The income gap between rich and poor is a bigger drag on the wellbeing of the Australian community than previously estimated, a broad measure of national welfare shows. Source: The Age.
The Sydney Morning Herald/Age-Lateral Economics Wellbeing Index has lifted its estimate of the wellbeing cost of income inequality in 2018 by nearly $8 billion.
The upward revision was triggered by the release this month of data from the Bureau of Statistics’ 2017-18 survey of household income and wealth which revealed a modest increase in income inequality compared with the previous survey.
Debates about how to respond to economic inequality have emerged in many Western democracies, including Australia, over the past decade amid growing voter concern about the distribution of wealth and income.
The index puts the cost of income inequality to Australia’s collective wellbeing in 2018 at $247 billion, up 3.8 per cent compared with the previous year.
During the past five years the annual wellbeing cost of income disparities across the economy has grown by a hefty $48 billion.
The index adjusts official gross domestic product figures to take account of changes in know-how, health, work life, environmental quality and income distribution. It provides a superior gauge of national progress than traditional economic indicators.
The most recent report revealed weak growth in Australia’s wellbeing last year – the index rose by only 0.3 per cent in the 2018, the lowest calendar-year increase since 2015.
According to Lateral Economics’ estimates each additional dollar received by the poorest fifth of households adds five times more to the wellbeing of those households than each additional dollar earned by the wealthiest fifth adds to theirs.
As the index’s author Nicholas Gruen puts it, “a dollar in the hands of those with low incomes tends to meet far more urgent needs than a dollar in the hands of those with high incomes.”
“Our analysis shows that inequality is an important factor for wellbeing and even small changes in the level of inequality – which the new numbers show – have substantial impacts on Australia’s wellbeing overall,” he said.