The PM’s claim in early May that low income households have enjoyed the strongest growth in private sector incomes over the period from 1997-98 to 2004-05 has been challenged this week by the St Vincent de Paul Society who criticise the PM for basing his claim on the spurious use of percentages rather than actual amounts.
Whilst it is true that there has been a rise of 165 per cent in average private household income in the bottom 10 per cent, this represents a rise of only $26 per week, whereas the top 10 per cent of income earners have had a rise of $770 per week – a paltry, so he would have us believe, increase of 38 per cent.
Even more telling is the change in the income gap between the top and bottom deciles which has increased from $556 to $652 per week over the period 1994/05 to 2002/03. The Gini coefficient – a standardised measure of income inequality – has increased from 0.296 to 0.309 over the six year period to 2002/3 – another indicator of wealth being concentrated in fewer hands.
The recent budget will clearly exacerbate these changes.
If income inequality only affected those most affected by it, the rest of us could perhaps turn a blind eye and blame it on the victims who some might wish to label as genetically inferior, workshy, or living with the consequences of behavioural choices they have made that have impeded their life chances. Others might see it as an inevitable consequence of the irremediable maldistribution of talent and opportunity in society – ‘the poor you will always have with you’.
But widening income inequality affects us all in that it impacts on the quality of life of everyone, not just those at the bottom of the distribution. Inequality, rather than poverty alone, has pervasive social effects. The degree of inequality a country is not preordained, but susceptible to social and economic policy. As Peter Saunders (SPRC, UNSW) has stated – it would take 2 per cent of GDP to eliminate poverty for all Australians ‘the fact that we don’t do so, is a matter of choice, not affordability ‘.
There is evidence that life expectancy ceases increasing after countries reach a certain level of GDP per capita (around US $10,000). Life expectancy in Costa Rica (76.6) is higher than in the US (76.4) despite a difference of GDPpc of around US$21,000. Life expectancy in the province of Kerala, despite having a third or a quarter the income of South Africa or Brazil, is only 3-4 years less than the US.
It seems that beyond this level, life expectancy – and other health and wellbeing outcomes – are more affected by the way income is distributed. For example, metropolitan areas in the US that had high income inequality had an excess of death compared to areas of low inequality that was equivalent in magnitude to all the deaths due to heart disease . Homicide rates increase in proportion to the degree of income inequality in US states and Canadian provinces, a finding also noted in cross-national comparisons. These findings parallel increases in hostility between people as income inequality increases. People trust each other less in countries with larger income differences. Social capital is higher in US states which have more equal income distribution. Hugh Mackay’s research which is picking up trends showing that people are reducing their social engagement in exchange for the pursuit of private activities is in line with these international findings.
Socioeconomic gradients in health outcomes have been known to exist for 150 years. They continue to exist even when – as in the case of the UK after the introduction of the NHS – universal access to health care is available. But what is worrying about the growing socioeconomic inequality in Australia is that it forebodes steeper gradients in health inequality. This means as Daniels et al point out, that ‘middle-income groups in a more unequal society will have worse health than comparable or even poorer groups in a society with greater equality.’
We haven’t yet seen it here yet, but in Britain, mortality in younger age cohorts actually increased during the Thatcher years when income inequality widened.
What explains the gradient effect in health and wellbeing outcomes? The Australian epidemiologist who heads the World Health Organisation’s recently appointed Commission on the Social Determinants of Health, Sir Michael Marmot found that even within an employed Whitehall civil service cohort, gradients in mortality from all causes and other health outcomes existed that were not explained by differential exposure to well known risk factors – smoking, early life experience. His conclusion – supported subsequently by other work – was that the extent of control over circumstances at work was a critical determinant. It was not work pressure alone that caused stress-related illness, but too much psychological demand in the face of low control. Marmot speculates that low control is likely to be a feature of the social conditions under which people live as well as work. One can’t help wondering about the impact of the proposed industrial legislation changes on job security and workers’ sense of control in the wokplace.
If we believe that equality of opportunity should not be determined by one’s position in the social hierarchy, education is a crucial leveller. Daniels and his colleagues argue that in addition to equitable public education, measures that aim to mitigate the impact of socio-economic inequality on opportunity must include ‘the provision of developmentally appropriate day care and early childhood interventions intended to promote the development of capabilities independently of the advantages of family background’ as well as access to graduate and professional education.
Whilst the Howard government has encouraged the expansion of child care and is in the process of launching a raft of early intervention strategies through the Stronger Families and Communities strategy, in some parts of the country more than half of school entrants currently have no prior to school group educational experience. Arguably this is a state and territory responsibility, but it is critical the shortly to be released Early Childhood Agenda addresses this inequity. Children’s language development – an important marker of successful progress in school – is strongly influenced by home experience, with US data showing marked socioeconomic differences in the richness of preschool children’s language experience. Without the beneficial experience of preschool, these children are candidates for poor educational outcomes.
Worryingly, given current government policies and the drift from public education, there is some evidence that even ensuring equality of investment in education across different social groups would be insufficient to address differential outcomes. Without increased levels of investment in educational spending for disadvantaged children, children from advantaged backgrounds will still benefit more, with the result being greater inequality in educational outcomes.
If we believe that one of the goals of social policy is to enable people to function as normally as possible to protect the range of opportunities open to them, fair equality of opportunity should be one of its governing principles. If we consider ourselves a fair society it is crucial that impairments of normal functioning arising from the health and ‘lack of capability’ consequences of socioeconomic inequality be addressed by policies that invest in infrastructure and equitable access to the resources needed to promote normal functioning. Otherwise, we will return to the jungle.