Unit 1
Unit 3
Distribution of Income
International Comparisons
The United Nations Human Development Report concluded in 1996 that "Australia’s pattern of income distribution is amongst the most uneven in the western world". However, it is also true that the distribution of income in Australia is improved by the policies that have been put in place. We can see this by examining the relevant statistics.
If we look at the distribution of factor income in several countries, we can see that Australia does perform at the bottom end of the scale.
| Country | Poorest 20% | Richest 20% |
| Indonesia | 9% | 41% |
| Japan | 9% | 38% |
| Germany | 7% | 40% |
| USA | 5% | 42% |
| UK | 5% | 44% |
| Mexico | 4% | 51% |
| Australia | 4% | 42% |
| Brazil | 2% | 66% |
The poorest 20% of the population in Australia received only 4% of the factor income at the time of the survey. This made the distribution of factor income in Australia very similar to that of Mexico, and much worse than that of Japan or Indonesia. The richest 20% in Australia shared 42% of the income. This is far more similar to other countries in the table, although both Brazil and Mexico have much higher figures.
It is important to remember as you examine these figures that we are considering the distribution of factor income. As a result, there are other factors that must be taken into account when assessing the distribution of income in these countries. Australia maintains a strong system of transfer payments, and we also have a progressive income tax scale. This means that the distribution in Australia will change significantly before we get to final income. These policies are not as strong in Indonesia, nor Mexico. As a result, when the final analysis is complete Australia compares far more favourably. (Things have also improved somewhat since 1996 - the unemployment rate at that time was over 8.0%.)
Even so, the distribution of factor income is an important consideration. Low rates of unemployment in Japan have resulted in a far more equitable distribution of income in the first instance. Brazil, on the other hand, with high rates of unemployment and relatively inequitable social policies, maintains an extremely inequitable distribution of income.
Finally, it is always important to remember the impact of the social wage income. There are many factors which contribute to our standard of living in Australia which will not become apparent in an analysis such as this. For example, we have access to school, and a world class health system. Combined, these factors mean that a person on a low income in Australia may actually be better off than a person on a relatively high income in some other parts of the world.
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