New research shows the income of those at the top of Australia’s earnings ladder has soared into the stratosphere in the past 20 years.
The Australian National University (ANU) report says the pay of the top 100 CEOs has risen twice as fast as the wage packets of the average Australian.
The 1920s was an era where the top 1 per cent of Australians earned the equivalent of $1,500. It was also the beginning of a period in Australian history when the divide between the rich and poor started to shrink.
According to the ANU’s Professor Andrew Leigh, the income share of the richest 1 per cent declined from 1921 to 1980, but in the past 20 years, a very different story has emerged.
“The income share of the top 1 per cent has basically doubled since 1980 and then if you go further up the distribution, you look at a super-duper rich group, the top 0.1 per cent, the richest one one-thousandth of Australians – their income share has tripled over the last generation,” he said.
“So Australians have gotten richer on average, but the super rich are accelerating away from the rest of us.
“If you have an income over $200,000, that puts you in the top 1 per cent. If you have an annual individual income over $700,000 a year, that puts you in the top 0.1 per cent. I guess they’re the richest sort of 15,000 or so people in Australia.”
Professor Leigh says the hiring of foreign CEOs for Australia’s big firms accelerated the wealthiest brackets away from average earners.
“One factor is the opening up of a range of labour markets to really international competition,” he said.
“When Australian firms wanted a CEO in the 1980s they did an Australian CEO search and then I guess beginning with the move to Australia of Bob Joss to head up Westpac, we started doing CEO searches that were international.
“That then meant that rather than paying an Australian CEO a wage, we now pay an international CEO wage.
“So even as recently as the early 1990s, a top 100 CEO was earning about a $1 million, now a top 100 CEO earns about $3 million, so top CEO’s salaries have accelerated away.
“But it’s not just executives – you see the same sort of pattern among top accountants, top lawyers, other professions have really experienced the internationalisation of the labour market and that’s pulled away the top of the distribution accelerated away from everyone else.”
He says while the drive towards higher pay packets increases incentives, it also comes at a cost.
“Rising inequality strains the social fabric in a way where you suddenly have a particular group of people who are able to take themselves out of the public sector in many different contexts – they’re able to use private schools, private hospitals, in some cases relying on private security forces rather than calling the police,” he said.
“So in that sense they sort of come to occupy a different portion of Australia.
“It’s a risk that we might split into two Australias and so that’s I think the main concern that we need to worry about when thinking about this rise in inequality.”