Since the Australian Bureau of Statistics began to release unit record data from its Income and Housing Survey and Household Expenditure Survey in the mid-1980's, microsimulation has become increasingly important as a tool for analysing distributional issues in Australia. Microsimulation is distinguished from other analytical approaches in that it relies on simulating the behaviour of individual units within the society, such as persons, families or households. Hence models which depend entirely on the characteristics of individuals as a basis for simulation, and this includes most microsimulation models, tend to be restricted both in the range of issues they can address and in the range of adjustment mechanisms they can bring to bear on an issue. In the light of these limitations, the Centre of Policy Studies has established a program of research designed to link microsimulation models with its well established applied general equilibrium models. In this endeavour, particular attention is being paid to the role of employment.
Employment is important for distribution for two reasons.
Firstly, most people receive most of their income in the form of wages, with about two thirds of gross income in Australia being accounted for by this source. Second, different individuals derive their wage income from different occupations, and the change in demand for labour of a particular type in response to some change in the economic environment may be quite different from the change in the aggregate demand for labour. Under these circumstances, it is the demand side of the labour market that is the primary determinant of employment and, given the importance of wages as an income source, the effect of economic change on the demand for labour of different types is likely to be a prime determinant of its effect on the distribution on income. The income distribution research is mainly carried out by Tony Meagher .