Share of net worth and equivalised disposable household income 2013-14 - Dianoetic

Classless Australia?

During the past few years, I’ve heard many times and from different people that Australia is a classless society. There is a common belief that there is not much inequality among the Australian population and thus, the class relations that are prevalent in other parts of the world do not exist here.

In this post, I use a few indicators to demonstrate that not only there are social classes in Australia but also that the chasm between them is increasing. This brief analysis easily shows that class struggle has been going on for a long time and in the most recent times, it has been in the favour of the upper classes.

This post is extracted from my longer piece on Australia’s risk. You can read the complete version on my website: Dianoetic.

·       Employment

Employment data provides interesting insights into Australia’s economy. Figure 1, presents the evolution of unemployment in recent times. After a peak in 1993 (11%), the unemployment consistently decreased and reached an all-time minimum in 2008 with 4%. Since then, the unemployment has been on the rise, with the most recent peak in 2014 (6%).

Unemployment rate - Dianoetic
Figure 1- Unemployment rate – Source ABS

Breaking down employment into its types, full-time, part-time, and unemployment, reveals an interesting trend (Figure 2). Since the late 70s, the rate of part-time work has increased constantly and more than doubled (14% to 30%). During the same 40-year period, the full-time proportion has decreased from 79% to 64%, suggesting that almost all the part-time gains came at the expense of full-time jobs.

Employment ratios by type - Dianoetic
Figure 2- Employment ratios by type – Source: ABS

This trend of changes in the type of employment is not restricted to Australia. The ‘(re)casualisation of labour’ began in the 1970s and persisted in developed capitalist countries ever since. This phenomenon has given rise to the ‘contingent economy’ (Broad 1995: 69), characterised by precarity, flexibilisation, casualisation, contractualisation, nonstandard, and irregular employment (Arnold & Bongiovi 2013: 289).

·       Wages

Two important factors that demonstrate the ability of the population to consume and save are wages and inflation. To study the status of these two factors, I explore the changes in Wage Price Index (WPI) and Consumer Price Index (CPI).

The CPI is an index that demonstrates the costs of goods and services that households consume. It is based on the Cost of Living Index (COLI) approach. A cost of living index “measures the expenditure needed for an optimizing consumer to maintain a specified level of utility as prices change” (Lebow & Rudd 2008: 2).

Another approach to the measurement of consumer costs is the Cost of Goods Index (COGI). This approach considers a basket of goods and monitors the changes in the price of the basket over time. This approach, however, has a significant weakness. The components of the basket are constant while the economy, including manufacturing and consumption patterns in the country, vary over time. This shortcoming renders the COLI approach and hence, the CPI, more favourable as measurement tools.

“The WPIs measure changes over time in the price of wages and salaries unaffected by changes in the quality or quantity of work performed” (Australian Bureau of Statistics 2017). The construction and calculation of this index follows a methodology similar to the CPI and includes procedures that only take into consideration the changes in price.

Figure 3 presents the changes in the WPI. The three graphs represent total wages excluding bonuses, ordinary working time with bonuses, and total wages including bonuses. The three graphs follow a similar trend. They start from 3% in 1998 and follow an upward trajectory until 2008, reaching almost 5%. After that, they all decrease with a steeper slope and reach almost 1% in 2017.

Yearly Changes in Wage Price Index - Dianoetic
Figure 3 – Yearly Changes in Wage Price Index – Source: ABS

·       Inflation

Figure 4 presents the annual change in the CPI as a measure of inflation. The graph starts from its peak in 1975 with 17.7%. It follows a downward trajectory and reaches its absolute minimum in September 1997 with -0.4%. After that, it regains part of its value and from 2001, fluctuates between 1 to 3%.

Inflation rate (rate of CPI change) - Dianoetic
Figure 4 – Inflation rate (rate of CPI change) – Source: ABS

·       Wages and inflation

To assess the condition of the working class and its ability to consume, the changes in wages should be contrasted with the changes in prices (inflation). Figure 5 presents the relative changes in the WPI relative to the CPI.

Changes in WPI relative to CPI – Dianoetic
Figure 5 – Changes in WPI relative to CPI – Source: ABS

For most of the period between 1998 and 2017, the WPI change has been higher than inflation, i.e., wages have grown (about 1%) faster than prices. However, several times during this period, the relative change of wages has become negative, the worst instance being in 2000 with almost -3% relative change. At such times, the workers virtually become poorer and they lose their ability to consume.

Since 2004, and especially since 2012, the relative wages have demonstrated a falling trend. In other words, the growth rate of wages has been decreasing for more than a decade, especially for the past five years. This trend is similar to the findings by (OECD 2017: 11). The weakening of workers’ condition is occurring while the output per worker has constantly been growing at least since the early 90s (Figure 6).

Output per worker - Dianoetic
Figure 6 – Output per worker – Source: ILO

·       Inequality

The decrease in full-time jobs, the increase in part-time employment and unemployment as well as the slowing wage growth raise concerns about the condition of equality in Australia. The Gini coefficient is a common measure to address such concerns and to study the changes in the level of inequality of income (Cowell 2008: 3-4). The value of the Gini coefficient varies between 0 (perfect equality) and 1 (perfect inequality).

Figure 7 presents the rising level of inequality in Australia’s economy from 1981 to 2010. The Gini coefficient has constantly increased since 1980 (0.31) to 2008 (0.36) and slightly falling in 2010 (0.35).

Inequality presented as Gini coefficient - Dianoetic
Figure 7 – Inequality presented as Gini coefficient – Source: World Bank

Figure 8 more dramatically illustrates the level of inequality by presenting the share of population quintiles out of Australia’s net worth and Equivalised Disposable Household Income (Australian Bureau of Statistics 2015). It reveals that while the top 20% of households own about 62% of the net wealth, the lowest quintile’s wealth is even less than 1%. In other words, the wealth of the top quintile is about 70 times the wealth of the lowest quintile.

Share of net worth and equivalised disposable household income 2013-14 - Dianoetic
Figure 8 – Share of net worth and equivalised disposable household income 2013-14 – Source: ABS

The rising inequality of income, the declining employment, and slowing wage growth all indicate the worsening condition of the working classes.  The increasing gap between the rich and the poor poses risks, which are even acknowledged by mainstream agencies. OECD’s most recent survey on Australia’s economy highlights the need for “[a]ddressing inequality and ensuring economic rebalancing delivers more inclusive growth” (OECD 2017: 2).

Under the “profit-squeeze” approach views this situation as the status of class struggle in Australia. To raise the class power and the rate of profit, Australian and transnational capitalists increase the pressure on the working class and decrease its standard of living. However, the amount of labour input declines with the level of employment, which, in turn, leads to the further falling of the rate of profit.

 

References

Arnold, D & Bongiovi, JR (2013), ‘Precarious, Informalizing, and Flexible Work: Transforming Concepts and Understandings’, American Behavioral Scientist, vol. 57, no. 3, pp. 289-308.

Australian Bureau of Statistics (2015), Household Income and Wealth, Australia, 2013-14, Canberra.  Retrieved from Canberra: http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/6523.0~2013-14~Main%20Features~Income%20and%20Wealth%20Distribution~6

Australian Bureau of Statistics (2017), Wage Price Index – March Quarter, Canberra.  Retrieved from Canberra: http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/4C0695A78F557164CA25812200155C37/$File/63450_mar%202017.pdf

Broad, D (1995), ‘Globalization and the Casual Labor Problem: History and Prospects’, Social Justice, vol. 22, no. 3 (61), pp. 67-91.

Cowell, FA (2008), ‘inequality (measurement)’, In Durlauf, SN & Blume, LE (eds), The New Palgrave Dictionary of Economics, Basingstoke, Palgrave Macmillan.

Lebow, DE & Rudd, JB (2008), ‘inflation measurement’, In Durlauf, SN & Blume, LE (eds), The New Palgrave Dictionary of Economics, Basingstoke, Palgrave Macmillan.

OECD (2017), Overview of the economic survey of Australia, OECD.  Retrieved from

 

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