'Perhaps one day the egalitarian facade will collapse and we won't like what we see.' Credit:hqPhotography I said I thought he was old enough and ugly enough to look after himself, but an old union secretary demurred. ''You blokes go back to the pub,'' he said quietly, ''I'll have a look around for him. You never leave your mates behind.'' You might think this egalitarianism would be reflected in a reasonably equal distribution of income between Australian households, but that's far from the case. As the economics professor turned Labor politician Andrew Leigh reminds us in his most readable new book, Battlers & Billionaires, the latest figures show us having the ninth-highest level of inequality among 34 rich countries. It's probably not terribly well understood that, between Federation and the late 1970s, the gap between the highest and lowest incomes narrowed steadily, whereas since then it has widened significantly. The standard way to study the distribution of income is to compare the fortunes of the poorest fifth of households with those of the middle fifth and the top fifth. But Leigh has led the way in using income tax statistics to focus on changes in the share of total income commanded by the top 1 per cent of income earners.

He finds that, in the 1910s, the top 1 per cent (individuals who, by today's standards, had pre-tax income of more than $200,000 a year) received about 12 per cent of all personal income. That is, 12 times what they would get if incomes were distributed equally. But this share declined steadily to reach a low of about 5 per cent of total income by 1980. What caused this marked decline in inequality? Leigh shares the credit between the effect of the union movement (and, I'd add, our system of arbitration and conciliation) in protecting and improving wage levels), our governments' increasing reliance on income tax (with its progressively higher rates on higher income earners) and the development of our heavily means-tested system of welfare benefits, such as the age pension, child endowment and unemployment benefits. Leigh says the welfare system has twice the equalising force of the tax system. The result was that, ''under the prime ministership of Malcolm Fraser, the share of income held by the richest 1000th of Australians was only a quarter of what it had been under Billy Hughes [in the late 1910s]''.

Since some time in the late 1970s, however, this equalising trend - bringing the way the nation's income is shared more into line with our egalitarian ideals - has been reversed. The share of the top 1 per cent of income earners has recovered from 5 per cent to about 9 per cent. Why? Leigh estimates the rise in inequality over the past generation can be attributed roughly equally to three factors, the first of which is technology and globalisation. New technology's ability to give the best entertainers, sportspeople and even lawyers and other professionals access to a global market has hugely increased the incomes of a relative handful of individuals. Efforts to attract foreign chief executives to lead Australian companies have helped to force up the incomes of all chief executives. Second is the decline of the union movement (including the move from collective bargaining to individual contracts), which has allowed many workers' wages to grow less strongly than other incomes. Third is taxation, with the moves to make income tax rates less progressive and rely more on indirect taxes.