Battlers and Billionaires: The Updated Story of Inequality in Australia by Leigh, Andrew 2024

Abstract

Economic inequality is an important issue deserving of the considerable attention it now receives among applied economics researchers, reflecting the reality that the distribution of economic output is almost as important to community wellbeing as the total quantity of output. While many questions remain unanswered, there is now a substantial body of Australian research on the topic and a correspondingly improved understanding of the nature, causes and consequences of inequality in Australia.

However, the translation of this body of knowledge to the general public was somewhat lacking until Leigh's 2013 book, Battlers and Billionaires (Leigh 2013), which provided an accessible overview of the evolution of inequality in Australia, its drivers and consequences, and proposals for ways to reduce it. It therefore provided a valuable resource for informing public discourse on this important subject.

In Leigh (2024), the author provides an update to Leigh (2013). As would be expected of an “update,” much of the material in this book is the same as in the original book. The main differences are the addition of more recent data and a few extra graphs, discussion of new research published since the first book was published, a few tweaks to the stories told and the way the material is explained, and the addition of two recommendations for “what is to be done.” The general story and the key messages have not changed and therefore the book is probably targeted at people who have not read the first book.

As with Leigh (2013), this is a highly enjoyable read, with Leigh complementing the well-researched empirical facts with engaging and often entertaining historical facts, stories and anecdotes. The book is written for a general audience, with technical details and sources consigned to endnotes. It succeeds in being accessible to non-experts, although I suspect much of it will nonetheless be somewhat heavy going for many readers.

The book contains eight chapters, the first three of which describe the evolution of inequality in Australia from pre-colonization to the present day. Chapter 4 then examines the drivers of inequality, mainly focusing on recent decades. Chapter 5 discusses the consequences of inequality; Chapter 6 addresses the issue of intergenerational economic mobility and Chapter 7 discusses community attitudes to inequality. He concludes in Chapter 8 with a list of recommendations for addressing inequality.

In broad terms, the story told in the first three chapters of the evolution of inequality in Australia is correct: inequality levels and trends pre-federation are uncertain, but inequality was probably very high over most of the nineteenth century. Inequality then decreased between federation and the 1970s, and then subsequently increased.

The description of inequality trends is most balanced over the period to the early 1980s, when data availability is limited and the evidence is patchy. However, for the last 40 years, when considerably more data is available, which Leigh labels “The Great Divergence,” he offers a somewhat selective coverage of inequality trends, ignoring the many nuances and deviations from the “inequality is ever rising” narrative that he prosecutes for this period. While there is little doubt that inequality today is higher than in the early 1980s, much of the increase occurred in the 1980s and 1990s. The changes that have occurred this century are more mixed and complicated. On some metrics, such as top income share estimates based on tax data, there has been some increase in inequality; on others, such as HILDA Survey measures of overall inequality, there has been little change (Wilkins, Vera-Toscano, and Botha 2023). While Leigh might be defended as not wanting to unnecessarily muddy the waters, the fact is the waters are muddy and his is not a disinterested treatment of the topic.

Here I also cannot resist the (self-serving) observation that he makes insufficient use of the HILDA Survey for describing and explaining the post-2000 environment (despite being a user of the unit record data himself). The HILDA Survey is the only source providing annual household income data, as well as providing rich information on intra- and intergenerational mobility and a multitude of other economic and social phenomena. For example, Leigh speculates whether US evidence on the greater instability of de facto relationships compared with legal marriages translates to Australia. But there is no need to speculate! We have evidence from HILDA that this is indeed the case (Wilkins et al. 2022). And while he does discuss research on intergenerational mobility drawing on HILDA, the evidence HILDA has provided on poverty persistence and intergenerational “transmission” of disadvantage is ignored (e.g., Rodgers 2010, Vera-Toscano and Wilkins 2020, Parolin et al. 2024).

Which leads me to the general observation that Leigh's discussion of inequality has a disproportionate focus on the top of the income and wealth distributions—too much attention on the billionaires and not enough on the battlers. This is more defensible for the pre-1980s period, when the available data is skewed towards the rich. And perhaps the fortunes of the rich produce better stories and provide reasons for concern about inequality that are more compelling to lay readers. Certainly, I can appreciate that it is difficult to convey that inequalities in the “middle 80%” matter. However, this does not excuse the light treatment of the poor and what being poor means for day-to-day life, at least in present-day Australia. For example, in discussing the period since the 1980s, fully four pages of the chapter are devoted to how the rich find ways to spend their money, while the plight of the poor is given only one paragraph. It is entertaining to read about the consumption possibilities of the extremely rich, but this adds little of substance to the story.

In examining drivers of inequality change, Leigh canvasses factors considered by the literature and presents a good summary of the findings, highlighting the roles of technology and globalization, taxation and education. He is, however, probably more enthusiastic about the inequality-reducing potential of education than warranted. There are good reasons to support education expansion, but its history in reducing inequality is somewhat mixed. More controversial is the important role he assigns to unions. While there is international evidence that unions tend to decrease earnings inequality, the evidence that this translates to lower income inequality is less clear—indeed, the only references cited by Leigh here examine the relationship between union density and earnings inequality, not income inequality.

The fact that earnings inequality does not directly translate to income inequality is a point more broadly missed in Leigh's treatment of the drivers of changes in inequality in Australia over the last 40 years. The key reason for the disconnect between earnings and income inequality is the role of the distribution of employment across households. Most notably, there has been a dramatic increase in labor force participation of women over the last 40 years, and this has evolved in a non-neutral manner with respect to income inequality. In the 1980s and 1990s, much of the growth in female employment was in households containing relatively high-earning males, acting to increase income inequality (Johnson and Wilkins 2004). In the early 2000s, by contrast, much of the growth was in households containing relatively low-earning males or previously jobless households (Greenville, Pobke, and Rogers 2013, Sula and Dugain 2019). This is part of the reason why inequality patterns over the 2000s and 2010s have been more nuanced: despite rising earnings inequality, measures of overall income inequality such as the Gini coefficient have changed little, and this is because of the nature of the changes in employment participation, particularly of women.

Also under-discussed for its role in affecting inequality is welfare policy. The design of the Australian income support system is a key influence on income inequality, and indeed it has done less to reduce inequality in recent years than it did in the 1990s. Measures such as tightening eligibility for Parenting Payment Single and the Disability Support Pension in the 2000s and 2010s had substantial negative impacts on single parents and people with disability. Also of note is the increase in family benefits between the late 1980s and the early 2000s, which positively impacted the incomes of low- and middle-income families with children and resulted in declines in child poverty (Redmond 2012). When it comes to welfare and other government cash and in-kind benefits, Leigh's main observation is that all benefits should be targeted via means tests. This is not self-evidently true, and many universal (or near-universal) schemes have substantial inequality-reducing effects.

Leigh's discussion of the drivers of inequality (and also what to do about it) focuses on income inequality and is largely silent on the drivers of wealth inequality. Indeed, his excessive focus on the very wealthy means he does not even mention the generational lines along which wealth inequality has grown and the important failures of housing policy in exacerbating this trend. Similarly not mentioned is that the expansion of superannuation since the early 1990s has acted to increased wealth inequality, with policy changes over the last decade only slightly moderating its worst excesses.

In the chapter on economic mobility, Leigh's focus is on intergenerational mobility. Here he addresses what he considers the delicate issue of the role of family structure in perpetuating disadvantage. While he correctly identifies growing up in a single-parent family as a strong predictor of disadvantage in adulthood, the inferences he draws from this are questionable. In essence, he ends up advocating for more parents to be legally married, citing US evidence that de facto marriages are less stable, and noting that single-parent families tend to be short on both money and parental time to invest in their children. Not considered by Leigh is the role that family poverty may itself play in precipitating family breakdown, as well as the fact that parents living apart need not reduce the parental resources available to the children (e.g., via “shared-care” arrangements).

Leigh is quite restrained in the consequences he is prepared to attribute to greater inequality. He first addresses so-called “instrumental” effects, whereby inequality affects other outcomes we care about. His assessment of the evidence is that inequality is positively associated with economic growth and may be negatively associated with social mobility and democratic functioning, while there is no relationship with other outcomes often hypothesized to be affected, such as crime rates and public health (although that does not stop him citing, in the Introduction, adverse health outcomes of the poor and longer life expectancies of the rich as reasons to be concerned about inequality). While I agree the evidence is generally not strong for instrumental effects, it is also true that there are few opportunities for credible empirical identification of these effects. I therefore lean more towards the view that we don't have strong evidence one way or the other, noting that absence of evidence does not necessarily imply evidence of absence of these effects.

Leigh then turns to “intrinsic” arguments, and here is where he thinks the main argument for concern about inequality lies: people do not like it. His chapter on Australians’ attitudes to inequality, therefore, takes on importance for his argument that it is desirable to reduce inequality. Leigh presents evidence that a majority of Australians believe inequality is too high, although one must be left to wonder why policies to reduce inequality have not met with more electoral success. Perhaps when the rubber hits the road in terms of specific measures that would reduce inequality, people find they are not so keen. Leigh goes further, to suggest that Australians have always been egalitarian in spirit. But the examples given are far from convincing and often reflect a highly conditional notion of egalitarianism, for example, based on sex, race or employment status. Leigh also appeals to salary caps (among other measures) in Australian professional sporting codes as evidence of an egalitarian spirit. However, salary caps are common in other countries, including the US, and are much more about attracting fans than a concern for fairness.

In the last chapter of the book, Leigh puts forward ten recommendations for reducing inequality. These are generally sound and reasonable, but one cannot but help think that he is constrained by his position in the Labor Party and more particularly his roles in the Labor Government ministry. Most recommendations are sorely lacking in specific policy actions, instead coming across as “areas we should direct attention”; moreover, there are glaring omissions.

Most strikingly, his recommendations on both welfare and tax policy are best described as tepid. His only recommendation for welfare policy is that we continue to ensure it is targeted to those most in need. There is no acknowledgment that the level of welfare benefits might matter, nor that an excessive focus on targeting can be detrimental to their capacity to reduce inequality. His only recommendation on tax policy is that we maintain a progressive income tax. There is no mention of eliminating or reducing concessional (or zero) taxation of certain income sources (such as from superannuation), increasing taxes on economic rents, or introducing taxes on wealth or inheritances.

One also suspects that political considerations play a role in Leigh's argument for the role of unions. The case made is weak—indeed, in responding to the critique that unions look after insiders (their members) at the expense of outsiders (including the unemployed), the best defence he can mount is that other interest groups do the same thing. This is, of course, true, but then I'm not aware that anyone is arguing these other interest groups reduce inequality.

Leigh is more convincing in his advocacy for maintaining policy expertise that delivers economic growth, improving the evaluation of social policies, improving our education system, keeping a check on monopoly power and reducing social isolation. These are goals that most Labor Party members, and probably most members of the Australian community, would regard as uncontroversial, albeit with no clear roadmap provided for achieving them.

Perhaps where Leigh is on the most dangerous political ground is in his advocacy for (largely unspecified) policies to reduce single-parenthood. Leigh treads very carefully, suggesting “light-touch programs that encourage relationship stability.” Here, however, he neglects the important potential role of policy in both addressing the adverse economic circumstances that often contribute to family breakdown and reducing the strength of the association between single-parent families and poverty. Policies that increase the economic resources of families, and especially single-parent families, combined with policies to promote the involvement of both parents in raising their children, irrespective of whether the parents live together, are more likely to meet with success than what Leigh proposes.

Leigh (2024) shows an admirable commitment to drawing on peer-reviewed research for a book targeting a nonacademic audience, doing so in a way that mostly does not drown the reader in detail (noting that I would be one of the few readers who enjoyed reading the endnotes as much as the text). I found the book illuminating and a very helpful tool for reflecting on the current state of our knowledge about inequality in Australia. While I have my quibbles, I fully commend the book to anyone seeking to understanding the evolution of economic inequality in Australia and who would like to enrich their thinking about what it means for Australian society and what, if anything, policy makers should do about it.