The Evolution of the Earnings Distribution in a Sustained Growth Economy: Evidence from Australia

We study the evolution of the earnings distributions in Australia from 1991 to 2020, a prolonged period of sustained economic growth without recession. Using a 10% sample of Australian taxpayer records, we document key trends in labour earnings inequality, mobility and risk for workers aged 25 to 55. Our findings reveal strong upward earnings mobility for both men and women. Earnings inequality rose modestly until the early 2010s, driven by top earners, but has since declined. The gender gap in earnings inequality has narrowed, and even reversed in recent years, mainly due to a sharp reduction in inequality among women at the lower end of the earnings distribution. Early-life disparities also play an increasingly important role in shaping later-life inequality, particularly for younger cohorts. This reversal in inequality trends has emerged over the past decade, coinciding with a slowdown in economic growth. Moreover, although aggregate macroeconomic conditions have been relatively stable, idiosyncratic earnings risk-captured by dispersion, skewness, and kurtosis-remains persistent, with greater volatility at both the top and bottom percentiles. Women continue to face higher risk and lower mobility than men, despite experiencing stronger average earnings growth over the entire period. Hence, our findings provide new insights into how prolonged economic expansion shapes the dynamics of earnings across different demographic and income groups.