The rising gap between rich and poor in Australia - Transcript, ABC Radio National Podcast

E&OE TRANSCRIPT

ABC RADIO NATIONAL PODCAST

CLASS ACT PART THREE: THE DARK HEART

WEDNESDAY, 4 APRIL 2018

SUBJECTS: Inequality, Class.       

RICHARD AEDY: Hello, I'm Richard Aedy. This is Class Act on Big Ideas, looking at social class in Australia. In parts one and two, you heard what class is, how it's determined, how we got here and the way it interacts with Indigenous Australians and with our politics. In part three we'll look at the dark heart of the class system: inequality and what it's doing to us.

It affects our health, where we live, how well we do at school and our prospects after we leave. You'll hear how class is playing into another big change, between one generation and the next. And we'll focus on something that's closely connected to inequality, and for some individuals is the antidote to it: social mobility. Because what we don't have in Australia is a level playing field.

VOICE: There's a perception among people who reside in that less well-educated, less wealthy group, that they're never going to be able to change the life of their children. And I think that's terrible because I think anybody can help their children to change their lives. And that doesn't mean changing the class they belong to; it means changing the perception that there is an underclass.

VOICE: In one instance, my house burnt down, and the only financial help that I got was through a fundraiser. Centrelink said, "oh, your house burnt down? You have nowhere to live and no clothes, no shoes, no nothing? Here's an emergency pay of $200."

VOICE: Poverty is not an accident in Australia. It's not accidental that you have people starving in Logan and starving in Caboolture and starving in Blacktown in Western Sydney, let alone remote and rural Australia.

VOICE: I would say that class distinctions have actually got sharper in my lifetime, say, since the 1970s or the 1980s. In the Australia of Menzies or Whitlam, there was a certain equality. The really rich people were – they might have been fifty times richer than the poorest people – but they weren't five thousand times richer than the poorest people.

AEDY: Robert probably fits into the precariat category in the ANU's six-class model. And his feeling that inequality is growing is backed by the data. Andrew Leigh is the MP for Fenner in Canberra's north, but for most of his career he's been an economist.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: So on pretty much any metric you can look at, the last generation has seen a rise in inequality. It doesn't have to be that way. In fact, for most of the 20th century, inequality in Australia was falling, particularly in the decades immediately following World War II. But since around 1980, measures of consumption inequality, income inequality, wealth inequality, all of those have showed a rising gap between rich and poor in Australia.

AEDY: The usual way that economists measure inequality is with something called the Gini coefficient. Andrew Charlton, from AlphaBeta.

ANDREW CHARLTON: The Gini coefficient is the statistical measure that economists use to describe inequality. It's a measure of the distribution of incomes, where if the Gini coefficient is one, that means that incomes are extremely unequal. And if the Gini coefficient is zero, it means that everyone essentially has the same income. And the Gini coefficient is a number between one and zero that describes how equal countries are. So Australia's Gini coefficient, for example, is 0.47. Denmark's Gini coefficient – Denmark is a more equal country than Australia – is 0.41, so lower than Australia. The United States's Gini coefficient is 0.48, slightly higher than Australia's. And Australia is sort of in the bottom half of the OECD pack on income inequality.

AEDY: While economists are overwhelmingly convinced that inequality has been increasing in Australia, the Minister for Education, Simon Birmingham, takes a different position.

SIMON BIRMINGHAM: I don't accept the principle that inequality per se has increased–

AEDY: It has, by every measure except recent lookings at the Gini coefficient, which is just about income. The OECD says this – inequality got to its lowest point in Australia in 1981 and although it hasn't been a constant upward progression since then, if you look at the band of it, it's going up.

BIRMINGHAM: I think Australia remains a country where people's opportunities remain very rich and where for virtually all Australians, the opportunity to be able to break through social constructs is quite strong. And that technological disruption that's occurring, the change in which the way businesses are made, I think means that we will see more people who come from more diverse backgrounds break through and break through with significant success than perhaps we've seen in the past, where what you knew and who you went to school [sic] might have been more important, in the future your capacity for innovation, for skill set that drives entrepreneurship, for thinking differently and creatively will actually be perhaps far more important.

AEDY: But the evidence that we've seen from research done at the University of Wollongong about 18 months ago shows not only that social mobility is not what we think it is in Australia, in our kind of general reflection on it, but it's almost certainly declining.

BIRMINGHAM: Look, I would struggle to agree with that as I travel around the country and see that many people, many people have opportunities that they've never had before. We have record numbers of school leavers going to universities nowadays. We have enormous wealth housed right throughout, I guess, what you would describe as middle-class Australia nowadays. And that for many Australians, the opportunities that they have to choose what they can do with their lives and the opportunities, whether it is to travel or otherwise, have grown enormously. That's not to say that there aren't Australians doing it tough – of course there are and that's where we have to be ever mindful of creating, in my portfolio, the opportunities especially for those children born in those circumstances, to be able to get ahead, to be able to get the best education possible and to demonstrate that everybody does have that opportunity.

AEDY: Later, we will look at the impact of education on social mobility. Since the 1980s, big gaps have opened up in terms of what people earn. This is income inequality. But why has it happened? Well, Ian Watson, who's an independent labour market researcher, says there are three reasons.

IAN WATSON: One has been a loss of union power. Another one has been globalisation and deindustrialisation, technological change. But the other one has been taxation and the way top tax rates have come down. All of that have contributed to a growth in income inequality over the last 30, 40 years. And to give you an idea of just how bad that is. In the 80s, wages were largely flat – and I'm talking now about wage earners – but by about the mid-90s, those at the top got back to about where they were, and then they took off. And they're the group – when you go back to your picture of the strata – they're the ones who live in the inner city, vote progressively, by terrace houses, gentrify, are in professional and managerial jobs, they might be 40 per cent better off than they were back in the early 80s. Those in the middle took until the late 90s to get back to where they'd been. And they are now a little bit better off, until the last few years when this wage stagnation set in. Go to the bottom though, the bottom 10 per cent of wage earners, it took them until about 2006 to get back to about the same level of real earnings that they'd had in the early 80s, and they're only a few percentage points ahead of that now. So this massive increase of inequality that we've seen – that a lot of people are in denial about, but it's there – that came about because of the modernisation of the Australian economy during the 1980s and 90s. Some of that was seen as inevitable. In other words, Australia couldn't continue the way it was. But a lot of it was also deliberate choices to make the economy more competitive, to expose it to international competition, to deregulate the financial system, and that's what's now coming home to roost, all of those changes.

AEDY: Former Treasurer Wayne Swan says inequality affects work in other ways as well.

WAYNE SWAN, MEMBER FOR LILLEY: I think it shows itself for most in the prevalence in the workforce of insecure work and of underemployment. People are really struggling out there to see a pathway that their older brothers or sisters may have seen over the past 10 or 20 years, where there was some way. So, underutilisation, for example in our labour force at the moment – that's when you take unemployment and you take people who want to work more hours and so on – is now 15 per cent. And indeed, if you go to the US, Richard, even though they've now got a headline unemployment rate lower than Australia, they have a much higher degree of what you'd call underemployment or underutilisation in their labour force, which is a consequence of the massive destruction that occurred to unemployed people in their system post the GFC – the sort of destruction we didn't see here. But the best measure of all of this is that our wage share in Australia at the moment is at 60-year lows. Now think about that. And people are really feeling it.

AEDY: The overall effect is very profound disadvantage. Andrew Leigh.

LEIGH: We've got huge gaps. I mean, if you look at some of our poorest communities, you take a place like Ravenswood in Tasmania where the average household income is $32,000, you've got households where life expectancy is shorter, where many of the stresses of life are more acute, where fewer people have the fulfilment that comes from a satisfying and rewarding job. The poor, on average, live six fewer years than the rich, and have seven fewer teeth. Home ownership rates are significantly lower among poorer Australians and their lives are much more often in flux. So many of these markers of deep disadvantage have worsened over time.

AEDY: Sebastian knows what this is like.

SEBASTIAN: I've never paid any less than one half of my income to rent. And I've never in my whole life lived above the poverty line. My mum's on the dole, has only just recently – well, I'm 20, I was 14 when she got a job – so for the first 14 years of my life, my mum was on the dole. My dad was on Disability. So we were on pretty much the bare minimum that the government can legally give you. And a lot of the issues that I face are because of class. I've been evicted from houses because I can't pay rent. I haven't been able to look after my mental health correctly because of my position significantly below the poverty line.

AEDY: This is Class Act on RN, the ABC Listen app, wherever you get your podcasts. I'm Richard Aedy. The novelist William Gibson famously said that "the future's already here. It's just not evenly distributed." It's the same with disadvantage. Mark Weston from the Institute for Social Science Research at the University of Queensland.

MARK WESTON: One of the things that we have seen over the last, sort of, probably since about 2006, has been an increasing spatial concentration of advantage and disadvantage – and particularly disadvantage. And so there are some regions which are becoming very disadvantaged in terms of the composition of the people who live there. So high levels of unemployment, relatively low levels of education. And what you tend to find is that the areas that are close to the centre of cities, the major cities tend to be the most advantaged. And the inner suburban areas near the centre of cities are also the most advantaged. The most disadvantaged areas tend to be in some regional and remote locations and that's particularly the case if there are large Indigenous populations in those locations. But also in metropolitan regions, it's the central and outer suburbs where you find higher levels of disadvantage. And this kind of concentration has become more pronounced over time.

AEDY: One of the most fundamental things that inequality affects is health. And as Sharon Friel, Professor of Health Equity at the ANU explains, it affects everybody.

SHARON FRIEL: For every rung in the social ladder, our health is better or worse. So for somebody who's higher in the social ladder, compared to me or people like me, my health is more likely to be worse than theirs. And so it goes as you move up the ladder. What the social gradient tells us is that everybody is affected by the social inequalities in society. They affect everybody's health; some much more than others, but they affect everybody's health.

AEDY: And how does it manifest? What are we actually kind of seeing out there?

FRIEL: Well, certainly people of lower social class groups are much more likely to die early. They're much more likely to die early from cardiovascular disease, from diabetes, from some cancers, not exclusively the gradient isn't quite as clear with cancers. Low social class groups are much more likely to have poorer mental health conditions. So basically the spectrum of – these are referred to as non-communicable diseases, also for infectious diseases as well, lower social class groups are much more likely to experience them.

AEDY: The biggest risk factors for non-communicable diseases are grouped under lifestyle. Whether you smoke. What you eat. How much you exercise. We all know what to do here. There's been public health campaigns for decades. But poorer people are worse at doing it.

FRIEL: So let me tell you a story. Growing up, there was a message that was coming out from Department of Health people saying "choose to eat healthy fruits and vegetables." So the food environment in which I grew up, the shops that were close by to me were fast food outlets. The shops that were close by to my family, there were many, many more options of high-fat, high-salt, high-sugar, which were also cheaper than the fruits and vegetables that were available, when they were available, in those shops. To purchase some of those healthier options in those shops, and to purchase them cheaply, we would have had to have bought the large packages, they weren't available in smaller package sizes. So my family couldn't afford to do that, so we didn't buy those things. We also were relying on public transport. So when you're trying to carry large, bulky foodstuffs, because they're cheap and because you're trying to do the right thing by choosing the healthy things, that's impossible when you're getting on and off buses and when there were us as young children. So I tell that story because that's all about the wider environment in which people make those supposedly easy choices. And I think it's beholden on us as a society to say yes, ultimately, what we pick up and put into our mouths, or whether we put that cigarette in our hands, yes, ultimately that's us as individuals, but there are many, many factors that are affecting what gets into that person's hand before it goes into their mouth. And I think we really have to pay attention to those wiser societal drivers.

AEDY: When people feel vulnerable to external events, when they don't feel that they have any control, that has an impact.

FRIEL: What starts to happen is people disengage, people have a poverty of hope for their lives, people have a sense of helplessness in their lives. There's been some work that came out from the US a couple of years ago now, talking about deaths of despair. And what that showed was – and particularly interestingly for white working-class men in the US; for many many years it was generally African American men and Hispanic men in the US who always experienced the worst health outcomes – but for the first time, it showed that for the white working-class men in the US who were feeling completely unheard and completely unsupported in society, which was not of course what they had grown up to expect, then they were dying much younger.

AEDY: Professor David Johnston, who's in the Centre for Health Economics at Monash University, says we know a lot more about what happens to the health of disadvantaged people than why it happens.

DAVID JOHNSTON: It's actually surprisingly difficult to understand these causes. And what researchers are trying to do now is approximate, or actually run randomised controlled trials, so some people are given something associated with socioeconomic status and then they're tracked for many years in the future to help us understand what action might be causing this correlation, but also in order to develop, ultimately, policies that we could use to improve people's health. And so this research has shown that the things that we thought might have big effects tend not to. Or at least in isolation, they don't tend to. So there's been lots of research looking, for example, at education. We know education is strongly related to how people do in the labour market. It helps people get better jobs. It improves people's wages. As you'd expect it affects lots of aspects of people's lives. However, most of the research shows, and it's certainly a mixed literature, but it shows that education tends to have weak effects on health throughout people's lives. It doesn't seem to have a strong effect on the age that you'll die, for example. And so that is one case where it's a bit of a disappointing result, in that education doesn't seem to be the magic pill for improving people's health.

AEDY: But location might make a difference.

JOHNSTON: There was some really interesting work coming out of the United States which have been much more progressive in their willingness to use big randomised controlled trials to understand this social mobility and residential mobility. So there's a big program called Moving to Opportunity that was run in the 1990s. And was aimed at essentially moving people from very disadvantaged areas to much more advantaged areas. And they did that by offering people housing vouchers. So, money to spend on housing that could be used so long as they moved from a highly disadvantaged area to a better-off area. And then they tracked these thousands of people – some were in control groups, some were in treatment groups – across many years and tried to work out how this change affected their lives. What they found was a real mixed set of findings, actually. But overall, people involved in this experiment did get better health – better physical and mental health. So we do know that the area that you live in is an important aspect of these associations.

AEDY: That makes sense. Remember, disadvantage is unevenly distributed. And that clustering acts as a kind of multiplier, making everything worse. Mark Weston.

WESTON: Spatial concentration starts to create some communities where you have enduring periods of disadvantage. Where over long periods of time you find lots of people with high levels of unemployment, with low levels of education, lack of access to good services, not very good access to good schools, few job opportunities, poor public transport. And the ABS has also done some analysis around this that shows that there are some localities where you have entire communities that are in disadvantage because of that. Those communities have experienced that disadvantage for the best part of ten years or so. And these communities, some of them are in New South Wales, some are in Victoria, some are in South Australia, particularly where they are consistently doing it very, very tough. When you get the concentration of disadvantage in a specific place like that, it becomes very, very difficult to address in terms of social policy and public policy. Because you're not just dealing any more with trying to support individuals or families and address circumstances that they face in their own lives. You're trying to support whole communities and address communities that whole communities have faced and may face for a very long time. And so the policy solutions around that become much more difficult.

AEDY: This is Class Act, with me, Richard Aedy. We've just been hearing about what happens when disadvantage is geographically concentrated. It's harder to deal with, is the short answer. It's also much harder to get out of for a family or individual. This is social mobility, something Julianne knows about from personal experience. She thinks of herself as established middle-class, but she lives between Sydney, Hong Kong, and country New South Wales. It wasn't always like this.

JULIANNE: I have been absolutely down and out and flat broke living hand to mouth, living paycheque to paycheque providing for three children. And I know how hard it is to look at your bank account and realise there's no money there but you've got to pay the rent next week. And I've come out of that, out the other side, but I don't think I've changed as an individual, as a result. I don't think coming out the other side and meeting someone else who raised me out of this wealth trap, has made my life any more smug. I don't believe I'm any better as a result of having money. It makes it easier for you to be better to other people – well it certainly did for me. So I've never taken the fortunate position that I'm in now as something that I deserved. I've never believed that it's made me a better person. In fact if anything, it's made me more humble, because I realise now how wonderful and how generous people can be – and specifically my husband. But it's made me realise that he didn't look away because I was flat broke. And he didn't look at me because I was some raging beauty, or because I was a younger woman. I was none of those things. I mean, I was flat broke, but I wasn't flat broke and I wasn't a younger woman!

AEDY: The kind of social mobility that economists are interested in is intergenerational. Richard Holden from the Business School at the University of New South Wales.

RICHARD HOLDEN: My favourite measure of social mobility – and there's a lot of different ways to do it – but my favourite one and the one that's commonly used is, if your parents were in the bottom 20 per cent of the income distribution, what's the chance that you went up in the top 20 per cent of the income distribution, now that's obviously a lot of mobility in some way but it's a measure of it. And on that basis, Australia does okay – not as bad as a country like the US but not as well as the Nordic countries, even New Zealand or Germany.

AEDY: Peter Siminski, Associate Professor of Economics at UTS, measures something called intergenerational income elasticity. This is a number between 0 and 1. The higher it is, the less social mobility. So one would mean there is no social mobility, all rich children would become rich adults and all poor children, poor adults. Zero would mean complete social mobility, so where you started wouldn't have any effect. Australia's number is 0.35, which means social mobility is lower than we thought.

SIMINSKI: Until now, we haven't had many studies at all about the extent of mobility. The one study that received a lot of attention ten years ago was conducted by Andrew Leigh, who is now a Member of Parliament, and that estimate was considerably lower, indicating a much greater level of mobility. Now, in our work, what we did was relatively straightforward; we just used more data. We used the same techniques; we just used more data, better data, which gave us a smaller standard error, it gave us more precision in our estimate, and that changed things considerably. I guess the story here with mobility in some ways mirrors what has been uncovered over previous decades' inequality research. People have always thought of Australia as a very egalitarian country, a country in which people get by essentially on their merits. People think of it as a classless society. But the research on inequality over the last few decades has revealed that our level of inequality is not particularly low. It's in line with many other western countries. It's sort of middle of the pack, perhaps slightly higher inequality than average, and the same sort of thing is now emerging with the new research showing intergenerational mobility.

AEDY: Simon Birmingham.

BIRMINGHAM: Myself, as the son of a bus driver and a retail worker, publicly educated at low socioeconomic schools, but today with the enormous opportunity and responsibility of sitting in the Federal Cabinet as our nation's Education Minister, I can recognise there are pathways that require hard work, support, a little bit of luck, but we do absolutely have systems that allow people to be able to pursue their dreams and excel where they apply themselves.

AEDY: That's certainly true, Minister, but you're obviously an exceptional person. We don't have Cabinet Ministers who are non-exceptional people. And you are, I think, only one of only four in the Cabinet who went to a state school. So it's not quite as easy as you're making it sound.

BIRMINGHAM: It's not easy by any means and we have to be ever determined in making sure that as policymakers, we are mindful of creating those opportunities. It's one of the reasons why, when reforming schools funding, I was so passionate about making sure that we provided a true needs-based setting that gives additional support to students from low socioeconomic backgrounds, or Indigenous backgrounds, or students with disabilities, so that we create the environment in which those schools can provide extra assistance to those students who most need it. The same can equally be said of new childcare settings, which are about helping low- and middle-income families choose to be able to work, work more, get back into the workforce, which of course, that time out of work can be a real inhibitor to people's career progressions and so on. So it's about looking very practically, I see, as a policymaker, about how we put the settings in place to help create the best opportunity for people to have that equality of opportunity.

AEDY: Education is the great generator of social mobility. It improves your prospects, it makes you more likely to earn more. Jenny Chesters researches inequality in education at the University of Melbourne. She says it's clear that both family background and the wealth of the school community makes a difference.

JENNY CHESTERS: We can look at an individual measure of socioeconomic status and a school measure of socioeconomic status, which is very important because it's the population in the schools so that sorts of students that are attending each school that have an effect on student outcomes.

AEDY: The way you've done this, as I understand, is you've divided up the students and the schools into four – the quartiles.

CHESTERS: Yes, that's right. So there's four groups, ranging from the most disadvantaged through to the most advantaged at the individual level, for the students. And I've also done the same for the schools, so from the most disadvantaged schools up to the most advantaged schools.

AEDY: And what did you find in terms of how well they do?

CHESTERS: Well, that's the interesting thing, because if we're looking at their PISA scores at age 15, which is a measure of academic achievement, we find that young people who are attending low-SES schools, regardless of their family background, have much lower scores than children who are attending high SES schools. And we find the biggest gap is between high-SES students in high-SES schools and low-SES students in low-SES schools. It's quite a considerable gap.

AEDY: That makes sense though, doesn't it? That, in a way, is not surprising? Did you get a surprise?

CHESTERS: I wasn't surprised by that finding, but what did surprise me was the finding that if you're a high-SES student attending a low-SES school, you don't do as well as a high-SES student attending a high-SES school. That was quite surprising, because a lot of people come from the view that, well, it's a family that makes all the difference and part of it's genetic – maybe you inherit more intelligence, which I don't agree with, but some people run that line. But the fact that I can find an effect according to the school that you go to, over and above the effect of your family, shows that there's two things happening and we should be looking at the one thing that we can change and that is the school effect. 

AEDY: That means that if you're better educated and better off, the quality of the school you send your child to matters less. 

CHESTERS: If you have highly educated parents, what's happening in the home can compensate for what happens at school, to a fairly high level. So highly educated parents can have very good learning resources in the home, lots of books, perhaps being engaged in cultural practices such as playing musical instruments at home, going to cultural events. Whereas low-SES children are less likely to have books in the home, their parents have lower levels of education and they don't understand or they don't have the finances to be able to provide those children with the learning resources that they need in the home. So high-SES children can overcome those disadvantages if they're going to low-SES schools. The difficulty is for low-SES children, they're not getting the resources at home and then they're not getting the extra resources at school that they need to make up for the lack of the resources in their home.

AEDY: Because one thing that we should underline is that although there are – and you've found and you've measured – low-SES students at high-SES schools, most low-SES students go to low-SES schools. 

CHESTERS: That's right. Because if you have a family background, your family is relatively poor, it's very difficult for them to afford to purchase a house or even rent a house in an area of high-SES school. So it's an unfortunate situation in Australia that our suburbs are becoming increasingly segregated into high-wealth suburbs and low-wealth suburbs. And if you happen to be living in a low-wealth suburb, you're probably going to go to a school that's populated predominantly by other students with low-SES backgrounds and that is going to cause problems in the long term, regardless of your actual ability in the classroom.

AEDY: So schooling has become increasingly stratified, with better-off families sending their children to better-off school, where they tend to do well. And at the other end, disadvantaged families are sending their children to disadvantaged schools, where they're tending not to do well. It's not exactly social mobility. Peter Siminski.

SIMINSKI: So in our work we actually kind of reposition education in terms of how we think about these issues as being part of the problem, as opposed to part of the solution, in the sense that education is a transmission mechanism of advantage from one generation to the other. So in our work, we do what's called a mediation analysis, where we look at the relationship between a whole range of family background characteristics and earnings, and we try to estimate to what extent a child's education is the transmission mechanism that operates between family background and child earnings. And we find that perhaps 21 to 37 per cent of the effect of family background operates through the greater education that those children receive. I guess it's sort of a slightly unusual way to position education in this debate, but it's sort of highlights that education is not a level playing field in the sense that family background is a large determinant in the educational outcome of people.

AEDY: What Peter Siminski's saying is that education is the medium that transmits established advantage. George Megalogenis is concerned that this could easily get worse.

GEORGE MEGALOGENIS: I think one of the big mistakes that we've made in public policy over the last 30 or 40 years is that we've tried to privatise everything. We've allowed this idea in the community that you can privatise education. Now, you might want a private system, but in the long run, is the middle class in Australia going to be able to afford a decent education for their kids when the taxpayer is picking up the majority of the tab? So if you transfer the cost of education onto the kitchen table, i.e. you privatise in a literal sense, so individuals are responsible for it, the data tells us that (a) private schools don't deliver better results, on average, for kids and (b) people are stressed about having to put them there in the first place. So I think this is one of the big issues in the 21st century – the things in Australia, the things the government can still deliver on behalf of the country, on behalf of the population, on behalf of the household, on behalf of the economy. It needs to figure out what that is and it needs to figure out quick smart, because I can paint you a scenario in 10 or 20 years' time, where people in decent-paying jobs won't be able to afford to send their kids to a decent school. They'll default to the public system and, horror upon horror, the public system would have been so run down at that point, that they won't be happy about it. Now you don't want to be the Minister that gets that advice 10 or 20 years from now and told you're going to have to massively reinvest in the education system, because it is creating structural problems in your community – it's actually separating your achievers and your newly-arrived migrants from the majority of the population. You don't want to end up in that place.

AEDY: This is Class Act on RN, the ABC Listen app, wherever you get your podcasts. I'm Richard Aedy and we're looking at inequality. The most important type of inequality isn't income – it's wealth. That gets us to housing. This is Sue. She's part of the established middle class.

SUE: I've got a tertiary degree, I'm what I'd call a late starter. A baby boomer, a late baby boomer, so I didn't have the benefits of a free education as some of my cohorts in the baby boomer generation did. So late starter, and paid for an education as a mature-age student – as a mother with two children in high school, actually. So, while that was a great mentoring opportunity, we haven't had in my household, the benefits of long-term, permanent, secure work in fairly high-paying or well-paid jobs.

AEDY: Sue, like many people in Darwin, isn't from there.

SUE: I myself live in what we call a shouse. A lot of Darwinians and a lot of people in my local shire live in a shouse. So a very comfortable home, but it is shared. We have air conditioning, tiles, and all of the creature comforts that you need to live very comfortably. And when you compare that to the housing out in a remote community where you might have 15 people living in one house, I think the housing class difference is quite apparent as well.

AEDY: There are huge differences in housing throughout Australia. Ilan Wiesel is an urban geographer at the University of Melbourne. He says class has a big effect on housing. But is that the quality of housing or security of tenancy, or the neighbourhood?

ILAN WIESEL: It's all of those, but it's also about wealth and what I guess, in my jargon, is called real income or after-housing disposable income. So if you measure not just the figure that you see on your pay cheque, but you actually measure your real income, which would take into account where you live and how much you have to spend on travel to work and all sorts of services that you need to access, which in some neighbourhoods are very accessible, in others they're less accessible, then your income looks very different. And if you look at your income after housing, after you pay your rents or after you pay your mortgage repayments, when you measure those real income, or after housing income, you see a gap that's much bigger than the one you see when you just measure income itself. A gap between the poorest and the wealthiest members of society.

AEDY: The wealthiest members of society live in very different neighbourhoods to the poorest. And living in those neighbourhoods actually amplifies their advantage.

WIESEL: If you think about the most affluent members of society, the so-called upper class, you'll get to live in a very affluent neighbourhood, you'll be surrounded with other very affluent and very high-powered neighbours. And you'll be able to network with them. So you'll have friends in your network who are Members of Parliament, who are CEOs, who are owners of very large businesses and small businesses. So you create a network, and we've done some work measuring those networks and how living in those very affluent neighbourhoods expands people's networks. So your social capital, in a sense, increases by living in a place like Toorak or Mosman.

AEDY: And I suppose if you're living in Mosman or Toorak, or Cottesloe in WA, you are more likely to be an effective lobby for the area you live in? You're going to have the connections to the politicians, you're going to understand when you need to get lawyers involved, because something is proposed that you don't want to happen.

WIESEL: Yes, certainly. It does help in certain types of situations or in respect of certain types of campaigns. For example, in Mosman around plans to build a retirement village in the National Park in Mosman, and the neighbours or the residents mobilised very effectively to stop that from happening, using their media connections, their connections in government, including Tony Abbott who was Prime Minister at the time.

AEDY: Some parts of the country have seen huge increases in property prices. Ilan Wiesel says in those circumstances, there's actually an alternative class system.

WIESEL: I think it's starting to become a story of three housing classes, which I see as the renting class, the homeowner class and the landlord class, or the housing elite class. And while you see the renters spending much of their income on housing, and basically, that's preventing them from accumulating wealth, you see the middle class – the homeowners – building much of their wealth. Around half of their wealth is built in their own homes. And then you've got the so-called landlord class, who are building wealth not only in their own homes, but also by renting homes or financing homes for others. And I'm not just talking about mum-and-dad investors; I'm also talking about financial institutions and investors and banks, who also profit significantly from housing and from the housing boom. So I think those three classes are becoming the class structure, as defined as the upper class, middle class and lower classes, becoming almost synonymous with those three housing classes.

AEDY: And this is having social consequences. George Megalogenis.

MEGALOGENIS: The big thing that's changed in Australia in the last 50 years is not so much what you're earning, it's not so much the job you do, it is your ability to borrow to own a house. It's fun to look at all the other micromeasures, but the homeownership rate is your sort of headline. So at the end of the Second World War, half of the population either owned their home outright or were paying it off. And one of the big things that both Labor and Liberal wanted to do as part of the post-war reconstruction after the Second World War was to lift the home ownership rate. And we were able to get it up to about 70 per cent by the early 1960s, and that figure held for pretty much the next 40 years. At the turn of the 21st century, the home ownership rate starts to drift down. And in fact, on the latest data, depending on what you're measuring, it's in the low 60s. So 10 percentage points of what used to be the middle class are out of the property market today. It's quite a large number of Australians. One of the reasons – and this is really driving the inequality argument in Australia today, because inequality primarily is about wealth distribution, rather than income distribution; we can measure income distribution and we can do things at the margin to correct that, but it's very difficult to correct wealth inequality, because you literally have to take money off people and people are reluctant in Australia to give stuff up, especially if you're asking them to get rid of an investment property. Now when the home ownership rate is sort of drifting from 70 per cent towards 60 per cent, that 10 per cent gap can be explained a couple of ways. One, people starting families later – so they're deferring a decision to buy. But the other reason is that the first homebuyer has been crowded out by the property investor. So that extra ten percentage points that was once a homeowner is now a property investor. That's where that stock has gone to. And this is a time bomb in Australia, because we've sort of allowed the property investor class to run rampant because of things we've done to negative gearing and the capital gains tax, and over the top of that has come this second trend, which is people moving back into the city, into an area where the housing stock is fixed, unless you build apartment towers, where those prices are going up. So most people want to live within 10 kilometres of the CBD now, but a lot of people can't. People don't want to be pushed to the outer suburbs, especially where service delivery is pretty crappy out there now, to be honest. But that aspiration to live in the centre is almost impossible to satisfy for a society that was used to a 70 per cent homeownership rate. We're in uncharted waters for Australia, because these are London, Paris, New York, San Francisco kind of dilemmas, and we know that those societies become more unequal because of things like this.

AEDY: The price inflation of property over the last 20 years doesn't affect everyone in the same way. Here's social researcher and writer, Rebecca Huntley.

REBECCA HUNTLEY: When we look at things like, not income inequality, but wealth inequality in particular, and how that plays into class, you need to then fold into that, generation. So I'm not saying this is the norm but it was much more probable to be two public school primary school teachers 20 or 30 years ago and find yourself in a reasonable house in a major city, with a manageable mortgage. Having spent a lot of time in the last couple of months interviewing 20-something primary school teachers, I can guarantee you that they are going to find it incredibly difficult, even to get into a one-bedroom apartment in the same area in which their parents would have easily bought. So we're still talking about same income, same professional backgrounds, same educational background, largely – in fact, you've likely got to be more educated to be a teacher, primary or secondary school now, than previously. And just because you happen to be in your 20s now, than 20 or 30 years ago, then you're going to really struggle to get into the housing market. And in a country like Australia, socially, culturally, as well as economically, where you are in the housing market – whether you rent, whether you own, whether you own outright or whether you own with a big mortgage – has a massive impact on your disposable income and levels of debt and quite possibly the kind of way that you're going to retire and the way that you're going to age. So, on the question of housing and class, we absolutely have to factor generation into that, in a way that on other questions, we may not have to consider so much.

AEDY: Melbourne University sociologist Dan Woodman says this, in turn, is affecting class.

DAN WOODMAN: It is re-engineering our class system. And I wouldn't say it was anybody's grand, nefarious plan, but it was also due to choices that were made in policy and such. We've decided to, in fundamental ways, make family resources more important than they used to be. Because the people who are getting into the housing market, amongst younger cohorts, very, very often are having help from their parents. So one thing that's happening is that the baby boomers who have done well – and that's by no means all of them, particularly if you're a baby boomer who's divorced, and you're a woman, you might not have very much super and you might be getting by on the pension, and there's all kinds of things like that – but overall, the baby boomer cohort had a kind of dream run with certain things around the economy and housing in particular. And some of them are helping out their children. And they're helping out their children before they die. So, handing over money and sometimes really quite substantial amounts of money to get that 20 per cent deposit to get into the housing market. The parents who have the time and resources are also contributing to child care. More and more, 20-somethings are living in their family home to do that Masters’ degree. Or even, that's the other way that people are getting into the housing market is moving back home for a little while in their late-20s or early-30s and saving, which is really another type of transfer. So we've made these decisions in how we've shifted things, that mean that if you've got parents that are wealthy, then it's helping more, or it's become more of a necessity to do some of these things than it once was. 

AEDY: This is happening at a time when work is becoming less and less secure. The historian Janet McCalman says we've seen this before, and we know what happens.

JANET MCCALMAN: The group who are most disadvantaged, apart from Aboriginal people, and this is true – I've looked at all of the data, starting with convicts, starting with babies born in the women's hospital, Aboriginal people, the people who went to the First World War – the group who come out as, by far, and the big gap between them and everyone else, is those who are in what we call the irregular economy. People who are in casual work. That stopped after World War II. Now we're returning to having a very large portion of our society trapped in a gig economy, where they operate with an ABN, they have no unions, they have no protections, the law doesn't touch them, their employers or contractors can't be sued for their ill health or their injuries, these are now people on their own with no security or no future. And we are going back to where we were in the late 19th century. Now these have become – even though many of them have now become middle class in terms of their qualifications – are going back to being this excluded, impoverished group of people, who will never get on top of their lives. It's okay being in the gig economy or working on contracts when you're in your 20s. It's awful when you're in your 50s.

AEDY: Middle-class Australia is increasingly worried about this. It's increasingly concerned about work, and about property prices. George Megalogenis.

MEGALOGENIS: I would actually like to have the conversation, but I would like to have the conversation on the oldest possible Australian frame, which is fairness. And if you have it around fairness, you frame your ideal and you work out the bits that are missing. And there are a lot of bits that are missing, but the most important bit, to be honest, is the underclass. And whilst I'm concerned about the middle class, the underclass in Australia – sole parents, Indigenous Australians, the refugees – they are literally silent in this debate. And I think this is another manifestation of the problem that we're facing now. Because a lot of people in the middle class feel their position is precarious, the people a rung below them – and I use the term underclass, it's not a loaded term, it's literally what it is, it's people almost out of sight, out of mind – they are not going to get the attention that the system needs to give them. Aboriginal novelist, Melissa Lucashenko.

MELISSA LUCASHENKO: There's families and there's suburbs in Australia where, simply by virtue of being born in that family or in that suburb, you are almost certainly not going to make it out of the working class or the underclass. Particularly if you're born to an underclass family in an underclass suburb or region, you are really pushing shit uphill with a pointy stick to try and claw your way into anything like a comfortable existence. And that's about violence, and that's about mental illness, and that's a whole toxic maelstrom of factors that interact in the Australian underclass. So you have to have a combination of luck, and hard work, and at least one parent who values education, and a whole lot of resilience if you're going to have even a shot of making it out of our poorest suburbs and our poorest families.

AEDY: Can I ask you a bit about the working class and the underclass? Because you've written about the underclass specifically.

LUCASHENKO: I guess what pops into my head when you say that is a conversation I was having on Facebook a couple of years ago. People were talking about jobs and joblessness and these were mainly white people I was talking to, and some of them made a throwaway comment about, I might just give up and go and get a job at Maccas. And my response to that is a job at Maccas is the promised land for a lot of people. A job at Maccas is an unattainable dream for lots of kids in the Australian underclass, including some kids in my family. It's not like flipping burgers is some kind of menial, last resort. It's a way to get a foot on the ladder. I suppose if you're talking about working class, you're on the bottom rungs of the ladder, bottom rung or two. If you're in the underclass, you're standing outside the yard, looking at the ladder in longing, or possibly wondering what the hell that funny thing made of wood with wooden slats across it is.

AEDY: Next on Class Act: why are we so weird about class? How does it get into the middle of our popular culture, when we only talk about it in code? And what can we do about the problem you've just been hearing about – inequality? Thanks to everyone you heard from today. And thanks also to Kate Pearcy, Jeremy Story Carter, and Loretta Cochrane, for location interviews. Class Act is produced by Kate Pearcy. Our sound engineer is Judy Rapley. I'm Richard Aedy.

ENDS

Authorised by Noah Carroll, ALP, Canberra


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