Autumn 2018

Inequality on the rise

by Dr Helen Szoke

As an organisation dedicated to tackling poverty for more than 60 years, Oxfam Australia is deeply concerned that levels of inequality continue to grow.

Image of woman wearing a hijab walking steps carrying a load of folded laundry.
Twenty-year-old Fatima makes a mere 43 cents per hour sewing clothes that are bound for sale in Australia. PHOTO: GMB Akash/Panos/OxfamAUS

Oxfam Australia was born out of a merger between two leading Australian international development agencies: Community Aid Abroad and the Australian Freedom from Hunger Campaign. Today, Oxfam continues its mission to empower communities to build better lives and to tackle the many drivers of poverty in the modern world.

But right now, growing inequality is making Oxfam’s work harder. Extreme inequality entrenches poverty and it blocks the path to opportunities for people around the globe. And while economic development and globalisation have helped to lift millions out of poverty, there are also many who have fallen through the cracks. The global poverty rate has halved since 1990, but progress is unevenly spread across countries. Much of the reduction in extreme poverty occurred in East Asia—but even here, large pockets of poverty remain. Sub-Saharan Africa has seen much less improvement, with half of the world’s extreme poor calling the region home. As a result, while the picture of poverty may have improved for some, there are many who have been left behind. Inequality within countries has also been on the rise, and Australia is no exception.

One of the starkest ways to really understand where and how poverty persists is to look at people’s living conditions. Until it was dismantled, the ‘tent city’ protest by the homeless in Sydney was a constant reminder of the growing inequality divide in Australia, lying right in the centre of Martin Place—a location that is usually seen as core to the engine of Australia’s economic growth. Organisations like Vinnies do a much-needed job in addressing Australia’s homelessness crisis every day.

At Oxfam, we get to understand what living conditions are like for people the world over. At the same time that Australia has been facing a crisis in homelessness, women across South Asia have been facing a crisis of working poverty. Women like Fatima, who work up to twelve hours a day sewing clothes bound for sale in Melbourne, Sydney and around Australia, remain so poor that they cannot afford a bed, enough food and decent housing—let alone having any spare money for medical costs. Twenty-year-old Fatima makes a mere 43 cents per hour, while one of the highest paid CEOs of a leading Australian clothing brand earns up to $2,500 an hour.

These extremes of inequality should not exist in Australia—or around the globe.

For the past few years Oxfam has released annual reports on inequality, timed to coincide with the World Economic Forum annual meeting in Davos, Switzerland. The Davos event has traditionally been a meeting of the world’s most rich and powerful, and has been a key moment for Oxfam to compel governments and the ‘haves’ to commit to doing more to help the ‘have-nots’ by tackling inequality.

Why do we focus on inequality? Countries that are more unequal have worse social outcomes in terms of health, life expectancy, mental illness and imprisonment rates. Inequality hinders social mobility and makes it harder to break the poverty cycle. Poor families have less ability to invest in their children’s education, which would help to open up economic opportunities; people are less able to stay healthy and can easily slip further into poverty if they fall sick. Inequality also means policies can be influenced to preference those with power and wealth, which undermines economic prosperity, fuels corruption and limits the provision of public services that communities around the world rely on.

Oxfam’s reports on inequality this year (Growing gulf between work and wealth, and Reward work, not wealth) continue to challenge the notion that growing the economic pie for the wealthiest will trickle down to benefit everyone. We have observed the richest people and firms accumulate record levels of wealth, while ordinary people, who are often at the bottom of business supply chains, are paid barely enough to get by. Last year, globally over 80 per cent of new wealth went to the wealthiest one percent, while the poorest half of humanity saw no increase in wealth at all—absolutely zero. We also saw the biggest rise in the number of billionaires in history—their increase in wealth was enough to end extreme poverty seven times over.

This stark picture of inequality sadly also extends to Australia. The share of wealth concentrated in the hands of the top one per cent of Australians has grown to 23 per cent in 2017—more wealth than the bottom 70 per cent of Australians combined. The gulf between the wealth shares held by the top one per cent and bottom 50 per cent in Australia is now the greatest at any point over the past two decades; and, over this period, the wealth share held by the top one per cent has grown almost continuously, while the wealth share held by the poorest 50 per cent has fallen almost continuously. The number of Australian billionaires has also more than doubled over the past ten years, from 14 in 2008 to 33 in 2017, with a corresponding increase in total wealth of almost 140 per cent to $115.4 billion.  Yet over the same time, the average wages of ordinary Australians have increased by just 36 per cent and average household wealth grew by just 12 per cent.

Ordinary Australians’ wages have not grown to match their contribution to the economy: except for the top 20 per cent household income group, income shares for all income groups in Australia have fallen over the decade to 2015.

What do all these numbers tell us? There’s clearly something going wrong when the differences are so stark. The widening gap between the rich and poor suggests that simply focussing on growing the economic pie, especially at the top, is not enough. This alone does not benefit the community as a whole.

Oxfam believes extreme inequality is not inevitable, but is an outcome of policy decisions. Businesses and governments can make decisions that will ensure the community receives a fair share of benefits of economic growth and can commit to taking steps to closing the inequality divide.

Companies can commit to ensuring a living wage for workers at home and in their global supply chains. Governments can hold these firms to account by legislating for businesses to report on their human rights due diligence, including paying living wages. Oxfam is calling on the biggest clothing retail chains in Australia to ensure their garment workers, such as those in Bangladesh and Vietnam, are paid a living wage.

At the other end of the economic divide, big businesses must ensure they pay a fair share of taxes in the countries where they operate, as well as here in Australia. Government can play a role too, by introducing tax transparency measures which allow the public to hold businesses (and governments) to account over tax arrangements. We already know that one in three large Australian firms reported on by the ATO paid no tax in Australia in 2015–2016. The Government can mandate that Australian-based companies also reveal the taxes they pay around the world, giving us a global picture of who pays the right amount of tax and where. We need continued reform towards a fairer tax system, including ending the tax competition between governments that leads to a race to the bottom on corporate tax rates—where everyone loses out.

Inequality has been growing, but it does not need to continue this way. It’s time for action to end this trend, in Australia and around the world.

Oxfam’s recent reports on inequality can be found here:

Dr Helen Szoke is Chief Executive of Oxfam Australia.

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