People have taken to noting that New Zealand’s level inequality hasn’t changed much in the last 15 years. And it’s true, up to a point. But it leaves out a couple of things.
First, it conveniently omits most of that period between the mid-1980s and the early 2000s, when income inequality grew more in New Zealand than any other developed country.[1] Truly an area where we are, unfortunately, world beaters. While incomes skyrocketed for some, the average New Zealander (and everyone below them) had less disposable income in 1984 than they did in 1999. If that seems hard to believe, you can consult the gold standard for inequality measurement, the annual Household Incomes Report put out by the Ministry for Social Development, where it’s all clearly laid out.[2]
What happened in that time was a shift to an economic system that delivers more of its gains to those who are already doing well. That happened through things like cutting the tax rate for the richest from 66% to 33%, reducing benefits by a quarter of their value in the 1991 Mother of All Budgets, and reducing the trade union membership, and thus bargaining strength, of the workforce. A lot of previously well-paying jobs also went overseas, never to return. Unsurprisingly, with the well-off taking a much larger share of the cake, there wasn’t much to go around elsewhere, and poverty surged from the early 1990s onwards.
Housing also started to misfire, especially as the government withdrew from its traditional role of providing houses for the most vulnerable. But we have to be careful how we talk about housing. Since the mid-1980s, the annual incomes of the poorest 10th of New Zealanders have increased by no more than $2,000, while those of the richest 10th of New Zealanders have increased by $60,000.[3] Housing costs have been responsible for no more than one-tenth of that increased gap between rich and poor – significant, but hardly dominant.[4] Fixing the housing crisis is not going to solve inequality. Basic questions around salaries – what share of company income people get – and taxes and benefits are much more important, as is the basic question of what jobs are on offer and whether people are trained to fill them.
The other thing omitted from the selective account mentioned above is that the last 15 years has had two very different trends. Under the various Labour-led coalitions of the 2000s, inequality was falling, albeit slowly. Under the current government, it has increased slightly on almost all measures, just enough to cancel out the progress made under Helen Clark.[5] Don’t forget, too, that in New Zealand the wealthiest tenth own 60% of all the assets, while the poorest half of the country only than 5%. That’s a pretty striking inequality, and one that is hard to justify based on how hard people work and the contribution they make.
The result is that we have been left with a high level of income inequality and poverty. Inequality divides society, creating concentrated neighbourhoods of wealth and poverty, reducing people’s empathy for and connection to each other, and lowering trust. Poverty leaves permanent scars on children and denies them a fair chance to succeed. Every day those poisons are left unchecked is a day in which a child’s life is damaged and the social fabric is further rent. The fact that these problems have been compounded for a while makes them worse than if they had sprung up recently.
That’s also why, to some people’s puzzlement, there are so many mentions of inequality in the media now. It takes people a while to work out what has happened to their country, and it takes a while for the problems to become evident. But now that we have working families sleeping in their cars, people are beginning to realise how serious the problems are.
Sources:
[1] OECD, Growing Unequal? Income Distribution and Poverty in OECD Countries, October 2008, p.27.
[2] See: https://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/
[3] Household incomes in New Zealand: Trends in indicators of inequality and hardship 1984 to 2015, Ministry of Social Development, 2016, Table 9.2, p.239.
[4] See: http://www.inequality.org.nz/mr-english-housing-costs-biggest-cause-inequality/.
[5] Household incomes in New Zealand: Trends in indicators of inequality and hardship 1984 to 2015, Ministry of Social Development.
