Who Gets What? Part 2

For background, see Part 1.

The second chapter, ‘Incomes’, starts with a discussion about the changes in the relative share of total income between wages and profits. Thankfully, Stilwell acknowledges there are complicating factors, that the data isn’t strictly a measurement of class differences, instead only being a broad indicator. It is an acknowledgement of nuance frequently missing in the rest of the book.

There are a couple of graphs here supposedly sourced from the ABS, but the wages one differs from another, more detailed graph I found in An Empirical Study of Labour’s Share in Income for Australia by Macri and Sinha. The general shape is the same, but Stilwell’s graph has peaks lower by several hundred basis points in certain places. I don’t know what’s happened there.

Anyway, the large peaks in the 1970s and 1980s are called ‘gains’ by Stilwell, that have now been ‘obliterated’. Were they really gains, though? Stilwell ignores what is widely considered to be the cause of the huge wage increases in the early ’70s – the reaction to the inflation shock from OPEC’s decision to massively reduce the supply of oil to the West. Unsurprisingly, unemployment also shot up in Australia during this time of huge wage inflation. So we have an exogenous event artificially boosting wage share, and increased unemployment hurting workers. Hardly a ‘gain’. As noted by Declan Trott:

I must admit that I do not see the trend to increasing inequality in this data as clearly as they do. Equivalised household incomes have been bouncing around in a fairly narrow range for the last decade, as has the wages share of income since the winding back of the Whitlam and Fraser wage breakouts. While the profits share has been rising more consistently and is now at a record high, this has eaten into rent and interest as much as wages.

It’s also disappointing to see that at this juncture Stilwell cites Michael Pusey, a sociologist (though a very good one), instead of a labour economist. It turns out to be a trend for the rest of the book that only ideological bedfellows are used as analytical references. Stilwell has a definite point to make, and complications or contradictions are not to be allowed, let alone dealt with.

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One Response to Who Gets What? Part 2

  1. Pingback: Interesting links around Ozblogistan at catallaxyfiles

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