making gains after inflation, a survey has found.

Low-income earners are making gains after inflation while those on top incomes are going backwards, contradicting claims inequality in Australia is worsening.

The comprehensive annual survey of household wellbeing, conducted by the Melbourne Institute, shows the number of Australians living in poverty is falling, with child poverty hitting a low.

The survey, which tracks about 10,000 households each year, shows that although average household incomes have not improved significantly since the global financial crisis in 2008-09, the gains among those on lower incomes have reduced the numbers experiencing financial stress.

Roger Wilkins, director of the Household Income and Labour Dynamics Australia survey, said the results were at odds with widely held views that disadvantage was increasing.

“All this language about the sky falling, in terms of households struggling and the spread of disadvantage, is not borne out by the evidence,” Professor Wilkins said.

“We’re not seeing the enormous improvement in income that we were seeing in the period up to the global financial crisis, but we’re not seeing anything like we saw in the 1991 recession.”

High-income earners were doing well until 2011; then, someone in the top 10 per cent of income earners was being paid at least 1.97 times median income.

Over the past five years, high incomes have fallen after allowing for inflation, and that margin has dropped to 1.9 times.

Snapshot of a nation graphic

Snapshot of a nation graphic

Snapshot of a nation graphic

The changes have been bigger among low-income earners. In 2009, the median income earner was paid at least 2.21 times as much as someone in the bottom 10 per cent of earners. That margin has now dropped to 1.97 times.

“With no movement in ­median incomes, this shows there has been some real growth in ­incomes at the 10th percentile,” Professor Wilkins said.

The same picture is shown by falling poverty rates. The number earning less than half the median income has dropped from 13 per cent in 2007 to 9 per cent now.

A measure of “absolute” poverty — which assesses the number of people unable to afford a minimum basket of weekly goods and services — has dived from ­almost 12 per cent in 2001 to less than 4 per cent now. The number of children being raised in poverty is also slowly declining, reaching a low of 7.6 per cent in the latest 2016 survey, down from a peak above 11 per cent at the time of the GFC. Professor Wilkins said he suspected the widespread commentary about worsening inequality reflected resentment over wages stagnating. “There was none of this talk about rising income inequality in the lead-up to the global financial crisis when incomes were rising generally,” he said. “There was less concern over how well the rich were doing when the middle class were also doing well.”

The one group in which inequality has risen is those aged 65 years and older. This may reflect the greater number in this age group who are still working, producing a big gap between their earnings and those of retirees.

The HILDA report suggests the rising number of retirees with significant superannuation savings may also contribute to the greater inequality in this group.

The report shows the number of people dependent on welfare has fallen sharply since the early 2000s, but most of those gains were achieved before the GFC.

Just more than 9 per cent of households receive more than half their income from welfare, the same as in 2008, while the share receiving more than 90 per cent of income from welfare is steady at about 5 per cent.