Wage and Income Inequality in Two Welfare States: Australia and Sweden

This paper compares aspects and contrasts of income inequality in Australia and Sweden, focusing on the distribution of wage incomes amongst prime aged full-time workers. After some discussion of the economic and labour market contexts of each country, the development of their wages policies is briefly summarised. This is followed by an analysis, using unit record household income survey data for 1990/91, of the factors contributing to overall income inequality in each country, focusing on the role of earnings, self-employment income and government cash transfer payments. A model is then developed to explain the wage incomes of full-time workers in each country and the model is used to make inequality comparisons which adjust for differences in age structure, industry structure and levels of education. The results indicate that taking account of these adjustments leads to remarkably similar distributions of wage income in each country.