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Inequality and poverty

By Don Aitkin - posted Thursday, 22 May 2014


We will have budget talk for another week, and then attention will shift to the new Senate and negotiations between the Coalition and the minor parties in the new Senate. But throughout the past week there has been a lot of talk and a lot of complaint about the 'inequality' said to be part of the Treasurer's approach to the deficit. Who really is doing the 'heavy lifting'?

I wrote a piece about the improvements in the level of poverty in the world some time ago, and said in it that inequality and poverty are not the same thing at all. The pervading theme in the complaints about the fairness of the budget is that the rich (whoever they are) should pay more than they do. Another way of expressing the theme is that part of the deficit is caused by the commitments to spending on the disabled and on public schools (via Gonski), and interfering with those commitments is to bring in (or back) more inequality. And that's not fair. So the rich should pay.

'Fairness' has been one of the great cries in Australian politics and society from the beginning of the British settlement, and probably has a lot to do with the circumstances of a penal colony and the re-settlement into civil society of those convicts whose terms had expired. There is a sense in which it is hard to be opposed to 'fairness'. But it is worth remembering, at the same time, that human societies are not naturally 'equal', and never can be. Humans themselves are not equal in any way: height, weight, beauty, talent, parents, circumstances when growing up, character, style, moral fibre, and so on. We are all unequal in every respect. That's not unfair - it's just the way it is.

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Howard Gardner, whose work on multiple intelligences I have praised before, says that almost anyone can be 'highly competent' at almost anything, provided always that he or she wants to be, is encouraged to be, and is trained to be. But there is still only one winner at Wimbledon. And you need to be an outstandingly good-looking young woman to be considered for Miss Australia. And there is only one Queen.

Fairness and equality do get muddied up a lot. In AFL, for example, the season is intensely competitive, but there is also a feeling that no one club should be able simply to buy all the best players. That leads to rules like salary caps, and to the draft, where the weakest club gets the first pick of the new talent. All sports have codes of conduct on the field, where some things are 'unfair' and legislated against. We want a contest, but between more-or-less equals, not between the big and the small - there's no fun in that (but remember David and Goliath). We do want a winner.

Perhaps there will be general agreement that there should be equality of respect, equality before the law and equality of opportunity. Yet as soon as you look hard at any one of these they become conceptually muddy too. We don't in fact respect people equally, and no team wants to win the wooden spoon, if only because fans leave in droves because they have lost their respect. Respect has to be earned. I think the nub of this aspiration is that we shouldn't treat people differently according to their race, sex, class and other categories. But of course we commonly do. Sometimes it is polite to do so.

Equality before the law is an important aspiration, but for every Alan Bond who serves time there are many others who get let off with light sentences or warnings because of their 'previous character' and their 'standing in the community'. It helps to have money if you're going to be in court. Not everyone has it, and only a few have lots of it.

Equality of opportunity? Another worthy aspiration, but see the list of inequalities above. It helps to have chosen your country, your parents, your race, your sex and your time of birth. As a society we do try to give kids a good start, and to offset their initial disadvantages if they are obvious enough. But we can't really have 'equality of opportunity' - it's just too hard to know what the real inequalities are in a particular case, and to compensate properly for them.

To me, the whole field of 'inequality' is a bog, where aspiration seems always to triumph over observation. I began with the budget and will finish with it. Those who didn't like the budget claimed that it was unfair that the better-off shouldn't be asked to accept more of the burden of the so-called heavy lifting. Do the complainers actually know who pays what in income tax? Below is a little graph showing the proportions of tax paid by the top 25 percent of income earners, the middle fifty per cent and the bottom 25 per cent. The data have been assembled from the ATO reports by Professor Sinclair Davidson of RMIT, originally for Catallaxy Files; the graph below was used by the IPA, and is simpler.

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Share_of_tax_percentiles

It's easy to see that the top 25 per cent of taxpayers in terms of their taxable income contribute about two thirds of all the income taxation revenue - and that in general their share has been rising over time, while the poor pay very little. Sure, you say, but that is because we have a progressive income taxation system. As it happens, I agree. But surely the better off are already doing a lot of heavy lifting, aren't they? There's some real inequality here.

As I said, talking about inequality gets you into a semantic swamp very quickly. I try to avoid it if I can.

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About the Author

Don Aitkin has been an academic and vice-chancellor. His latest book, Moving On, was published in 2016.

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