Andrew Leigh points to ABS data showing increasing inequality in both wages and disposable income since the mid-1990s. This is scarcely surprising for a number of reasons. First, our poor performance in education means that the supply of educated workers has not kept up with the long-run trend increase in relative demand for such workers, so the equilibrium wage differential has increased. Second, IR reforms over the last decade and the decline in union membership would both be expected to increase wage inequality. Finally, whereas tax-welfare policy under the Hawke-Keating government generally offset the effects of increasing inequality in market incomes, the reverse has been true under Howard.
Looking at overseas experience, particularly the US, UK and NZ we can expect a whole lot more inequality once Workchoices takes effect.