Income leap for low-paid in recent years

THE incomes of the nation's poorest households rose more dramatically than those of the richest Australians in the final years of the Howard government, buoyed by rising wages and bulging welfare payments. While lone parents, indigenous Australians and the disabled still struggled, overall the poorest households have enjoyed the largest rise in income over the past six years.

The findings of the first study to track changes to income and wealth in the same group of people cast a new light on one of Kevin Rudd's central themes in Opposition - that in John Howard's "brutopia" the rich were getting richer and the poor were getting poorer. During last year's election campaign, Mr Rudd described working families as the "forgotten people", but the new research appears to paint a contrary picture. Since 2001, earnings for those at the bottom of the ladder rose more sharply than for those near the top - the top 10 per cent suffering a slight fall from 2001 to 2006.

While the rise in overall wealth favoured the top end - primarily due to higher property ownership - increases to lower-end incomes meant the rich hadn't skated away from the poor. "The figures show current income is not a good predictor of future income," said labour economist Mark Wooden, who will detail the findings at the two-day New Agenda for Prosperity conference, presented by the Melbourne Institute and The Australian, opening at Melbourne University on Thursday.

The data comes from the federal Government's Household, Income and Labour Dynamics in Australia survey, a longitudinal study of 14,000 people nationwide, which is managed by the institute. "It shows everyone has done pretty well in Australia since 2001," Professor Wooden, institute deputy director, told The Australian. "The rich have done a little better overall than the poor, and those with property have had a big surge. "But those with property are spread across the income spectrum."

The data, compiled by the institute's Roger Wilkins, shows median incomes - after adjusting for inflation - for those in the lowest 10 per cent of households increased 29 per cent after tax to about $26,000. The top 10 per cent saw their income fall by 2.5 per cent to $138,000. Wealth for the median household has risen rapidly since the turn of the century, from $215,000 to $340,000, fuelled by the property boom and a 51per cent increase in average superannuation balances to $123,000. For the bottom 10 per cent, wealth rose from $114,000 to $175,000. For the top 10 per it rose from $770,000 to $975,000.

"Income changes have tended to favour the poor, with the biggest winners being those in the bottom 10per cent and the biggest losers those in the top 10 per cent," Professor Wooden said. "And if you factor in non-cash benefits provided by the Government, the figures would tilt even more in favour of the poor."

Professor Wooden said a significant contributor to the improved fortunes of the poor had been better employment prospects and relatively strong wages growth. Moves from welfare to work almost invariably mean increased incomes, but even among the employed it has been the low-paid who have fared best. "People don't tend to move from one minimum pay job to another," he said. "They move to better jobs. Also at the lower end, there are automatic pay increments built into the system, whereas atthe top of the scale when people are close to their maximum productivity potential, pay increases are harder to come by except when there's a promotion. "And those lighthouse examples of directors getting massive bonuses or payouts? They are just a tiny fraction of the overall picture."

The pro-poor picture in income growth had policy implications for welfare delivery. "The Government could be handing out dollars to people who will be doing a lot better in the near future," Professor Wooden said. "This approach won't do much to address systemic disadvantage."

Those who remained stalled in the lowest 20 per cent of income and wealth over the six years surveyed were the indigenous, lone parents and the disabled. "It is here where the study could point the way to more targeted welfare delivery," hesaid.

In an essay titled Howard's Brutopia: The Battle of Ideas in Australian Politics published in The Monthly in 2006 shortly before he became Opposition leader, Mr Rudd cites warnings about the "brutopia of unchecked market forces".


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