Australia is entrenching inequality across education and housing — deliberately

The Productivity Commission (PC)’s new interim report on education and the performance of our systems as a result of additional funding has again demonstrated just how poorly public education is faring in resource allocation.

The PC’s chart on school funding between 2011 and 2020 shows that public schools have enjoyed only a modest real increase in funding over the decade, compared to substantial increases in real funding for Catholic and independent schools. Catholic school funding per student has now overtaken that of public schools, and independent schools have dramatically increased funding per student to levels far above that of public schools.

The disparity was primarily driven by big increases in Commonwealth funding for Catholic and independent schools, while other funding sources, including state government funding, stayed broadly the same. While public schools had only a relatively small increase in Commonwealth funding, both Catholic and independent schools were given substantially greater Commonwealth funding.

Bear in mind this is funding per student, not overall levels of funding — the public sector is much larger than the Catholic or independent sectors.

As the PC notes in its report, “investment in education has been found to reduce inequality”. But when investment flows to already wealthy schools, or flows disproportionately to one sector so that its resourcing grows much faster than the public sector, it has the opposite effect: entrenching advantage for those able to afford Catholic or independent schools. The PC suggests that this may be an important reason why “overall, gross school income per student has increased by nearly 20% in real terms since 2011, with little discernible improvement in test scores” — much of that increase has not gone to where it is needed.

That’s one key sector where government policies are entrenching inequality, but it is by no means the only one.

As Brendan Coates of the Grattan Institute recently explained in his excellent speech on housing, “The Great Australian Nightmare“, while income inequality in Australia hasn’t been growing markedly worse recently, housing policy is ensuring that wealth inequality has: “if we consider incomes after accounting for housing costs, inequality is growing, with the poor being hurt the most”.

As Coates points out: “the growing divide between the housing ‘haves’ and ‘have nots’ also risks being entrenched as wealth is passed onto the next generation … Big inheritances boost the jackpot from the birth lottery. Richer parents tend to have richer children. Among those who received an inheritance over the past decade, the wealthiest 20% received on average three times as much as the poorest 20%.” Home-ownership has fallen substantially among low-income earners since 1981.

This too is the result of government policies: negative gearing and capital gains tax settings, poor housing development approval processes, and a lack of social housing investment.

We’re also entrenching inequality on wages growth. As a Reserve Bank paper from 2019 showed, the great wage stagnation of the Coalition years disproportionately hit lower-income earners.

The highest income earners had the highest wages growth from 2009-17, and the lowest wage earners had the lowest growth. And while wages growth slowed in the 2010s, it slowed much faster for low-income earners (down 2.71 percentage points) than for high-income earners (down 2 points). It also slowed more for people with lower education levels and low-skilled occupations.

Despite the best efforts of the Reserve Bank to pretend that wages growth is improving, wage stagnation remains entrenched in the Australian economy in the wake of the pandemic — in fact, the RBA seems now to be counting on workers lacking the capacity to increase wages growth in its fight against inflation.

And this too is a deliberate policy of the previous government, in an industrial relations system tilted heavily against the bargaining power of workers in which trade unions were specifically targeted with legal harassment by regulators with extraordinary powers, while temporary migration was used to suppress wages.

Unlike in housing and education, the new government appears committed to tilting the balance back in favour of workers, especially through allowing industry or multi-employer bargaining, and the abolition of the discredited Building and Construction Commission. Labor has been willing to take on employers in the interests of its key donors, trade unions, and the interests they represent, workers.

But in housing and education, we continue to allow powerful interests — homeowners and housing investors, wealthy seniors, the property industry, the Catholic Church and wealthy private schools — to dictate policies that reward the wealthy at the expense of taxpayers. Indeed, in the Malcolm Turnbull years, Labor actually aligned with the Catholic and independent school sectors to oppose an attempt to reduce funding for wealthy private schools.

The result is an ongoing entrenchment of privilege and perpetuation of inequality — a country where winning the birth lottery is crucial.

Are you affected by rising inequality in Australia? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.