Australia Yearbook - 2001

Chapter 7—Income and welfare 293
transfer policies, though nowhere has inequality
declined to any noticeable degree. The important
point to emphasise is the value of comparisons
like those shown in tables C5.8 and C5.9, not only
in describing how income distribution varies in
different countries, but also in raising important
questions about why the differences arise and
what can be done about them. The LIS project
has contributed to the analysis of income
distribution by providing a sound statistical
basis for making cross-country comparisons
and raising awareness that the income
distributions of different countries are
different.
C5.9 CHANGES IN INCOME DISTRIBUTION (GINI COEFFICIENTS)—1985 to 1995
Year Gini Year Gini Year Gini Overall Change
Country(a)
%
Finland 1987 0.207 1991 0.223 1995 0.226 +9.2
Sweden 1987 0.220 1992 0.229 1995 0.222 +0.9
Norway 1986 0.234 1991 0.234 1995 0.242 +3.4
Luxembourg 1985 0.238 1991 0.239 1994 0.235 –1.3
Germany(b) 1984 0.265 1989 0.281 1994 0.300 +13.2
Netherlands 1987 0.268 1991 0.272 1994 0.282 +5.2
Canada 1987 0.289 1991 0.286 1994 0.286 –1.0
Australia 1985 0.295 1989 0.310 1994 0.317 +7.5
United Kingdom 1986 0.304 1991 0.340 1995 0.346 +13.8
Italy 1986 0.310 1991 0.290 1995 0.346 +11.6
United States 1986 0.341 1991 0.342 1997 0.375 +10.0
(a) Countries are ranked by their Gini coefficient in the initial year. (b) Refers to West Germany.
Source: Smeeding, 2000, Table 1.
Current issues
Australia has made enormous progress in many
areas of economic activity during the course of
the twentieth century. That progress has resulted
in a substantial increase in economic prosperity
in which all groups have shared, though to
varying degrees. At the same time, there have
been major changes in the institutional
framework and social conditions that both shape
and reflect economic progress. An assessment of
the overall impact on living standards requires
account to be taken not only of the increase in
material prosperity, but also of changes in the
social, environmental and cultural context within
which the fruits of economic progress are
produced, distributed and consumed. An
important element of this is how economic
product is distributed among members of society,
and income distribution is one aspect of this. The
distribution of income provides important
information about how economic resources are
distributed in society, particularly if income is
defined in a broad way.
As the foregoing analysis has shown, however,
significant progress over the century in our ability
to measure the income distribution, identify its
causes and monitor distributional change has
evolved only recently. Although there has
been a long-standing and intense interest in
the topic, appropriate statistics and analytical
tools have only emerged over the last three
decades. Despite the considerable progress
that has been made in this period, there are
still many areas where current understanding
of the causes and nature of income
distribution is in its infancy. Yet the broad
picture of rising inequality that has emerged
from the statistics and research already
conducted has entered the national psyche,
with references to a “growing divide” and
“poverty in the midst of affluence” a regular
feature of media accounts of contemporary
Australian society. Unfortunately, these
accounts do not always capture the subtleties
of the data and the complexities of income
distribution measurement and analysis. This
situation reinforces the need for more
studies of income distribution and for greater
effort at disseminating the findings and
highlighting their limitations.
While great progress has been made in
collecting income distribution statistics in
Australia, the debate over living standards
calls for more sophisticated measures of