Distribution of Income Flashcards
Where does Australia rank in the OECD, in terms of equality?
About Average
What are some factors that promote equality in Australia?
Sustaining economic growth since the early 1990s
Universal Access to Public Education
Universal Access to Healthcare
A well-targeted social security net
Define personal income
The amount of money, or other benefits measured in money terms, that flows to individuals or households from the sale of factors of production
Define income inequality
The degree to which income is unevenly distributed among the people in an economy
What are some of the recent share of income figures?
In 2017/18:
- the lowest quintile group earned 7.5% of total income
- the highest quintile group earned 40.4% of total income
Over the past two decades, the share of income has fallen for every quintile except the highest 20%
What is the Lorenz curve?
A graphical representation of income distribution, plotting the cumulative increase in population against the cumulative increase in income
The further the Lorenz curve is from the line of equality, the greater the degree of income inequality in society
What is the Gini coefficient?
A number between zero and one that measures the extent of income inequality in an economy
It is calculated as the ratio of the area between the actual Lorenz curve and the line of the equality (A) and the total area under the line of equality (B)
The formula is; A/(A+B)
When all incomes are equal, the coefficient is zero
How does Australia rank in terms of its equality?
The most recent study by the OECD ranked Australia 23rd for its equality with a coefficient of 0.328
What is the relationship between the distribution of income and wealth?
There is a much greater disparity between Australia’s wealth compared to income
The top quintile earns 40.4% of total income while owning 63.5% of total wealth
The bottom quintile earns 7.5% of total income but owns less than 1% of total wealth
Why is there a much greater disparity between income and wealth levels?
Although Australia experienced only modest rates of economic growth during the 2010s, house prices and share market values increased dramatically, thus increasing the wealth of asset owners
What are the main sources of income in Australia?
Wages and Salaries - 57%
Rent from Land - 8%
Earnings from Capital - 9%
Profit from the Sale of Entrepreneurial Skills - 9%
Transfer Payments - 8%
What are the main components of household wealth in Australia?
Owner-occupied Property - 42%
Superannuation - 18%
Investment Property - 15%
Contents of House 7%
Savings in Financial Institutions - 5%
What have been some recent trends in the distribution of income?
During the late 1990s to early 2000s, the level of inequality generally increased
However, this upward trend appears to have stabilised since the Global Financial Crisis
Over half of the population earn less than the mean income of $1062 per week
More than 80% of households have a net worth that is below the average, because it is so highly concentrated
How does age & education impact income/wealth?
Income will generally increase over one’s working life, and 45-54 years earn the highest mean weekly income
Wealth follows a similar pattern according to age
How does gender impact income/wealth distribution?
Full-time female workers earn less than males - $240 per week on average
