Light at end of inequality tunnel?

For a brief time, the arrival of COVID-19 nudged Australia a little closer to being a country of equality. This is because the pandemic didn’t just bring restrictions on how we lived and worked, it triggered a cascade of income supports from the Australian Government.

As a result, the latest annual Household, Incomes and Labour Dynamics in Australia (HILDA) Survey found income inequality fell to its lowest level since the HILDA Survey began in 2001 – even though this year’s HILDA data only takes into account the early months of the pandemic from mid-March to June 2020.

The Gini coefficient measures overall inequality and ranges from a score of zero – where everyone has the same income – to one where one individual has all the income, stood at 0.303 in 2019.

In 2020, it was 0.289. In 2001, the first year of HILDA, it was 0.304.

The HILDA Survey follows the lives of more than 17,000 Australians each year, over the course of their lifetime, collecting information on many aspects of life in Australia, including household and family relationships, income and employment, and health and education.

Professor Roger Wilkins, Deputy Director of the Melbourne Institute: Applied Economic & Social Research and Deputy Director (Research) of the HILDA Survey program, says the Government’s economic interventions to counter the financial impacts of COVID-19 were key in bringing income inequality to its lowest level since HILDA began.

He pinpoints the Coronavirus Supplement, the $A550 per fortnight payment for low-income Australians already receiving some government payments and allowances, as “crucial”. But JobKeeper also played a role.

“It was interesting to see the extent of the impact on income inequality when the Government’s financial measures were only applied in the last quarter of the financial year -from mid-March to June 2020.

“It was only a short period but it had a substantial impact on income distribution – the financial measures made a real difference to people’s lives,” says Professor Wilkins.

The JobKeeper payment was introduced on 30 March 2020. Employers who were significantly affected by the pandemic were eligible for $A1,500 per fortnight for each employee with the full payment passed on to those employees.

People on temporary migrant visas and casual employees who’d been with an employer for less than 12 months were excluded from JobKeeper.

“With JobKeeper, we saw more negative effects on higher income earners. If you were a high-income earner, your business closed during the pandemic and you received JobKeeper instead, your income probably dropped,” says Professor Wilkins.

“If you were a low-income earner, the fortnightly JobKeeper payment may well have boosted your usual income.”

Overall, 23.1 per cent of households received JobKeeper but only 5.1 per cent of the country’s poorest households received the payment. This was probably due to lower rates of employment within those homes which excluded people from receiving JobKeeper.

Associate Professor Alysia Blackham from the Melbourne Law School says young Australians suffered the highest rates of job loss during the pandemic, and they were often excluded from JobKeeper.

Lawyers report that many of their young clients said their employer didn’t apply for JobKeeper for them – they were told they didn’t need the payment and could move back home but they may have lived independently for years,” says Associate Professor Blackham.

“The idea that young people don’t need a wage is a form of age discrimination. I think age stereotyping may have informed some employers’ choices about whether or not to apply for JobKeeper for particular workers.’

The fact that JobKeeper didn’t apply to casual workers with less than 12 months of continuous employment with an employer also exacerbated inequalities for young Australians and women – who are more likely to be in casual work, adds Associate Professor Blackham.

For those who did receive JobKeeper, HILDA shows that, on average, the top 40 per cent of earners in Australia saw their incomes fall while incomes rose for the remaining 60 per cent of earners slightly narrowing the income inequality gap.

Not surprisingly, the pandemic brought plenty of financial stress with people under pressure to meet basic financial commitments and unable to pay utility bills (10.6 per cent) or mortgage or rent (6.8 per cent).

HILDA found 11.7 per cent of adults dipped into their savings, on average withdrawing $AU4,997. Due to Victoria’s early lockdowns and stringent pandemic restrictions, dipping into savings was most common in Victoria (13.0 per cent) and least prevalent in the Australian Capital Territory and Northern Territory (6.9 per cent).

There was an uptick in people asking for help from welfare and community organisations (from 3.7 in 2019 to 4.9 in 2020), and a drop in people asking for financial help from friends and family (11.8 to 8.5).

“I suspect this is because often when you have an adverse financial event, it’s specific to you so you can ask friends or family for help because they aren’t going through that experience.

“But COVID-19 affected everyone and probably made it less viable for people to ask friends and family for financial help,” explains Professor Wilkins.

For the first time, HILDA explored the issue of food insecurity and people’s ability to buy enough food. The results found this was particularly a concern for Indigenous Australians, single parents, single non-elderly men and women, and those with poor health or disability.

Because of concerns around affording to pay for food, the survey found 8.5 per cent of people ate only a few kinds of foods, seven per cent were unable to eat healthy and nutritious food, and 2.9 per cent of people reported that their household ran out of food.

“We’ve seen a substantial increase in demand on emergency food services because of COVID-19 and cost of living issues,” says Professor Jo Barraket, Director of the Melbourne Social Equity Institute.

“International students, people living in public housing and people who lost their jobs or got stood down are vulnerable to food insecurity. It’s inevitable that when you are at the lowest level of the income scale, a proportionate decrease in your income can be the difference between being able to eat and pay bills.

“For a high-income earner, that decrease in income might instead change how much savings you can put aside.”

One unexpected HILDA finding is that people reported more satisfaction with their financial situation (up from 6.7 to 7.0 in Australia generally and rising from 6.9 to 7.2 in Victoria).

Professor Wilkins explains this as an effect of the Government’s increased financial support. He says it illustrates how Government economic measures can have profound effects on the quality of people’s lives and on creating greater economic equality.

“This HILDA Survey graphically demonstrates how the Government has policy tools available to reduce income inequality if it wants to exercise them. Using these tools for only a quarter of a year had a profound effect on reducing poverty and inequality,” he says.

Professor Barraket agrees that the effects on people’s financial wellbeing of the Government’s response to COVID-19 clearly show that, to a large degree, “poverty is a policy choice”.

“We have a welfare system that stigmatises those who use it and where many people who receive social security have lived below the poverty line for a long time.

“As soon as COVID-19 supplements were introduced, for the first time in a long time, we saw large groups of people move above the poverty line, or very close to it,” she says.

“If we want greater social equity in Australia, we need to review our social security income provisions and reform our tax system. We need to review where our collective resources come from and how they can be more fairly distributed.”

Associate Professor Blackham believes future HILDA data that encompasses a longer period of the pandemic will highlight income and job inequalities created by COVID-19.

“When we have disrupted careers and violent periods where we lose work, we might be re-employed again but under-employed with not enough hours, less pay or in a job that doesn’t match our skills or expertise,” she says.

“I think we will see the legacy of COVID-19 in terms of inequalities of health, wellbeing, education and work for many years to come.”

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