Who’s rich?

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Rebecca Huntley, of research company Ipsos, which publishes the regular social trends study Mind and Mood, recalls sitting down recently with a group who were on household incomes of $200,000 a year, living in expensive homes no more than five kilometres from the city centres of Sydney and Melbourne.

”What was so interesting,” she tells Fairfax Media, ”is that most of those people saw themselves as middle class. Some would say, ‘Well, we’re not rich’.”

And yet $200,000 a year puts them firmly within the top 5 per cent of all Australian households measured by income, according to Australian National University analyst Professor Peter Whiteford.

The flattening of income tax scales, which began under Bob Hawke in the 1980s but accelerated under John Howard and was perpetuated by Kevin Rudd, may have further clouded perceptions of what it means to be well off.

These days there are far fewer tax brackets and you have to be earning $180,000 or more before the top tax rate kicks in.

”The tax system no longer sends cues to high income earners that they have entered top earning echelons,” Denniss argues.

All the muddy political rhetoric and confusion about who sits where feeds into growing uncertainty about what constitutes middle class in today’s world. Once, as the famous British TV skit with John Cleese and the two Ronnies had it, the tall man in the bowler hat (played by Cleese) looked down on the man in the suit, who looked down on the man in the cloth cap.

The working class got its hands dirty at the bottom while the middle class toiled in white-collar jobs in the professions or middle management, and the upper class had the posh accents and most of the loot.

But in Australia, as in other advanced Western economies, those paradigms have been turned on their head.

Today’s economy is very different from the 1950s, when nearly half the workforce was employed in manufacturing and agriculture, many in semi-skilled or low-skilled jobs. Now those two industries account for about one in 10 Australian workers.

At the same time the nexus between education, the social status of certain kinds of work and higher incomes has been weakened. These days a highly successful tradie with his or her own contracting operation in the western suburbs, employing others, is likely to exceed many professionals in income.
”One of the most important things that hasn’t been given enough attention is the extent to which intelligent working people or intelligent skilled tradesmen became themselves little capitalists,” former Hawke cabinet minister Dr Neal Blewett says. ”A lot of them in the past would have been active unionists. Now they are contractors, employers of labour. And as the trade union movement broke down there has been more and more opportunities for contractors to get in on the act.”

Huntley says when she surveys these people, they will ”call themselves tradies but they will also say, ‘Well I’m really running my own business and doing my own BAS every three months”’.

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