The American middle class is no longer the world’s richest, according to a feature at the new NYT wonk blog, The Upshot. The feature compares American incomes to those of other advanced economies, and shows that people in the bottom half of the income distribution have fared better in Canada and the Netherlands than in the US over the past few decades. It’s a really interesting feature, but the first question that came to my mind was: what about Australia?
Fortunately, and commendably, the data used by the NYT is available to download for free. Unfortunately, the data for Australia stops at 2003, so we can’t compare the incomes of households in the mining boom period.
The data shows that low-income Australians had about the same income (after taxes and cash transfers) as low-income Americans three decades ago, but have overtaken them since then. Australian top incomes have risen faster than middle incomes, but the difference isn’t nearly as stark as in America.
Here’s income in the two countries, adjusted for inflation and differences between countries in purchasing power, at the 5th, 50th, and 95th percentiles.
Here’s total income growth in the two countries between 1980ish and 2003ish, by percentile:
The incomes of people at each percentile in the two countries at around 1980:
And the same thing, around 2003:
Australian income as a percentage of US income at each percentile:
For everyone but those at the very bottom, Australian income growth lagged behind the US over the three decades. Remember, though, that these figures (for Australia) end just as the mining boom was kicking off. Income inequality didn’t grow nearly as much in Australia as it did in the US, but remember that America is pretty extreme among advanced economies for both its level of inequality and the increase in inequality over time. Also remember that the slower growth in inequality in Australia didn’t just happen – to some extent it was a policy choice. We maintained a more redistributive tax-transfer system than America over time, with higher top tax rates and more targeted welfare payments.