Flying High or Staying Fair

Did you know that the number of helicopters in Australia has more than doubled since the mid-1990s? Or that there was a near-doubling in annual Porsche sales during the 2000s? Our private jet fleet is also almost three times bigger than it was just a decade ago, which is pretty remarkable considering a new plane will set you back millions of dollars.

The spike in sales of luxury goods like these is one of the more visible signs of a problem that’s been growing in prominence recently: inequality. From Hillary Clinton to Bono, Thomas Piketty to the Pope, inequality is one of the central issues of our age.

Just a couple of numbers explain why. The average first-year ANU student was born in the mid-1990s. Your parents came into the world a couple of decades earlier. Over your lifetimes and theirs, the top Australians have dramatically expanded their share of this country’s resources.

These days, an annual income of about $200,000 puts you in the top 1 percent, and an income over $700,000 puts you in the top 0.1 percent. Since 1980, the top 1 percent share has doubled, while the top 0.1 percent share has tripled.

Even further up the distribution, we can see inequality at work. Over the past twenty years, the top 0.001 per cent have seen their wealth share grow from 2 per cent to almost 3 per cent. The richest three Australians – who could easily ride in a limousine – now have as much wealth as the poorest one million – the population of Adelaide.

One of the central divides in modern politics is inequality. Put simply, those of us on the left think it matters, while people on the right tend to share Tony Abbott’s view that “in the end we have to be a productive and competitive society and greater inequality might be inevitable”.

So here’s three reasons why we should all be looking for ways to close the gap in the coming decades.

First, excessive inequality is simply unfair. Imagine yourself as an unborn child, with an equal chance of being born into the richest fifth or the poorest fifth of society. Would you really want a society where the rich had 62 percent of the wealth and the poor less than 1 percent of the wealth? Or would you want something more equal? Indeed, even survey respondents – who by definition know where they are in the distribution – express a preference for a more egalitarian distribution than exists in Australia today.

Second, plenty of research shows that less equal societies are also less mobile ones. Think of social mobility as the extent to which people can climb up or down a ladder during their lifetimes. Now, imagine that inequality represents the gaps between the rungs. As the gap grows wider, the ladder gets harder to climb. Unequal societies tend to be ones in which the circumstances of your birth determine where you end up. Mobility depends on policies to ensure that the ANU takes more students who are the first in their family to attend university. But it also depends on a society where the gap between the top and the bottom isn’t too large.

Finally, having a lot of inequality in the community just runs counter to who we are as Australians. Ours is a society where we prefer “mate” to “sir”, where we don’t have private areas on our beaches, where we often sit in the front seat of the taxi, and where we don’t stand up when the Prime Minister enters the room. Our egalitarian ethos is one of the things that make Australia great – but it’s under threat from the economic reality of rising inequality.

Inequality is about wealth and money, but it’s also about opportunity, growth and what kind of community we want to be. You’ve grown up in an Australia that has become more unequal. That doesn’t mean you have to continue living in one into the future.

 

Andrew Leigh is Shadow Assistant Treasurer and Member for Fraser. He is the author of Battlers and Billionaires: The Story of Inequality in Australia, and a former Professor of Economics at the ANU.