The data presented in my earlier “Snapshot of Inequality” shows that levels of inequality in South Australia are lower than the national average in a number of areas, but there are alarm bells ringing in the background – and they are getting louder.

The First Warning

At first glance it looks like good news for croweaters. Income distribution between households is slightly more even in South Australia with proportionately fewer households on very high incomes. Compensation for workers in South Australia is higher as a proportion of the state economy than the equivalent national figure (the labour share). The “official” gender wage gap is around half the national average, and households in regional South Australia earned closer to the average Adelaide household than the regional/capital city divide nationally.

However, the apparently good South Australian outcomes come against a background of South Australia having lower average incomes and wealth than the national averages. For instance, the gender wage gap is lower in South Australia – but so are women’s wages with average full-time ordinary time earnings for women $68 per week lower than the national average for women. Similarly, the average income of households in regional SA is closer to the Adelaide average, but $217 a week lower than the national average for regional households.

Wellbeing is about quantum as well as relativity to others (equality). However, the picture here is also complicated by differences in housing costs, service provision and the need for a fuller accounting of income (alluded to in a previous post, but beyond the scope of this work).

The Alarm Bells for South Australia

In the context of this study, what is ringing the alarm bells loudest for South Australia is not the current gap to the national averages, but the general decline in the position of South Australia relative to the rest of the country over the last 30 years. The South Australian share of the national economy (GSP as a proportion of GDP) has fallen from 7.71% in 1990 to 5.7% in 2021. The data in the graph below shows the impact of this relative decline on inequality statistics. Cue the alarm bells: South Australia’s share of national household income, SA labour’s share of the national economy and even the SA female share of the national wage pool, all declined over the period.

It is important to note that this is not, or not necessarily, about average incomes declining relative to the rest of country. Equivalised household disposable income in SA was 92% of the national average in 2001, and the same in 2020. Similarly, female full-time total earnings in South Australia were 96% of the national equivalent in May 2001 and the same in May 2022.

Population Impacts

A key factor driving the data, but which is not evident in the average income data is the decline in South Australia’s population share. This decline is evident in the top line of the graph. The drop was less than 1 percentage point (from 7.8% in 2001 to 6.9% in 2020), but this is still significant.

Had SA retained its population share (that is, grown at the same rate as the rest of the country) over the period, there would be around 220,000 or 13% more people in the state. On current averages of household size and income, those population differences equate to around $9.7bn of household income per year extra that would have been in the SA economy (not counting any multipliers arising from extra population).

Clearly the relative loss of population has a major impact on the SA economy. Combined with the changes in the various average incomes, it gives the downward trajectories in most of the data (even where the income share actually increased in relation to the SA economy). Capturing both population and income changes is the whole point of using income shares rather than household averages, and in this case it highlights several concerns for South Australia.

Firstly, with a declining share of national household income, the gap between South Australia and much of the rest of the country is growing. SA is becoming poorer as a community, even if that is not reflected in the individual household data. That is the alarm bell ringing in the background. As I noted in relation to regional South Australia (where this process is heightened with a further decline in regional communities), this impacts on the ability of communities to provide infrastructure, growth and the ability to attract and retain people. It becomes a self-reinforcing cycle, and the alarm bells become a symphony.

Secondly, as the data above shows, the relative decline of South Australia as a whole means that inequalities within South Australia are also made worse – not internally, but in relation to the rest of the country. Put another way, the more egalitarian income spread and distributions within South Australia may ameliorate, but do not overcome the growing inequality between South Australia and the average of the rest of the country (hence the downward sloping graphs).

As a whole, the South Australian data provides an example of how different inequalities interact with eachother. In this case the geographic inequalities undermine greater gender and class equalities (or alternatively, greater gender and class equality ameliorate increasing geographic inequalities).

Policy Response

South Australia is not alone in this predicament. The same is probably true of other smaller jurisdictions (although I have not done the numbers), and it is certainly true of regional South Australia where the decline of local communities is truly alarming. Clearly a policy response is needed: the current policy settings are not working as South Australia and the regions are being left behind. However, the interactions of different forms of inequality make the policy response complicated.

I have previously noted the importance of government redistribution through mechanisms like the sharing of the GST pool. The data here clearly shows the ongoing need for a sharing from the high-income states to the rest of the country. I have also noted that traditional responses in economies at the periphery (be it regional areas, struggling Australian states or developing countries) has been to attempt to intensify the use of natural resources. However, academic literature suggests that this “extractivism” offers no guarantee of genuine development and may exacerbate inequality and environmental degradation.

In South Australia’s recent history, the Rann/Weatherill Labor governments, like the Liberal state government before them, were desperate to develop new mining operations in the regions and defence technologies in Adelaide. The Marshall government offered a high-tech space future, and the current government spruiks a hydrogen future. Whatever we make of these ideas, the obvious point is that they did not stop the relative decline of South Australia and regional South Australia in particular, and there was little consideration of the multiple layers of inequality in those policies. A far more comprehensive approach is needed.

There are no easy answers here, and there are contradictions in dealing with ininequality. For instance, as my post “the super-rich don’t live here” indicated, the biggest areas of geographic inequality between South Australia and the rest of the country, and between regional SA and Adelaide, exist at the higher end of the income spectrum. This creates a contradiction because policies aimed at creating high paying jobs in particular areas would be a step towards reducing inequality between geographic areas, but would increase inequality within those same areas (as there would be a greater spread of incomes). For instance, policies which pay highly skilled workers loadings for working in regional or remote areas may increase incomes at higher levels (and may be necessary to ensure service provision), but they will increase the income gap between those people/households and most other households in that area. Similarly, regional development based on extractive industries may increase regional incomes and geographic equality, but is also likely to favour male workers and exacerbate the gender wage gap.

Conclusion

The contradictions of development and inequality are difficult to navigate, and the focus on multiple dimensions of inequality (in this case, how the inequality between South Australia and the nation as a whole intersects with inequalities within South Australia) complicates the picture of inequality. However, such a focus is important.

The examples above and the use of data on gender and class inequality alongside household income remind us that inequality is built in to economic activity. In turn, this suggests that addressing inequality can’t simply be a distributional after-thought where we drive policy for narrow economic goals, then catalogue how the results are distributed and perhaps seek to address inequalities at that point through welfare provision.

At best, with that approach we will always be playing catch-up – looking for payments and services to paper over fundamental cracks. More likely, we will simply lose. The macro-dynamics will overwhelm any welfare provision.

I will say more about that in a future post, but from the inequality data presented here and in previous posts, it is clear that greater economic intervention is essential. If left to themselves, market forces and demographic patterns will continue to channel money and population to existing growth areas, and continue the decline of South Australia. And if intervention and governance is done without a focus on inequality, or with too narrow a focus only on some inequalities, we will see people or groups within South Australia (and elsewhere) left behind.

The alarm bells are ringing – we need to pay attention.