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Rising to the challenge of inequality

Andrew Leigh writes in Inside Story (15.6.18) that Thomas Piketty and his colleagues have used new data to track inequality and sharpen the choices we face to create an equitable society.

‘Australian inequality has risen markedly over the past generation. Homes on Point Piper’s Wolseley Road can cost $50,000 per square metre; and if you’d like to park Australia’s most expensive sports car in your garage, Pagani’s Huayra Roadster — powered by a 562kw engine — will set you back $5.5 million. Many stores are struggling, but luxury retailing in Australia has surged.

‘The battlers aren’t so lucky. When the Salvation Army surveyed the disadvantaged clients who rely on its services, it found that almost half had been forced to move house in the previous twelve months, a quarter of them fleeing family violence. Two-fifths of families couldn’t afford to feed their children properly.

‘Egalitarianism holds a special place in the hearts of most Australians. We don’t have private areas on beaches, many of us sit in the front seats of taxis, and most of us prefer the word “mate” to “sir.” But to fully understand inequality, we have to look beyond our borders, to see what’s going on in the rest of the world. And we have to look not just at the situation today, but at the lessons from history and possible paths for the future.’

To tackle inequality, we must start in the labour market

Jim Stanford writes in The Conversation (1.11.18) that, while government payments and programs go some way to reducing inequality, the transformation of the labour market and its institutions has cut workers’ share of the pie to historic lows.

‘Scientific understanding of the consequences of inequality has grown by leaps and bounds in recent years. Thanks to the pioneering work of scholars such as Joseph Stiglitz, Kate Pickett and Richard Wilkinson, and Tony Atkinson, we know that persistent social and economic inequality exacts an enormous toll: on mental and physical health, the stability and efficiency of communities, and macroeconomic performance.

‘How, then, should this pervasive and multidimensional problem best be tackled? Statistically, we can measure income inequality at three different levels. And those levels provide a natural categorisation of the policies needed to combat it.

‘… Fixing this problem requires an ambitious, multidimensional effort to rebuild the policy levers of inclusive growth. Minimum wages should be high enough that anyone working full-time can escape poverty. Supplemental measures like penalty rates and casual loading should be strengthened, not eroded. The award system should again aim to support wage growth for all workers, not just those at the bottom.’

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