La concepción y elaboración de los instrumentos de recogida de datos

Most of the developed world experienced strong economic growth in the years following the end of World War II. The subsequent fall in unemployment reduced the high level of inequality that had resulted from the Great Depression in the 1930s1. While economic growth declined from an average of 4 percent in the 1950s, to 3 per cent in the 1960s and 2 percent in the 1970s, income inequality remained relatively stable, rising only slightly from the 1960s to the mid 1970s2.

During the late 1970s and 1980s politics in the western world shifted to the right, and many governments adopted policies of deregulation, unleashing market forces upon the western world. Restrictions were lifted on the movement of international capital, resulting in many localised boom and bust cycles. Production involving unskilled labour was often shifted to developing low cost countries and traditional markets were eroded as trade restrictions were lifted. The demand for

unskilled labour fell, reducing the real earnings of unskilled workers and forcing many into unemployment. In contrast, deregulation provided opportunities for skilled workers, increasing their wages. The rise in unemployment and increase in earnings dispersions in many countries through the 1970s and 1980s subsequently increased income inequality3.

The reaction of governments varied, some countries with centralised labour markets managed to limit the increase in earnings dispersion, while others increased transfer payments and altered their taxation system lowering family income inequality. However policies generally moved against the welfare state, with many developed countries decentralising their labour markets and making regressive tax reforms, such as the introduction of consumption taxes, the increase in flat rate contributions for social security and decreasing top marginal income tax rates. A counteracting influence on the growth in inequality came from high inflation from the oil shocks and the economic boom of the 1980s. These effects pushed many tax payers into higher tax brackets, helping to reduce or stabilise the growth in the dispersion in earnings.

Saunders, Stott and Hobbes (1991) extend the analysis of the Luxembourg Income Study (LIS) database by O’Higgins, Schmaus and Stephenson (1989), to include comparable Australian and New Zealand results. Table 3.1 contains the quintile shares and Gini coefficients of selected countries from the LIS. Australia records a Gini coefficient for gross family income inequality of 0.40, just below the U.S., while slightly higher than Canada and the U.K and considerably higher than Sweden. Removing income tax and adjusting for family size using an equivalence scale where a value of 0.5 is assigned for the first member and 0.25 for each

3 _Ibid.

additional member, provides the net equivalent income estimates of Saunders, Stott and Hobbes, presented in the lower half of Table 3.1. The use of net equivalent income reduces inequality across all the countries listed. However the size of the effect varies due to differing degrees of income taxation and different joint distributions of family size and net income, across the countries studied. Adjusting for family size and income taxation, results in very similar quintile shares and Gini coefficients for Australia and Canada, suggesting they have a similar shaped distribution for real net equivalent income. In fact, as Saunders (1994, p. 209) notes, “In terms of other countries studied, both the Australian and New Zealand distributions are closer to that of Canada than of any other country”.

Table 3.1 Distribution of Family Income from Six Countries

Australia Canada New

Zealand Sweden

United Kingdom

United States Gross family income share among quintiles of families

Lowest quintile 4.6 4.7 5.7 6.7 4.9 4.0 Second quintile 9.8 11.1 11.4 12.3 10.9 10.1 Third quintile 16.6 17.8 17.6 17.2 18.2 16.7 Fourth quintile 24.8 25.3 24.7 25.0 25.2 25.1 Highest quintile 44.1 41.2 40.5 28.9 40.8 44.2 Gini coefficient 0.40 0.37 0.35 0.33 0.36 0.41

Net equivalent family income share among quintiles of individuals

Lowest quintile 7.7 7.6 8.2 10.9 9.0 6.4 Second quintile 13.0 13.3 3.5 16.0 13.5 12.8 Third quintile 17.5 17.9 17.6 19.0 18.0 18.0 Fourth quintile 23.6 23.7 23.7 23.0 23.4 24.2 Highest quintile 38.2 37.4 37.0 31.1 36.1 38.6 Gini coefficient 0.31 0.30 0.29 0.20 0.27 0.32 Reduction in Gini (from removing tax

and scaling for family size)

22.5% 18.9% 17.1% 39.4% 25.0% 22.0%

Source: Saunders, Stott and Hobbes (1991), Table 1.

Note: These results were derived from the January 1990 LIS database.

Atkinson, Rainwater and Smeeding (1995) provide a comprehensive study of OECD countries using the Luxembourg Income Study (LIS) database. The LIS

extent, comparisons of inequality to be made across countries. Table 3.2 provides a ranking in descending order, of income inequality by Gini coefficients from the Atkinson, Rainwater and Smeeding (1995) study. The United Sates has the highest income inequality, with the continental European countries (excluding Italy and France) experiencing lower inequality and the Scandinavian countries enjoying the lowest levels of inequality in the OECD. Australia’s income inequality along with that in Canada and France’s is slightly above the OECD average.

Atkinson, Rainwater and Smeeding (1995) also examine the annual change in inequality for selected OECD countries over varying time frames. Basically their study covers the early 1980s to the early 1990s and a summary of the results are presented in the top portion of Table 3.3. The European countries exhibited a substantial decline in gross income inequality compared to the rise in inequality in non-European countries.

Table 3.2 OECD countries ranked in descending order by income inequality in the mid 1980s

Rank Country Date Gini (x 100) Atkinson Index ε= 0.5 % Growth in Real GDP 1 United States 1986 34.1 9.9 2.9 2 Ireland 1987 33.0 9.3 4.7 3 Switzerland 1982 32.3 9.9 -0.9 4 Italy 1986 31.0 8.0 2.9 5 United Kingdom 1986 30.4 8.2 4.3 6 France 1984 29.6 7.7 1.3 7 Australia 1985 29.5 7.5 4.5 8 Canada 1987 28.9 7.0 4.3 9 Netherlands 1987 26.8 n.a. 3.3 10 Germany 1984 25.0 5.2 3.3 11 Luxembourg 1985 23.8 4.6 6.2 12 Belgium 1988 23.5 4.9 4.9 13 Norway 1986 23.4 4.6 4.2 14 Sweden 1987 22.0 4.6 2.8 15 Finland 1987 20.7 3.6 4.1

Source: Atkinson, Rainwater and Smeeding (1995).

Notes: See Section 2.2.2 and 2.2.3 respectively for an explanation of the Gini and Atkinson (ε = 0.5)

indices of inequality. n.a. not available.

Of the countries selected, their study shows that Australia and New Zealand experienced the highest rate of growth in gross income inequality over the 1980s. The bottom half of Table 3.3 includes Pendakur (1998)’s Gini inequality estimates for Canada over a similar period and demonstrates that income inequality measured by the Gini coefficient has risen for both Australia and Canada to a similar degree.

Table 3.3 Changes in Gini Coefficients of Gross Income

Date Coefficient Annual % change 1967 0.399 United States _{1991 0.428} + 0.29 1968/69 0.330 United Kingdom _{1984-85 0.360} + 0.37 1966 0.318 Finland _{1985 0.2} -2.47 1950 0.396 Germany _{1985 0.352} -0.43 1981 0.283 Netherlands _{1989 0.296} - 1.50 1987-88 0.290 New Zealand _{1993-94 0.340} + 1.00 1981-82 0.270 Australia _{1989-90 0.290} + 0.90 1982 0.289 Canada _{1992 0.316} + 0.90

Source: United States, United Kingdom, Australia, New Zealand, Netherlands, Germany and Finland:

Atkinson, Rainwater and Smeeding (1995), p. 40. Canada: Pendakur (1998), Table 5, p. 276.