Sue Richardson

Resources and Functions: A New View of Inequality in Australia

The degree of inequality in the levels of well-being of its citizens tells us a great deal about a society. It enables us to judge its social and economic system, to identify those citizens with a claim on community compassion, to identify the sources of hardship, and to devise strategies for reducing levels of hardship. The value of such information is undoubted. But we confront a severe practical problem in first defining, and then measuring, what we mean by well-being. It is surely multi-dimensional, and difficult to reduce to a scalar-valued index.

Who Gets Minimum Wages

There have been rising levels of inequality in the earnings distribution in some OECD countries (principally the English-speaking ones), together with stub bornly high levels of unemployment in many others. Australia has shared in the increases in earnings inequality and persistent unemployment. The increasing earnings inequality has led to renewed interest in the usefulness of legally binding minimum wages as an instrument for redressing it. The high unemployment has led to a renewed interest in removing restrictions on what employers must pay, in the hope that this will increase employment. This paper provides the first detailed examination of the low- wage group in Australia and its standing in the distribution of household equivalent income. It finds that low-wage workea s are varied in their socioeconomic characteristics. They are not typically new entrants to the labour force. They look very like all wage earners in their age distribution. A majority work full-time and are married; 40 per cent have dependent children. Most live in lower income households, but many do not. A cut in low wages that focuses on those around the Australian Industrial Relations Commission minimum would be regressive. The circumstances necessary to make the gain to the unemployed exceed the losses to low-wage workers who have a low income appear to be quite implausible.

Proxy Indicators and the Real World

Measures of standard of living and of poverty are plagued by the obvious gap between the relative simplicity of the indices and the infinite complexity of what they are trying to capture. Some trade-off between the simplicity desirable in an index, and real-life complexity is inevitable. The paper takes the approach of defining standard of living narrowly, but then using a relatively elaborate index, full income. Full income supplements equivalent income (the measure normally used in poverty studies) with the value of assets, of time, and of receipts in kind. Using this measure, and drawing on data from the Australian Standard of Living Study, the paper asks what story it tells of inequality in ownership of possessions, ranging from those most commonly held, to the goods of affluence. It then asks how useful it is as a proxy measure for peoples level of participation in society. The paper concludes with a cautionary note about the limitations of even a rich index such as full income.