Much of the discussion about the need for tax reform to preserve intergenerational equity is confused. The main challenges facing young people, in particular, are the limitations on the supply of housing and climate change.

In his summing up of the conclusions from the government’s Economic Roundtable a few weeks ago, Treasurer Jim Chalmers said the first objective of tax reform would be “a fair go for working people and including in intergenerational equity terms”.

But what does this really mean? What are the threats to intergenerational equity in terms of the distribution of income and wealth, and how far is tax reform relevant to ensuring future equity for today’s young people?

Income distribution

There are no official figures showing the distribution of income for different generations, but there is no obvious reason why the distribution of income for younger generations should have evolved differently from that for the rest of Australians over the last 40 years or so.

As regards the income distribution for all households, what we do know is that from the early 1980s to around the time of the global financial crisis (2008-10), OECD data show that income inequality increased in most OECD countries, including Australia. Since around that time, income inequality as measured by the Gini coefficient has stabilised in Australia (see Table 1).

Table 1 Gini Coefficient for household income and wealth

ABS Survey of Income and Housing.

A Gini coefficient of 0 means all households have the same equivalised income, while a Gini coefficient of 1 means that one household has all the income.

Furthermore, Stephen Bell and I have shown in our book, Fair Share, (MUP, 2018), that the impact of technological change on the distribution of jobs was the main reason for the increase in inequality in the 1980s, 1990s and early 2000s. Unlike America, however, Australian Governments ensured that education and labour market policies responded to meet this shift in demand in favour of skilled labour. As a result, in Australia relative wage rates have remained pretty stable over the years, whereas the wage premium for a university degree doubled in the US.

In sum, inequality of pre-tax income is a bit higher in Australia than it was 40 or more years ago, but that increase has been much less than in America. Further, in the last 15 years or so, income........

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