Data is the key to reducing inequality

Posted on 03 Oct 2023

By Dr Michael D’Rosario, chief economist, Per Capita

The Australian Inequality Index is an indispensable online data analytics tool for NFPs trying to level the societal playing field, writes Per Capita Chief economist, Dr Michael D’Rosario.

Inequality in Australia is a multifaceted issue that transcends mere numbers and statistics; it weaves itself into the very fabric of society, manifesting in various forms and affecting numerous aspects of daily life.

Australia's history with inequality is marked by significant shifts and contrasts. And understanding the historical context of inequality in Australia is crucial.

As Dr Andrew Leigh, Assistant Minister for Competition, Charities, Treasury and Employment, noted in a panel discussion during a fringe event at the Australian Labor Party’s national conference in August, inequality doesn’t have to worsen.

“There is that extraordinary period of the post-war … where you see wages rise faster on the factory floor than in the office. That's a period in which the reduction in inequality is as big as it would be for Australia to (be on par with) a Swedish level of inequality…”

From the ’50s to the ’70s there was a concerted effort to reduce inequality through progressive taxation, robust social welfare programs and strong labour unions.

This period serves as a valuable lesson showing that concerted efforts, progressive taxation and a thriving union environment can lead to a significant reduction in inequality. It also provides a benchmark for current and future endeavours to address inequality.

The latter part of the 20th century witnessed a reversal in these trends, leading to a growing gap between the rich and the poor. Income and wealth disparities have since widened, with the top percentiles of earners enjoying substantial growth in their incomes, while those at the bottom see stagnation or even decline; it’s an economic divide with implications for social mobility, access to resources, and overall economic stability for many vulnerable Australians.

Michael D'Rosario Chief Economist, Per Capita — Per Capita chief economist, Michael D'Rosario.

Inequality in Australia is not confined to economics; it extends into the social realm as well.

Gender, race, ethnicity, and educational background all play a crucial role in determining opportunities and outcomes. Discrimination and biases continue to contribute to disparities in education, employment, healthcare and other vital areas of life.

The geographical landscape of Australia presents its own set of challenges in the context of inequality. Urban areas, with their concentration of resources and opportunities, often stand in stark contrast to rural and remote regions. This geographical divide can exacerbate existing inequalities, leading to a lack of access to essential services and opportunities for those in less developed areas.

Despite the historical successes, the current situation is alarming. Leigh highlighted the contemporary trends:

"We've seen a rise in the top 1% share, which has doubled over the last generation. A rise in the top 0.1% share, which has tripled. We've seen wages grow three times as fast for the top tenth as for the bottom tenth."

These statistics are a source of consternation and underscore the pressing need for a comprehensive approach to addressing inequality. Understanding and addressing inequality requires robust and nuanced measurement tools.

Per Capita’s Australian Inequality Index is as an essential instrument in this regard, providing a quantitative measure that allows for comparisons and targeted interventions. Here's how:

Policy making: Governments can use the index to design targeted interventions, identifying the most affected areas and demographic groups. By aligning policies with quantifiable data, they can maximise the effectiveness of interventions.

Civil sector: Working in collaboration with government bodies, the civil sector can advocate for equitable policies, for community engagement, and for direct interventions that target rising inequality.

Philanthropy: Philanthropists can leverage the index to direct resources effectively, focusing on the areas of greatest need and making a tangible impact on communities.

Business sector: Corporations can align investment strategies with social responsibility goals, contributing to community development and reducing inequality.

Addressing inequality in Australia is a complex and ongoing challenge. It requires a multifaceted approach that includes government intervention, civil society engagement, corporate responsibility and individual awareness.

With concerted effort, collaboration and a deep understanding of the underlying issues, a more equitable Australia is possible. By leveraging the insights provided by the Australian Inequality Index, engaging the right stakeholders, and learning from historical lessons, we can work towards a just and equitable future.

Accessing the index

To support civil sector organisations, philanthropists and government in this pursuit, Per Capita is developing a series of guides to inform and support the use of the Inequality Index.

Visit www.inequalityindex.org.au to explore the online tools, which already include a lesson plan for schools. Guides for philanthropists and the civil sector are under development.

"Data analytics is no longer a “nice-to-have” option but an indispensable tool for NFPs."

The Inequality Index and not-for-profits

Not-for-profits present a large pool of untapped potential when it comes to using data such as that contained in the Inequality Index.

While NFPs are often hampered by funding constraints and limited access to actionable data, Per Capita champions the notion that empowering NFPs with data analytics will amplify their impact, refine efficiencies, and enable better – data-informed – decisions.

Even small NFPs can implement robust data collection and impact evaluation, with data analytics able to yield invaluable insights into program effectiveness, resource allocation, and strategic planning. Data also serves as a formidable asset in grant procurement and acquittal, elevating an organisation's credibility and competitiveness.

Beyond operational benefits, data analytics can unlock opportunities for research. NFPs can unearth trends, anomalies and success stories. Such research can refine an organisation's strategies and influence community dialogue and public policy.

The landscape is ripe for transition, thanks to the increasing availability of public datasets. Agencies like the Australian Charities and Not-for-profits Commission (ACNC), the Australian Taxation Office (ATO) and the Australian Bureau of Statistics offer extensive data for analysis and demographic insights.

Inequality Index graphic — Dimensions of inequality addressed by the Australian Inequality Index.

Financial constraints and system limitations are a challenge, yet data readiness should be viewed as a long-term investment in impact and organisational sustainability.

Accessible and affordable tools are available. Open-source communities have developed specialised software aimed at impact appraisal and data collection, often at a modest cost.

Our Community, for example, has developed guidance frameworks and e-learning to support NFPs at the start of their data science journey.

At Per Capita, we've witnessed small NFPs successfully establish research programs that can serve as the catalyst for impact evaluation.

The secret is to embrace a data-centric ideology from the outset, even with scarce resources. The modest investment required for data capture and protocols is vastly outweighed by benefits.

Emerging tools include our Inequality Index, which will continue to evolve with new dashboards and interactivity to improve its accessibility and usefulness.

The index can also serve as a framework for organisations wanting to develop indices to measure and track impact, and to understand social progress in key dimensions.

In short, data analytics is no longer a “nice-to-have” option but an indispensable tool for NFPs.

The development of the Inequality Index was financially supported by Our Community.