In some parts of Australia, the top one percent received just one-fifth of all personal income in 2012-13, recent data from the Australian Bureau of Statistics (ABS) reveals.
The areas in 2012-13 with the most noticeable estimated concentrations of income in the hands of the top one percent were the local government areas of Woollahra (Sydney), Mosman Park (Perth) and Mosman (Sydney).
Potentially affecting these personal income statistics is the absence of government benefits and pensions in the ABS's dataset.
The top one percent of income share is a good indicator to describe one aspect of inequality, Professor Roger Wilkins from the Melbourne Institute told SBS.
“It gets at the idea of a [super] rich class who have disproportionate control of society’s resources and may have considerable influence on government,” Prof Wilkins said.
He said the top one percent was not a comprehensive indicator, however no one indicator on income inequality would be able to give you the full picture.
Data on income inequality for the whole of Australia suggests inequality had never been higher in the post-war period than it is today, according to Prof Wilkins.
“However, there has in fact been little change in inequality over the last 15 years – most of the increase occurred in the 1980s and 1990s,” he said.
He said the implications of income inequality were contentious, potentially wide-ranging and subject to the causes of inequality within communities.
“That said, it is likely that greater inequality, among other things, reduces social cohesion, diminishes the quality of democracy, and reduces equality of opportunity,” Prof Wilkins said.
The ABS data also reveals high median personal incomes are often concentrated in centres of financial and political power.
The median personal income data shows regional areas of Australia are less likely to have high median personal incomes, apart from the regions where mining was important for local economies.
Former professor of economics at the Australian National University, and current federal Labor MP, Doctor Andrew Leigh said communities where one percent of people controlled relatively large proportions of personal income often experienced a range of social effects.
One of those effects is on the happiness of individuals who are not doing as well as their peers.
“We know that people living in unequal suburbs are often unhappy,” Dr Leigh said.
Backing up Dr Leigh is research from US Professor of Economics, Erzo FP Luttmer, whose paper in 2005 “Neighbours as Negatives: Relative Earnings and Well-Being” addressed this issue.
“This paper shows that individuals’ self-reported happiness is negatively affected by the earnings of others in their area,” Prof FP Luttmer’s paper said.
Another adverse effect of income inequality on people is the observed phenomenon where children born into poverty are less likely to improve their financial circumstances if the community they live in is more unequal.
This is illustrated in a famous chart, called The Great Gatsby Curve, which shows a negative correlation between intergenerational earnings elasticity (the ability for poor children to earn more later in life) and income inequality.
The phenomenon has been observed in the US and worldwide.
However, the famous chart does not use top one percent of income share; it uses another and more-commonly used measure of income inequality, the Gini Coefficient.
This article has been edited with some clarifications.
