Do you earn more than most people?
This question vexes a lot of people, because we mostly like to think we are “middle class”, and politicians – especially those selling high-end tax cuts – encourage us to think we all earn more than we actually do.
The Australian Bureau of Statistics’ latest annual characteristics of employment survey released this week shows that if you earned $62,400 this year, you are smack bang in middle Australia:
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Median earnings for full-time employees are $77,948, and $31,200 for part-time workers.
The figures show how the use of “average” earnings – a figure that is skewed by high incomes – is quite a misleading way to talk about middle Australia.
The latest figures, from May, suggest that average earnings for all workers are $67,902 – some 9% more than the median rate.
For full-time workers the disparity between average and median earnings is even greater. Average full-time earnings are now $93,496, nearly $16,000 more than the median level of $77,948.
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So when politicians talk of average full-time earnings, they are referring to people earning at least 20% more than what half of all full-time workers earn, and an amount most workers won’t reach for many years.
Current median male-full time earnings are just under $80,000, which is what the average level was nine years ago:
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Little wonder that when the treasurer, Josh Frydenberg, said in 2019 that “we have abolished a bracket – a whole tax bracket. The 37c in the dollar bracket has been abolished,” he justified it by saying that “if you’re on average full-time earnings, you can get a promotion, you can get a wage increase, but you won’t get a higher marginal rate of tax”.
Remember that this measure to tackle “bracket creep” by removing the 37% tax bracket only applies to people earning more than $120,000.
For half of all full-time workers that is a level they will only reach in more than a decade’s time, and for half of all workers, earning more than $120,000 is something they will have to worry about only in 2040:
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Such a timeframe does rather put a damper on the need for the tax cuts to come into effect in 2024.
As it is, by 2024 fewer than 20% of employees will earn above $120,000, and even by 2030 only the top quarter of employees will be benefiting from the removal of the 37% tax bracket:
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Just as noteworthy, by the end of the decade even those in the 90th percentile – ie those earning more than 89% of all employees – will earn less than $200,000.
Such a fact really does put scorn on statements such as those by Anthony Albanese a couple of years ago, when he suggested that he did not “regard someone who’s earning $200,000 dollars a year as being from the top end of town”.
Even now, only in mining and finance do more than 10% of employees earn above $200,000. And half of workers in the mining industry earn less than $122,500:
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If we are at a point where the leader of a notionally progressive party of workers is unable to concede that earning more than $200,000 puts you in very rare and elite company, then it is little wonder the ALP decided to support the stage three tax cuts.
We need to be much more honest about who earns what, because allowing talk of the “average Australian” to mean someone on average full-time earnings excludes around three-quarters of workers.
We often hear about “aspiration”. The treasurer just last month boasted to parliament that “this is what lower taxes are helping to do across the Australian economy: create jobs, reward effort and encourage aspiration”.
And yet that is just a fib to justify giving tax cuts to a small minority of workers.
If you care about rewarding effort and allowing people to aspire to higher incomes, the figures show that without any doubt education is the path to pursue.
Employees with a certificate III/IV qualification earn around a third more than those with just year 12 qualifications. Those with a bachelor degree earn a further 19% more:
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If you want people to earn more, help them be able to afford more education, not give tax cuts to people who earn almost double what half of Australians do.
And while education is clearly the key, fewer than 10% of people with a postgraduate degree earn more than $200,000, and the median earnings for someone with a bachelor degree are nearly $20,000 below “average full-time earnings”.
We need to be honest about how much people earn, and not develop policy that pretends Australians earn more than they do in order to benefit those who actually are rich.
