The effects of changes in family composition and employment patterns on the distribution of income in Australia

Trends in the distribution of family disposable income in Australia over the last two decades are examined using the unit record files of the ABS Income Distribution and Income and Housing Costs surveys. The effects on income inequality of government intervention, in the form of provision of transfers such as pensions, benefits and allowances, and through personal income tax, are also investigated. We find government intervention has acted to reduce growth in inequality in disposable incomes over the period, to a significant extent offsetting the substantial growth in private (before income taxes and transfers) income inequality. Decomposition techniques are applied to identify the roles played by potential sources of this growth in private income inequality, including the contribution of changes in family composition, changes in labour force status, changes in demographic factors and changes in the wage distribution.