Addressing Economic Inequality
We believe all people should have the means and opportunities to participate socially and economically and to live with dignity and thrive, but issues such as economic inequality mean this isn’t always the case.
According to ABS data, one in eight people in Australia live below the poverty line, and the rate of poverty for children is even higher, at one in six. Nearly half a million young people aged between 15 and 24 live in poverty, while single-parent families, unemployed people, people with disability, and First Peoples are most likely to experience income poverty.
Australia is also at a critical juncture when it comes to economic inequality. Aspirations for shared prosperity in Australia are unravelling under the sustained, twin trends of weak wage growth and rising asset prices. In 2003, a household 20 per cent above the middle had 3.2 times more wealth than a household 20 per cent below the middle. By 2017, that gap had grown by more than 40 per cent. In 2017, the wealthier house was 4.6 times better off, notwithstanding both houses considering themselves to be ‘middle-class’.
Greater inequality strongly tracks with stress, hunger, poor physical health, poor mental health, homelessness, and social exclusion. As a result, the Government needs to spend more on services and payments. A reduction in economic inequality would therefore directly reduce Government costs.
It would also limit economic drag. Economic studies show income inequality has a negative impact on growth. More specifically, a bigger gap between low-income households and the rest of the population has a bigger negative impact on economic growth. Limits on spending for low-income households also reduces demand for business and stops people from making worthwhile investments in their own future, such as education.
Finally, inequality produces instability. So demand for workers during busy times is drastically different to demand for workers during slow times. The problem is, this means there are almost always more people that can’t get a job than there should be. In turn, this keeps wages low.
At UnitingCare Australia, we believe that everyone should be able to fully participate as citizens across all domains of life. While there are many challenges and risks, the current moment presents opportunities to enact policies that build a fairer, more equitable, and economically just society.
We advocate for public policy that highlights equality in economic policy, and a response to the pandemic focussed on sharing the economic costs and preventing an increase in poverty and inequality. These policies would lay the foundation for a more economically just and sustainable society that is better prepared for future shocks.
UnitingCare Australia is platforming key government actions to drive great economic equality and reduce poverty in Australia, including:
- Pay Superannuation on Parental Leave Pay
- Raising aged care wages
- An accelerated Productivity Commission Inquiry into the causes of wage stagnation to report by the end of 2022. This should include comprehensive policy option analysis to drive income growth.