Egalitarianism Under Threat

After I gave a National Press Club address on egalitarianism, a somewhat aggrieved Maurice Newman responded by throwing his dictionary of quotations at my head. Today's Australian kindly gave me space to respond.
Gap Between Haves and Have Nots Must be Narrowed, The Australian, 21 April 2014

Egalitarianism goes deep in the Australian character. Most of us don’t like tipping, and passengers tend to sit in the front seat of the taxi. There aren’t private areas on our beaches, and audiences rarely stand when the prime minister enters the room. We’re a country that happily dispensed with knighthoods decades ago, and no sensible person would suggest that the land of ‘mate’ should become the kingdom of ‘sir’.

And yet that egalitarian ethos is increasingly under threat from a rise in inequality over the past generation.

In Battlers and Billionaires, I found that since 1975, real wages for the bottom tenth have risen 15 per cent, while wages for the top tenth have risen 59 per cent.

Cumulatively, the increase in inequality over the past three decades represents a $365 billion shift from the bottom 99 per cent to the top 1 per cent.

It’s not just income that has become more unequal. By my estimate, the richest 50 people in Australia have more wealth than the bottom 2 million. The richest 3 people in Australia have more wealth than the bottom 1 million.

Rising inequality is not an inevitable feature of economic growth. Indeed, from the 1920s to the 1970s, Australia became more equal.

In June 2000, The Australian published a week-long series on inequality, with its lead editor arguing that ‘Inequality in Australia today is a serious social issue’. Over the past 14 years, the level of inequality has continued to rise. But ideologues of the right have become more dismissive of the issue. Writing in these pages, Maurice Newman demanded that equality be off the political agenda, because it impedes mobility.

The facts show precisely the opposite. The more unequal the society, the less likely it is that a poor child will make it into the middle class: a relationship that has been described as ‘the Great Gatsby curve’.

Most Australians are worried about inequality. When asked their views about wealth distribution, the vast majority have a preference for a more egalitarian society than we have today.

And yet I am concerned that the Abbott Government’s policies may leave Australia a more unequal country.

The Coalition has announced that it will abolish three payments that are targeted at low-income and middle-income families: the income support bonus, the SchoolKids bonus, and the Low-Income Superannuation Contribution.

The wealthiest Australians benefited disproportionately from the Coalition’s decision last December to abandon 55 tax measures. For example, the Coalition has decided to maintain extremely generous tax concessions to people with more than $2 million in superannuation, despite the fact that these retirees receive more government assistance than someone on the full pension.

As though it wasn’t enough to cut benefits for the most disadvantaged and cut taxes for the most affluent, the Abbott Government has gone one step further, by proposing to transform Australia’s flat-rate paid parental leave scheme into a wage replacement scheme.

The effect of this is that a high-wage family will get $75,000 when they have a child, while a low-wage family will get $16,000. As the Coalition’s policy document last year stated, ‘paid parental leave is an economic driver and should be a workforce entitlement’.

So to the most prosperous: welcome to your new age of entitlement.

Meanwhile, the Coalition’s industrial focus is on making life hard for unions. Making collective bargaining tougher will likely widen the earnings gaps in Australia. One right-wing think-tank advocates abolishing the minimum wage altogether.

A blind faith in trickle-down economics will make it harder for the Coalition to achieve other goals. While the Abbott Government may claim to have a Closing the Gap Indigenous policy, it’ll be harder to achieve if they have a Widen the Gap economic policy.

But a deeper conversation about inequality is vital for my party too.

The gap between the powerful and the powerless has grown. So more than ever, Labor must be the voice of the vulnerable. If we do not speak out for those on the margins of our society, who will?

When Labor is given the chance to govern again, we should assess policy proposals based on how they will affect the gap. With Australian inequality higher than it has been for three-quarters of a century, we must not ignore the distributional consequences of policy.

The past generation has seen great success for the Australian economy. Our nation is more productive and entrepreneurial; more open to ideas, products and people from overseas. Yet at the same time, we have become more unequal.

Too much inequality strains the social fabric, threatening to cleave us one from another. Australia is a stronger nation when we act together than when we pull apart.

Andrew Leigh is the Shadow Assistant Treasurer, and the author of Battlers and Billionaires: The Story of Inequality in Australia (Black Inc, 2013).

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