A leading banking analyst, "Ross", shot this response to Andrew Leigh today on our inequality debate...
Hi Mr Leigh,
I think your opening statement in today’s AFR is misleading, “To see if you care about inequality, take this simple test. Suppose you had a chance of being born into any of the five wealth quintiles in Australia. Would you prefer to be born into a society where the share of wealth held by each of the quintiles was 1 per cent, 6 per cent, 12 per cent, 20 per cent and 62 per cent? Or a society where the shares were 15 per cent, 17 per cent, 20 per cent, 24 per cent and 24 per cent?”
This statement presupposes that there is no social mobility in the society into which you are born. Australia as a nation has excellent social mobility (ie the income of the child has a very low correlation to the income of the parents) which is testament to our fantastic free education system.
Income inequality is primarily a problem when it is coupled with low social mobility (such as in the US) as it breeds class resentment and disengagement with society at large. Where the highest levels of income are broadly available to all members of society income inequality is much less of a problem.
Ross
