This is the fifth post in the series on inequality in South Australia. While previous posts used ABS data to identify and track inequality between households, this post shifts the focus to structural inequality, and questions of class in particular – as evidenced by the changing labour share of the economy. Future posts will look at other structural inequalities based on gender and race.

Structural Inequality

The shift in focus is important because while the household data reveals much about patterns of inequality, it also has many limitations. Household income and wealth data is based on an assumption that households share resources. This assumption is probably unwarranted for many households, including the 13,000 “group households” in South Australia (272,000 nationally) where some expenses may be shared, but income is likely not shared. Further, viewing the household as the basic economic unit hides dynamics of potential inequality within households – most obviously gender and age dynamics, which then have ramifications in society more widely.

Further, the household data produced by the ABS, and used in many studies of inequality (for instance, the Productivity Commission report and the ACOSS/UNSW research) presents a mono-dimensional stratification of income distribution: a continuous spectrum from lowest to highest income/wealth on which all household/individuals are located. The measures of inequality are then based on the relationship of arbitrary points along this continuum such as income quintiles, top-bottom deciles. They do not tell us much about what is driving this stratification.

While it is possible to look at different demographic characteristics of households at various points on this spectrum, it is still largely only a scoring of an end point of distribution – not the mechanism of unequal distribution itself. By contrast, structural inequality is not simply a different location on a spectrum, it is a systemic and often conflictual relation, buttressed by a range of institutional arrangements where the economic inequality drives or at least contributes to the reproduction of that inequality.

Class – the Labour Share of GDP

This description of structural inequality and some of terms above are loose and contested, and there are mountains of academic writings on the subject. I have previously discussed Erik Olin Wright’s attempt to draw together classical Marxist, Weberian and Durkheimian approaches to class. All these approaches offer different insights, and all are added to and cross-cut by analysis of other structural inequalities. However, with no claim to being comprehensive or determinative, in this post I want to keep it fairly simple with just one measure of one structural inequality: class, as measured by the relative financial returns going to capital and labour.

The usual measure of these class-based economic flows is the share of national income going to labour (“compensation of employees” in ABS-speak), or alternatively, the labour share of the whole economic pie (that is, the share of Gross Domestic Product going to labour). I am sure there is a PhD somewhere critiquing the notion that “GDP = the economy”, but nonetheless, the labour share of GDP is a convenient measure as there is a robust ABS data set and changes in the labour share reflect changes in class power within the economy.

The Labour Share Data – National and South Australian

As is well-known, labour’s share of GDP in Australia has been falling in recent times. In 2018, the Journal of Australian Political Economy dedicated an excellent issue to highlighting the issue and examining the causes, and the labour share remains a cause of concern for the labour movement and many on the left.

Rather than add to the debate about causes or solutions, in this post, I simply want to look at the figures and compare the situation in South Australia with the rest of the country. As can be seen in the table below, despite lower average wages and lower workforce participation rates, the most recent ABS data (June 2021) shows that labour share of the South Australian economy was slightly higher than the labour share nationally.

	Australia	South Australia
Average Total Weekly Earnings	$1,797.10	$1,626.00
Participation Rate	66.2%	62.7%
Labour Share	47.7%	49.3%

While this suggests a slightly better distribution of income to workers in South Australia (i.e. a more equitable outcome in class terms), as the graph below shows, this is not historically consistent. The labour share in South Australia is more volatile and slumped below the national average in the decade from 1996 to 2006.

It should also be noted that the national data here does not show the current “historically low” labour share discussed in the media. That discussion is rightly based on seasonally-adjusted figures, but these are not published at the state level so I have used the ABS “original” data series to ensure a like-for-like comparison. That said, the seasonally adjusted figures show an even lower labour share nationally (46.1%), so either way, it would appear that SA labour’s share of the state economy is higher than labour’s share at the national level.

While this may appear to be good news for South Australian workers, this is a higher share of a decreasing part of the national economy. In 1990 the SA economy (Gross State Product) accounted for 7.7% of the national economy (GDP). In 2021, SA’s share was 5.7%. As the graph below shows, South Australian labour’s share of the national economy (in orange plotted on the right axis) has declined over the last 30 years, even while largely retaining its share of the state economy (black line plotted on the left axis).

For South Australian labour there is then a double-challenge – the class challenge of retaining and increasing its share of income, and the development challenge of growing the economic pie overall. Of course this struggle is not unique, but it is a particular challenge given the arguments in previous posts about being at the economic periphery.

Caveats and Conclusion

It is worth emphasising again that the labour share is a class distribution, an economic process rather than a positioning of people or households. Many people and households (particularly higher-income households) have multiple sources of income including government transfers, bank interest, investment income, imputed rents and capital gains. These are different economic flows (class processes) and those households’ labour income does not necessarily determine their total income, lifestyle options or position in society.

That said, labour income is the major income source for the majority of Australian households. Accordingly, changes in the labour share of income are a key contributor to the household income spectrum, while also being important in their own right as a reflection of structural inequality.

In this context, my interim conclusion (to be added to in future posts) is simple: with a declining share of the national economy, it is no paradise for workers[1] – either in South Australia or nationally.

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[1]  With apologies to Ken Buckley and Ted Wheelwright for stealing their classic title.