Bill Shorten's inequality pitch has rustled the jimmies of conservatives

Extract from The Guardian

Business

Grogonomics

Greg Jericho

Those who dispute the problem of inequality, rather like climate change deniers, focus on the short term. But, as the graphs show, the long-term trend is clear

• Greg Jericho is a Guardian Australia columnist

Leonardo Di Caprio playing Jordan Belfort in the film The Wolf of Wall Street: ‘From 2004 to 2014, the tide lifted a hell of a lot faster for the rich than it did the poor.’ Photograph: Allstar/Paramount Pictures

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Tuesday 25 July 2017 10.39 AEST Last modified on Tuesday 25 July 2017 13.39 AEST

The response to Bill Shorten’s move to make inequality front and centre of his re-election campaign has the highlighted how utterly stuck conservatives are in a pre-financial crisis mindset. Rather than address the issue that has been a clear concern of households during a period of flat real wages growth, the response has been to argue the problem doesn’t exist and that all we really need to do is reduce government spending, keep the minimum wage low and cut workers wages.
Bill Shorten’s speech on Friday in which he argued that inequality was “the biggest threat to our health as an economy and our cohesion as a society” certainly rustled the jimmies of the conservatives.

The treasurer, Scott Morrison, responded by clutching at the take put forward by the Australian and the Australian Financial Review on the weekend, that Shorten was overstating the problem of inequality and that it was “a lie” to say inequality had got worse.
As with all economic data, measurement is an issue. Roger Wilkins, the deputy director of the Melbourne Institute of Applied Economic and Social Research on the weekend suggested that the ABS’s measure of income share and Gini coefficient (a measure of inequality) was unrealisable because the ABS had “changed its method of collecting this data”, a claim the ABS’s Dean Adams disputed.

Shorten talks up Labor plan to tackle inequality and tax reform

The Melbourne Institute’s Gini coefficient since 2000 is quite stable, whereas the Bureau of Statistic’s Household Income and Wealth survey, which has been run irregularly since 1994, shows that inequality rose during the mining boom, but has flattened since the global financial crisis hit:

Generally, those who dispute the problem of inequality, rather like climate change deniers, focus mostly on the short term.
Shorten’s argument is not that inequality is higher this year than last year – or even five years ago (or, as he has been falsely accused of arguing, that it has been “ever rising”), but that it has been clearly rising in the long term.
For example, in his speech he noted correctly that “workers’ share of income is at its lowest level in a half a century.” In the latest GDP figures, 51.5% of income went to employees – the lowest since September 1964:

Shorten’s main claim that inequality is as bad as it has been for 75 years (something he did first in 2015 on the ABC’s Q&A) is based on research done by the ALP’s assistant treasury spokesperson, Andrew Leigh.
Leigh’s research is also used in the World Wealth and Income database set up by French economist Thomas Piketty. That data shows that the share of national income held by the richest 1% is indeed at the highest since the second world war – if you exclude the abnormal spike which occurred due the Korean war boom:

The share held by the richest 10% tells much the same story:

Professor Wilkins argued that looking at the share of income going to the richest 1% could be misleading because it was pre-tax and not equalivalised – meaning the figure did not take into account household sizes. He told the Australian that “it’s conceivable all of these people in the top 1 per cent are the only earners in their households and live in large households.”

However, it rather beggars belief that a greater share of income going to the top 1% would also see inequality falling – especially given it is much less likely that people in the top 1% are single breadwinners compared to those in the 1960s and 1970s when women’s employment participation was much lower.
And of course the issue of income inequality is not just about who has the most money, but how entrenched is that situation.
On this score, the Hilda release last year noted the problem of falling income mobility – which meant that people who were within one income were unlikely to improve their situation in the future.
The report noted that while this was good for people with high incomes, it was not for poor households as it meant “they are more likely to have persistently low incomes”:

Certainly the OECD thinks we should be worried about the issue. In its latest survey on Australia in March, rising inequality was a major focus.
It noted that: “Australia’s adjustment to the end of the commodity boom has not been painless. Unemployment has risen, and there are increasing concerns about inequality.” It compared Australia with other nations in the OECD since 1991, and found its Gini coefficient has risen significantly:

It also found that in the decade from 2004 to 2014, the tide lifted a hell of a lot faster for the rich than it did the poor:

Morrison has also taken the short-term view. He told the ABC’s Fran Kelly that “the latest census” showed that the Gini coefficient “hasn’t got worse, it has actually got better.”
Andrew Leigh responded that “it doesn’t matter” which measure you use – whether it be Gini coefficent or share of income “you get the same answer – inequality has risen over the past generation”.
One of the more odd responses from the conservative side was by chief executive of the Business Council of Australia. Jennifer Westacott, who addressed the issue of fairness by asking rhetorically, “How fair is it to let the country fall behind and be unable to compete globally and attract investment, to create jobs, better jobs and higher incomes?”
This about an economy in which real incomes have been flat for four years and the real unit cost of labour has just plunged to a record low:

Is there thanks to the workers whose purchasing power is now lower than it was four years ago? No, of course not.
Labour productivity in the past four years has risen nearly 6% while real wages have fallen 0.6%:

Any thanks? Of course not.
Westacott also argued bizarrely that the way to address the issue was to cut government spending because she asked “how fair is it to lumber our future generations with debt if we go on spending and expect them to pay for it?”
Similarly, the editorial of the Australian Financial Review laughably argued that we not have a problem with inequality, and that Labor should look with longing to the time of Bob Hawke when he “forged a consensus around restoring profits and job growth by deliberately cutting real wages”.
Yep, lower wages, less purchasing power for workers and lower government spending is always the answer.

And the reflexive responses by those on the right highlights why Labor must continue this campaign – the push to cut workers’ incomes and services they use is ongoing.