Unpacking Inequality: Wage Incomes, Disposable Incomes and Living Standards

Abstract

This paper focuses on the relationship between the labour market and the distribution of income. It begins with a thorough analysis of the distribution of wage and salary income among the full-time labour force. This analysis shows the importance of the number of earners to the overall distributional location of Australian income units, and also locates the distribution of wage incomes within the broader distributional picture. An analysis of the factors contributing to the change in the distribution of wage incomes over the 1980s is then undertaken before the relationship between the distributions of wage incomes and disposable incomes is explored. There, it is shown that other income components (including government benefits and taxes) can have significant distributional effects which markedly change the distributional rankings of individual workers. These relationships are also explored using a range of international data for OECD countries. Finally, an attempt is made to impute a value to time spent outside of the labour market and the consequences of combining this with wage incomes is explored, both in terms of levels and distributions, for Australia and four other countries: Canada, (West) Germany, Netherlands and the United States.