Indigenous income inequality: wider ramifications

Well, whiles I am a beggar, I will rail,

And say there is no sin but to be rich;

And being rich, my virtue then shall be

To say there is no vice but beggary

King John Act 2, scene 1, 593-6

I recently came across (h/t Marginal Revolution) an interesting article on a World Bank Blog by World Bank researchers Francisco Ferreira and Marta Schoch (link here). Their short post repays reading, including for the enlightening graphs.

Their article, which is focused on the relationship between inequality and social unrest in Latin America, raises interesting implications that Australian policymakers dealing with Indigenous public policy should consider.

As the authors point out, widespread social unrest has increased across the globe in recent years, but has been particularly intense in Latin America.

The core of their argument is that the recent outbreak of mass social unrest in Latin America is not correlated with increasing income inequality, as in fact income inequality has been declining for the last two decades and the middle class cohort measured by income has been increasing. They also point out that notwithstanding the declines in inequality, levels of income inequality remain at ‘obscene’ levels and across Latin America are the highest in the world.

Instead, they hypothesise that it is ongoing inequality of opportunity that is fuelling social unrest. They point to data that suggests that Latin America (along with many African nations) has the highest levels of inequality of opportunity globally. They conclude that the protesters cross Latin America are in fact demanding

a break with the old Latin American social contract through which elites pay lower taxes (except in Argentina and Brazil) and opt out of low-quality public services, hoarding opportunity through private schools and kindergartens, private health insurance schemes and clinics, and better pension systems than those available to most.  In that sense, the 2019 protests in Chile and Colombia are related to inequality after all: inequality of opportunity preserved by an oligarchic social contract. 

Another way to frame this hypothesis, it seems to me, is that it reflects the failure of governments and national economies to meet the economic expectations of rising middle classes.

Of course, Latin America is not Australia. We have much greater equality of opportunity than Latin American nations (see figure 3 in the Ferreira and Schoch blog post). And our levels of income inequality are much less than in Latin America. The World Inequality Database (link here) suggests that while Brasil’s top one percent earn around 25 percent of national income, in Australia the top one percent earn around 9 percent. Interestingly however, while income inequality (measured by the share of income earned by the top one percent) has been falling across Latin America over the past two decades, in Australia it has doubled. See for example this article in the Treasury Economic Roundup from 2013 (link here), particularly fig. 8.

The issue of income inequality amongst Indigenous citizens is complex for a range of reasons, including increased rates of self-identification in urban and regional areas, and supplementary access to non-monetary forms of income in remote and very remote areas. Nevertheless, it is worth outlining the basics. The best and most recent account is to be found in Biddle and Markham’s 2018 CAEPR Census paper ‘Income, Poverty and Income Inequality’ (link here), particularly from page 20 on. Again, interested readers will benefit from reading the article in full.

Their paper analysed data from three censuses, in 2006, 2011 and 2016.

As outlined in the Abstract to their paper, key findings include:

a growing divergence between the incomes of Indigenous people in urban areas and remote areas. Although Indigenous incomes are growing steadily in urban areas, …median disposable equivalised household income in very remote areas fell …Indigenous cash poverty rates in very remote areas rose from 46.9% in 2011 to 53.4% in 2016. During this period, poverty rates in urban areas continued to fall, reaching 24.4% in 2016. Finally, changes in the difference in the incomes of Indigenous and non-Indigenous Australians followed a similar pattern, with income gaps shrinking in urban areas while growing rapidly in very remote areas. Although the increased incomes in urban and regional areas – where the majority of the Indigenous population lives – should be welcomed, this paper highlights a great divergence in the material circumstances of the Indigenous population across Australia. Urgent policy action is required to ameliorate the growing prevalence of poverty among Indigenous people in very remote Australia.

While their paper is rich in data and insights, I wish to emphasise three of the most policy relevant insights their analysis reveals:

1.    Compared to non-Indigenous citizens, Indigenous citizens are over-represented in lower income deciles (see fig. 17 and page 23);

2.    There is a significant divergence between income levels of remote and very remote Indigenous citizens versus the income levels of regional and urban Indigenous citizens (see fig. 17 and page 23), and

3.    While the income gap between Indigenous and mainstream citizens is very slowly reducing, it continues to worsen in the bottom half of the Indigenous population. This divergence largely maps on to the urban / remote divide.

Or to quote Biddle and Markham directly (refer page 33):

For the first time that we are aware of, more than half of the Indigenous population in very remote Australia was in income poverty, with rates in most very remote regions well above 50% in 2016. Indigenous incomes in very remote areas fell further behind non-Indigenous incomes, with the median Indigenous income in these areas averaging just 44% of the median non-Indigenous income. The structural causes of this increase in poverty require urgent action (emphasis added).

Their final paragraph is also worth quoting (refer page 34):

One final finding of note relates to income inequality within the Indigenous and non-Indigenous populations. This paper is the first of which the authors are aware to observe that incomes are distributed less equally among the Indigenous population than among the non-Indigenous population… this finding underscores the diversity of outcomes within the Indigenous population. This Census Paper has reported both a cash impoverishment of Indigenous people in remote regions and at the bottom end of the income distribution, and the continued growth of Indigenous incomes in urban areas. There is an urgent, clear policy imperative to ameliorate the former while promoting the latter.

Social unrest is not unknown in Indigenous Australia, but widespread social unrest amongst Indigenous citizens directed against governments is quite rare. Over the past four decades, unrest, demonstrations and riots have occurred in both larger urban centres and remote regions. In the years before 2000, they were often political in nature, related to activism in favour of land rights, or responses to particular acts of police violence. Over the past two decades, most instances of social unrest have occurred in remote Australia, but they have generally been localised in particular communities. Examples include violent conflict between youth gangs in Wadeye in the period 2007 to recent times, a major split and some associated violence between family/clan groups in Yuendumu in 2010, and more recent unrest, and regular outbreaks of rioting and violence in Aurukun over the past decade, including this year.

My intuitive sense is that in regional and urban Australia the quantity and intensity of social unrest has gradually declined over the past two decades. This may accord with Biddle and Markham’s observation that the levels of income growth amongst Indigenous citizens at the top of the income distribution adds weight to discussion regarding the possible emergence of a middle class amongst urban Indigenous citizens (see page 9). However, in remote Australia, regular outbreaks of unrest appear to have persisted through the past two decades, although the absence of a readily available data set makes any assessment inherently unreliable.

My point is not to collate or outline a comprehensive listing of such occurrences, nor to promote a particular narrative regarding the causes of community violence. I am aware of an extensive anthropological literature on political conflict and violence within traditional Indigenous communities. Rather, my aim is to look to the future, and in particular assess (in a provisional way) the likelihood of ongoing social unrest within Indigenous Australia arising from the hypotheses of the World Bank research.

As noted above, there appears to be a dearth of analysis of the overall levels of social unrest in Indigenous Australia. Raw data in the form of media and police reports of particular community conflicts or riots exist, but these are of variable quality and coverage, not easily accessible, and are likely to provide little insight into the immediate drivers of the unrest. In parallel, there is an increasing reluctance among academic analysts to seek to measure and explain the overall levels of community unrest, perhaps because such analysis is seen to contribute to a ‘deficit narrative’. My own view, however, is that whether or not the causes of community unrest are endogenous or exogenous to Indigenous societies, the existence of such unrest ought to be an issue of policy concern and attention. Indeed, the ongoing existence of overt and in particular violent unrest ought to be seen primarily as a policy failure of government, not as a failure of Indigenous societies, communities or leadership.

Taking the World Bank hypotheses as our starting point, it is immediately obvious that they do not translate to Australia, and in particular not to Indigenous Australia. We have a more robust democratic culture. Moreover, the comparative position of Australia vis a vis most Latin American nations on income inequality and inequality of opportunity is much more egalitarian (see figure 3 in their post). Australia does not have a robust tradition of sustained mass demonstrations against government initiatives, and we might hypothesise that this is a result of our comparative wealth, our comparative economic egalitarianism, and perhaps the long term erosion of union power.

In relation to the position of Indigenous Australians, they benefit from the comparative robustness globally of our national institutions, reflected in lower levels of income inequality and inequality of opportunity. Nevertheless, it is fair to assume that the bulk of these benefits accrue to urban and regional Indigenous citizens.

As Indigenous incomes at the top of the income distribution, and thus the Indigenous ‘middle class’, have grown, the instances of social unrest appear to have dissipated in urban and regional areas. There appears to be little evidence that expectations around greater equality of opportunity are creating greater unrest. In remote areas, income inequality is growing, and we can assume expectations of greater equality of opportunity are either non-existent or also falling. Social unrest continues (albeit most obviously in larger groups of residents), but it is rarely directed at government, and more often might be characterised as either lateral violence or a form of communal anomie.

If anything, the remote Indigenous experience of unrest fits more neatly into a simple hypothesis (at variance from that proposed for Latin America by the World Bank authors cited above). Namely, that there is a correlation between continuing or worsening inequality of income (probably accompanied by absent or falling expectations of equality of opportunity) and continuing and sporadic lateral unrest and violence. We might also hypothesise that the existence of lateral violence is also correlated with higher rates of disengagement (eg poor school attendance), and higher levels of individual violence, domestic violence and suicide. The extraordinary rates of Indigenous incarceration, out of home care for children and youth suicide in remote Australia support such an hypothesis. Of course, the fact that these are also serious issues in regional and urban Indigenous contexts (albeit not at remote levels) correlates with the continuing existence of income inequality in those contexts.

Indeed, the starting point of this post, namely a focus on the comparative experience of social unrest directed against governments, may well be a distraction from the pandemic levels of internally directed unrest and violence within remote Indigenous communities.

So what is the appropriate policy response going forward?

My first point, is that there is a desperate need for greater policy relevant research related to the levels and causes of internally and externally directed social and economic unrest (including lateral violence) within remote Australia. The data and analysis that is currently available is inadequately synthesised into policy relevant conclusions, is highly siloed between disciplines, and is mostly inaccessible to non-specialists. This sort of synthesis research is highly unlikely to occur and be promulgated without some sort of government support and initiative. Moreover, the risk flowing from the absence of such research is that it leaves the way clear for anecdote and social media driven narratives to drive policy initiatives.

Second, we can confidently assert that whatever governments are doing or have done in relation to remote Indigenous policy has not worked. Moreover, a number of existing government policy approaches are likely to make the situation worse. In particular, I would mention the ideological fixation by both major political parties on jobs and commercial development as some sort of panacea. This rhetoric, which is often not backed up by comprehensive or coherent policy nor programs, may be appropriate in relation to urban and regional Indigenous Australia, but hasn’t worked in remote Australia, and wont for the foreseeable future. See John Taylor’s recent demographic research in the Pilbara for evidence of this (link here).

Another disastrous policy is the Community Development Program (CDP) which operates only in remote Australia. CDP incorporates a work for the dole imperative, a minimum 50 % income management element across most of remote Australia, and highly punitive job search and reporting conditions which in turn lead to stratospheric rates of breaching adversely impacts thousands of remote citizens, and is largely invisible to mainstream Australia (link here).

Finally, the deliberate, short-sighted, and deliberately obscured decision by the current federal Government in 2018 to unilaterally discontinue the ten year National Partnership on Remote Indigenous Housing with the states upon its expiry will have seriously adverse long term consequences. The decision effectively cuts Commonwealth funding from $550m per annum to around $100m per annum (for the NT only). It will lead to a reduction in social housing investment for the most disadvantaged citizens in the nation. It will exacerbate existing overcrowding, shorten asset lifespans (leading to a need for further taxpayer investment down the track), and reduce economic opportunities within remote communities (links here and here). Given the likelihood of a national covid-19 pandemic, and its greater impact on the aged and medically vulnerable, the overcrowding crisis in remote Australia may, in a worst case scenario, turn into an avoidable death sentence for many remote citizens over the coming decade.

My third point is that remote Indigenous Australia is facing a largely invisible social and economic crisis. In comparative terms, for remote Indigenous citizens it is as bad as, or worse than, the impact of the Great Depression. There is no single policy initiative that will on its own, or quickly reverse this crisis. What is required is for governments to reverse their current policies of disinvestment and structural neglect, and to establish and sustain a ‘remote new deal’. This would involve working with local and regional Indigenous organisations, to gradually ramp up the levels of government investment and engagement in remote Australia. This would need to be led by the Commonwealth and include the relevant state and territory jurisdictions. It would require a radical reconceptualisation of both policies and programs.

I am under no illusions regarding the likelihood that governments of any persuasion will adopt the policy agenda outlined here in the near or proximate future. The reason is that, like the poor in Latin America, remote Indigenous citizens face an inequitable social contract, a ‘political settlement’ if you will, that does not include them. They do not have the demographic heft to undertake mass protests, or to challenge the existing social contract electorally. Instead, they express their powerlessness in fundamentally self-destructive ways. While not designed to challenge, these outcomes should challenge Australia’s self-perception as a fair and equitable nation, where everybody gets a fair go. There is thus both a moral and economic imperative for fixing these issues. Fixing them is in the national interest. They are not inherently intractable, it is just that we Australians lack the vision, consensus and commitment to address them. Instead we prefer to blame (and punish) the victim, and clothe ourselves in the cloak of fiscal and moral virtue.

Along with our punitive policies on treatment of refugees, and our wilful blindness on the risks of climate change, our treatment of Indigenous citizens, particularly in remote Australia, will stand out as one of the most short-sighted and irresponsible decisions we have taken as a nation in the 21^st century. Like the White Australia policy that shaped our nation for almost a century, that record will represent a permanent blight our history.