Decades of booming property prices and stagnant wages mean assets now determine a person’s class more than their job and pay-cheque – and it’s making life much harder for Australians born to asset-poor parents.
In a paper published this week in Environment and Planning A: Economy and Space, social scientists Professor Lisa Adkins, Associate Professor Melinda Cooper and Professor Martijn Konings argue that Australian society is now split into five, asset-based classes.
At the top of the pile is Australia’s “investor” class, which comprises individuals who mostly live off the income earned through their assets.
Next are those who own their homes outright, followed by those with a mortgage.
The fourth and fifth rungs are occupied by renters and people experiencing homelessness respectively.
Ms Cooper said the new class system proved “it is no longer possible to speak about a broad middle class”.
And colleague Dr Adkins said it was entrenching inequality and eroding social mobility.
“We’re talking about a fundamental restructuring of class and inequality,” Dr Adkins told The New Daily.
“Many people talk about [inflated property prices] as a bubble that might burst … but our argument is that this is a systemic shift in society … it’s the new normal.”
Dr Adkins said the transition towards an “asset society” will widen inequality in Australia, as property prices are growing faster than wages and an increasing number of young Australians are struggling to break into the property market.
Many commentators have described this asset gap as an intergenerational divide – with older Australians who bought homes when they were affordable and benefitted from a series of housing booms on one side, and young Australians who have seen property prices rise faster than incomes on the other.
But Dr Adkins said this explanation didn’t quite fit the bill, as asset-owning parents could use their wealth to help their children.
“Parents who are asset rich and have benefitted from the years of property inflation are able to give their children cash gifts or other kinds of gifts … such as letting their children live at home so that they can save a deposit,” Dr Adkins said.
“So what we’re seeing is not generational inequality, but class inequalities across generations.”
In other words: the asset-rich get richer, and the asset-poor get poorer.
“For many Western societies, in the post-war period, there was a great deal of pride in the idea that you could achieve [social] mobility within generations,” Dr Adkins said.
“But because life chances now depend on asset ownership and wealth … the chances for mobility decline for those who are not wealthy.”
Low interest rates and tax settings that encourage investment in property further compound the issue, as they both drive up the price of housing, according to John Quiggin, Australian Laureate Fellow in Economics at the University of Queensland.
Dr Quiggin said this was pushing up the value of capital relative to wages, which in turn was serving to create “patrimonial” society.
“It means having the right parents matters a lot more than it used to, because assets that are directly heritable are completely untaxed in Australia,” he said.
“This is already happening and I think it will become more evident in time.”