Distribution of the Economic Gains of the 1990s

This Staff Research Paper examines the effects of the surge in Australia's productivity growth in the 1990s on the growth and distribution of incomes in Australia. It focuses in particular on the distribution of income between labour (wages and salaries) and capital (profits).

Contrary to some perceptions, it finds that the gains of the 1990s have been evenly distributed between labour and capital. Labour has gained through growth in real wages and employment. The owners of capital have gained through growth in average rates of profit.

The study also found that much of the productivity growth in high-performing industries has been passed on in the form of lower prices. This is particularly true in the 1990s, suggesting that increased competitive pressures have been at work and have limited the scope for wage and profit growth differentials to emerge across industries.

The paper is part of a stream of ongoing work at the Productivity Commission on productivity growth, its causes and implications for the living standards of Australians.