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Recent Trends in Wage Income Inequality in Australia

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Title: Recent Trends in Wage Income Inequality in Australia


1
Recent Trends in Wage Income Inequality in
Australia
  • Peter Saunders
  • Social Policy Research CentreUniversity of New
    South Wales
  • p.saunders_at_unsw.edu.au
  • Presented to the Australian Social Policy
    Conference, University of New South Wales, 20-22
    July 2005

2
Recent Studies of Earnings/Wage Income Inequality
  • Using Earnings Data from Labour Force Surveys
  • Gregory (1993) Keating (2003)
  • Norris and McLean (1999) Saunders (2000)
  • Using Household Income Survey Data
  • Borland and Wilkins (1996) Borland and Kennedy
    (1998) Borland (1999)
  • Richardson and Harding (1998 1999)
  • Saunders (1996) Pappas (2001)

3
Recent Findings
  • Full-time earnings inequality has increased for
    men and women, particularly between 1990 and
    1994-95
  • Inequality increase concentrated at the top for
    males, but strong growth at the bottom for
    females
  • Increased inequality has taken place within
    education/experience groups, in a small number of
    industries, among Australian-born and immigrants,
    in private but not public sectors, with some age
    differences

4
Keating (2003) Study
  • Relative pay rates by occupation have been stable
    since the mid-1970s
  • Observed change in inequality reflects changes in
    the occupational composition of employment
  • Need to address inequality through employment
    policies, not by trying to control wage rate
    changes

5
Advantages of Using SIHC
  • Can relate individual earnings to family
    circumstances
  • Can locate earnings inequality in the overall
    inequality profile
  • SIHC data are available in unit record file
    format
  • BUT
  • Switch from IDS to SIHC in 1995 is a potential
    problem
  • Problems with some aspects of the reported SIHC
    data (but not wages of full-time employees)

6
Approach Used Here
  • Focus on full-time employees aged 15-64 years
    only
  • Period covered 1981-82 to 2000-01
  • Examine changes in real (CPI-adjusted) total wage
    incomes at different points (percentiles) in the
    distribution
  • Explore changes at the very top of the
    distribution
  • What does the disaggregated picture look like?
    Have all FTEs experienced real wage income
    increases? Are there systematic differences by
    gender and age
  • Examine the distribution of employment growth
    (since 1986)

7
Ratio of Wages and Salaries (SIHC/IDS) and
Employee Income (HES) to Cash Wages and Salaries
in the Household Income Account (ASNA)
8
Distribution of Wage and Salary Income Among
Full-time Employees by Gender, 1981-2001
(2000-01)
9
Changes in Real Wage Incomes of All Full-Time
Employees (percentages)
10
Changes in Real Wage Incomes of All Male
Full-Time Employees (percentages)
11
Changes in Real Wage Incomes of All Female
Full-Time Employees (percentages)
12
Main Findings
  • Overall increase in inequality is substantial
  • Inequality increased most between 1990 and
    1994-95 steady increase for men since 1996-97
  • Increase is mainly at the top for men, but more
    evenly spread for women
  • P10 and P20 males have gone backwards, P10
    females have done very well
  • Female earnings in 2000-01 lower than equivalent
    male percentiles in 1981

13
Changes in Real Wage Incomes of All Full-Time
Employees Under 25 (percentages)
14
Changes in Real Wage Incomes of All Full-Time
Employees Aged 25-49 (percentages)
15
Changes in Real Wage Incomes of All Full-Time
Employees Aged 50 (percentages)
16
Main Findings
  • Clear age differences in the change in
    inequality
  • Little change in levels or inequality among
    younger employees employment structure effects?
  • Older employees have done best in terms of
    levels, but inequality has grown fastest
  • P10 P20 employees aged over 25 have gone
    backwards

17
Distributional Pattern of Changes in Male FTE,
1986- 2000-01
18
Distributional Pattern of Changes in Female FTE,
1986- 2000-01
19
In Conclusion
  • The SIHC data provide a valuable source of
    information on trends in wage income inequality
  • Findings are consistent with previous studies
  • P90 and P95 employees have done very well, P10
    employees (not females) have gone backwards
  • The aggregate picture is misleading not
    everyone has gained from recent reforms
  • The disappearing middle thesis is still alive
    and well particularly for males (but need more
    research on this)
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