General Economics

Sep 15, 2010

Want to double average income in 4 years?

For that's exactly what happened in the WA town of Ravensthorpe between the 2003/04 and 2007/08 financial years - driven by the construction and opening of the BHP Ravensthorpe nickel m

Possum Comitatus — Editor of Pollytics

Possum Comitatus

Editor of Pollytics

For that’s exactly what happened in the WA town of Ravensthorpe between the 2003/04 and 2007/08 financial years – driven by the construction and opening of the BHP Ravensthorpe nickel mine. Sadly for the residents of Ravensthorpe, the mine was mothballed shortly after opening as a result of weak nickel prices – but it highlights the nature of the massive growth in incomes over the period in small WA towns that really stood out in yesterdays ABS release Estimates of Personal Income for Small Areas.

The ABS publication tracked a number of income measures across the financial years starting in 2003/04 and ending at 2007/08 for over 500 local government areas in Australia.  If we look at the top and bottom 20 local government areas for average annual personal wage and salary incomes for the 2007/08 financial year, it shows the usual suspects turning up – we’ll also throw in a histogram of the distribution of average wage and salary earnings for the 522 local government areas as well.

avwagesalary1

incomedistributionlga


We get the usual Mosman, Woolhara and Hunters Hill type areas coming in at the top, with a collection of boondocks coming in at the bottom. We also see a pretty standard income distribution skew for a country like Australia with a longish right hand tail.

But more interesting is the way average wage and salary income changed over the four year period, particularly the geographical distribution of where the biggest changes occurred. If we firstly look at just the net dollar changes in average wage and salary earnings for local government areas, we start to see the big mining areas pop up as some of the largest net dollar movers:

top20change

It’s a pretty good representation of the boom sectors of the Australian economy over the period, with the top end white collar areas of Mosman and Peppermint Grove etc making the big dollar gains on wages and salaries, along with the big mining areas of the Pilbara and Mount Isa etc.  Also noteworthy is that 12 of the top 20 LGA areas experiencing the largest net increase in average wage and salary earnings are in WA.

While this fairly interesting, if we run those numbers again, but rather than look at the net changes in average wages and salaries, we look at the percentage change that occurred in average wage and salary  earnings – the growth rate in wage and salary earnings in LGA areas – something extraordinary happens.

top20growth

Welcome to the WA mining boom! 18 of the top 20 local government areas across Australia that experienced the largest wage and salary growth were in WA, and 19 out of 20  occurred as a result of the resources boom (including Franklin Harbour in SA where the Iron Duke mine draws a large number of its employees from). As far as I can tell, only Peppermint Grove in WA was not directly reliant on mining driving wages among the top 20 – although a significant proportion of Peppermint Grove workers would either work in the white collar end of the resources industries, or work for companies supporting the resources industry.

The mining boom is roaring back after its 12-18 month hiatus – so we should start to see this effect happening more and more often, not only in WA, but also Qld and to a lesser extent SA. It’s pretty astonishing.

Finally, it’s worth running two scatterplots. One where we chart the average wage and salary income in LGAs in 2003/04 against the net dollar change that occurred in those average wage and salary incomes for the 4 years to 2007/08, and another where we charrt the same 2003/04 income against the percentage change in that income that occurred over the 4 years to 2007/08 (click to expand – net dollar change in is blue, percentage change is in red)

changevinc growthvinc

While the first chart shows that LGAS with higher base levels of wages and salaries in 2003/04 generally experienced higher net increases in those wages and salaries over the 4 years to 2007/08,  the second chart actually shows that it wasn’t disproportionally so, in that the rates of growth for LGA’s that had higher wage and salary incomes in 2003/04 wasn’t particularly larger than the rest. So while the rich areas were generally getting richer in terms of wages and salaries, their rates of growth weren’t particularly higher than what was happening, on average, everywhere else.

UPDATE:

As for the bottom 20 by both total wage and salary increase and the percentage change, here they are (click to expand):

bottom20change bottom20growth

23 comments

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23 thoughts on “Want to double average income in 4 years?

  1. Bird of paradox

    I’ll quibble about this bit:

    [ Welcome to the WA mining boom! 18 of the top 20 local government areas across Australia that experienced the largest wage and salary growth were in WA, and 19 out of 20 occurred as a result of the resources boom (including Franklin Harbour in SA where the Iron Duke mine draws a large number of its employees from). ]

    Most of these LGA’s are nowhere near anywhere with a mine – I’d only count Boddington (gold) and Ravensthorpe (nickel) as boom towns, possibly along with the areas around Geraldton (Chapman Valley, Mullewa, Yalgoo, Murchison, Irwin), which between them would include some iron ore and gold mines. The rest of those WA shires are scattered across the wheatbelt (except for Waroona, dairy farming country), mostly coming off a very low result last time. It could be due to low-income people moving either to Perth or up north to get better jobs, but wouldn’t be directly to do with the mining boom.

    Also, be careful with any data for the Shire of Murchison – it’s the smallest LGA by population in the state (maybe the whole country), and doesn’t even have a town. It’s the kind of area that would be left as ‘unincorporated areas’ in SA or NSW. Peppermint Grove’s pretty small, too – it’s literally one suburb. If it wasn’t in the richest part of Perth, it would’ve been merged with the surrounding half a dozen councils long ago.

  2. rationalist

    All the sorting I do is stooge sort.

    http://en.wikipedia.org/wiki/Stoogesort

  3. paritybit

    [Nah, that’s not too nerdy – this is too nerdy!

    http://www.youtube.com/watch?v=t8g-iYGHpEA%5D

    Thats a bunch of awesome

  4. calyptorhynchus

    Does anyone know what’s happened in Barcoo (Qld) to make it No. 2 on the list?

  5. Possum Comitatus

    It was definitely a stretchy kind of night 😛

  6. rationalist

    That’s a bit of a stretch, Dr Good and steam driven interwebs.

  7. Dr Good

    The 2PP is now 50.35% ALP to 49.65% LNP: a margin of nearly 90,000
    votes to the ALP. But there are more LNP votes still to count than ALP ones.

    Mr Abbott’s favourite measure of legitimacy is, however, the first preference vote.

    Luckily that count is nearly complete.

    It shows that the new Government enjoys the support in parliament of
    parties and independents which attracted
    6,280,629 first preference votes (or 50.6% of all formal votes)

    Supporters of Abbott in parliament, however, attracted only
    5,446,806 first preference votes (43.9% of all formal votes)

    That’s a margin of 833,823 votes to the current Government.

    This incidently is only the first time in 30 years that a Government
    commands support of a majority of first-preference votes.

    It is only the second time ever in Australian Federal election
    history that an ALP PM has such a majority, the only other
    time was in 1914.

    That is an historic claim to legitimacy and to a mandate.

    Full details at
    http://dr–good.blogspot.com/

  8. steam driven interwebs

    My brother spent 15 years as an unemployed bum, went back to UNI and
    studied his guts out and got a degree / distinction average in engineering.
    Worked his way up the professional ladder to become a CIO at BHP-billiton
    earning over $120,000 a year: Still votes greens as he did when he was an unemployed bum, what hope is there for Abbott’s army ??? i.e. the young folk just don’t think about voting liberal (a racist bigot vote equivalent).

  9. Possum Comitatus

    The seats havent been fully counted yet Dodgy – but when they are Labor will come out in front at somewhere around 50.1%.

    So saying, that has nothing to do with legitimacy – that comes from getting a majority Members in the House supporting a government.

    So yes, a large number of Australians are ill informed – or just outright dickheads – depending on their motivations.

  10. DodgyKnees

    Forgive the off-topic query, but:

    The AEC currently has labor leading the 2pp 50.25%
    http://vtr.aec.gov.au/

    Is this an aberration or are the large number of Australians who still think the government is illegitimate ill informed ?

  11. Possum Comitatus

    wilful,

    This is only wage and salary earnings – paid labour. If we add in investment income and whatnot, the usual suspects you mention turn up.

  12. wilful

    I’m really surprised that the nice areas of Melbourne didn’t make it in to the richest LGAs. Why is that, is there simply less money in Melbourne? Less Macquarie Bank partners?

  13. Boris Kelly

    Possum
    Do you have data on how the profits from the mining boom are distributed?
    I am particularly interested in the breakdown of institutional/individual shareholders and onshore/offshore. For example, how much of that profit (not including local taxes) stays in Australia?

  14. Sgt Pepper's Bleeding Hearts Club Band

    Thanks.

    Sucks to be in Sandstone. They don’t appear to have a whole lot of other sorts of income either. That said, there’s barely 100 people there so I guess the data could be pretty volatile.

  15. Possum Comitatus

    Sgt Pepper – I just updated the post with tables of the bottom 20 for both actual wage and salary change as well as the percentage change.

    On inflation, I don’t think it’s broken down to that level. The closest is the capital city breakdowns over here:
    http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/6401.0Jun%202010?OpenDocument

    But that’s not really applicable in many respects.

  16. Sgt Pepper's Bleeding Hearts Club Band

    Very nice.

    I assume this is unadjusted income, in which case it looks like there are a small number of LGAs whose average wage/salary income effectively went backwards. E.g. your second plot shows one LGA with close to 0% rise over the 4 year period. Can you identify those 6 LGAs with the lowest relative growth in average income, and tell us how the income growth in those areas compared to inflation?

  17. blue_green

    Ta Poss

    I also found a an article by Ken Henry

    http://www.ada.asn.au/defender/Summer%2005-06/Australia's%20Defence%20to%202045%20(Henry).pdf

    I often find myself the only Greenie in the room arguing for a bigger Oz popn.

  18. Possum Comitatus

    Defence and the economy are one and the same. If we have defence spending running at 2-2.5% of GDP, the larger our GDP actually is, the larger will be the actual size of the defence budget.

  19. blue_green

    Poss,

    you have talked a lot about the need for Oz’s popn to grow for economic reasons. Has anyone talked about the need to grow the popn for Defence reasons?

    I would have thought that an Oz economy and popn that does not keep pace to some degree with our region will leave us miles behind in the Defence stakes.

  20. blue_green

    Poss,

    I can’t imagine what sort of stuff you would find if you had more time on your hands. 😆

    That is seriously strange.

  21. Possum Comitatus

    [Or is that just too nerdy?]

    Nah, that’s not too nerdy – this is too nerdy! 😛

    http://www.youtube.com/watch?v=t8g-iYGHpEA

  22. blue_green

    [So while the rich areas were generally getting richer in terms of wages and salaries, their rates of growth weren’t particularly higher than what was happening, on average, everywhere else.]

    Thats a pretty damn good result. And very, very different to what is happening in US.

    This article has almost encouraged me to plot a change in the Gini Coefficient over time. Or is that just too nerdy? 😆

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