Latest research and data – Income Inequality in Aotearoa New Zealand
Household Incomes in NZ: Trends in Indicators of inequality and hardship 1982 – 2010 (MSD, July 2011).
Latest inequality data shows a drop in income inequality in the year to June 2010. Income inequality is however still embedded at rates well above those of the mid-1980s. The effects of the October 2010 tax cuts and tax changes since are not included in latest data. Main factors in reduction in inequality are increased NZ Super income due to October 2008 “tax compensation” increase that flows into the lowest two deciles. The other main effect is a drop in the highest two decile incomes due to loss of investment income.
Left Further Behind (CPAG, September 2011)
Strong relationship between inequality and poverty – inequality affects life chances, health, education and employment opportunities. “The worst thing about living in poverty is the way it gives others permission to treat you – as if you don’t matter” (Lister, 2010). High levels of inequality hinder attempts to reduce child poverty.
He Ara Hou: The Pathway Forward (Every Child Counts, September 2011) Manuka Henare et al
The brown poverty a “Polynesian time bomb” –as it is described by Hone Kaa. The report discusses the way current ways of measuring inequality, poverty and disadvantage “fail” Māori and Pacific children. They turn to the “capabilities approach” and note the UN Human Development Index as one example of a broader approach to measuring wellbeing (NZ ranks 3rd in the world in this). They criticise the “welfarism” of the current system based on economic welfare, material wellbeing and limited human agency”. The current inequality measures compare Māori with non-Māori and represent a “colonising” approach. They call for a new “dedicated well-being survey” with questions designed to reflect the capabilities approach.
The Big Kahuna, Gareth Morgan & Susan Guthrie (August 2011)
Human rights argument to adequate income emphasised – not attached to “work readiness” criteria. They criticise the “dumbed-down and myopic” NZ discussion on tax that focuses on tax policy as how to stop tax dodging and redistribution issue is to end welfare bludging. Also they expressly use the language of egalitarianism while being highly critical of the welfare system we have developed in this country.
Unconditional Basic Income (UBI) and a Comprehensive Capital Gains Tax (CCT) coupled with a universal flat tax rate of 30% are the key elements of their new take on tax and welfare. Reviving the debate on UBI is interesting and they have combined it with a suggested way to spread the tax base by taxing all capital (including the family home) and an attempt to overcome the problem of high marginal tax rates, especially for those on benefits, by having tax rate meaning you always get 70% of any extra income you earn.
Closing The Gap – the income equality project www.closingthegap.org.nz
This group has launched a website and online campaign to promote the Spirit Level message in NZ. Shares the message of Closer Together Whakatata Mai but has chosen to be a more closely aligned with the Spirit Level book and research.
Fiscal Incidence in New Zealand: The distributional effect of government expenditure and taxation on households in 1987/88, 1997/98 & 2006/07 (Treasury, draft paper not for citation presented at July 2011 Ass of Economists Conference))
Treasury analysts have compared “final incomes” across the income deciles, defining final income as “income after adjusting for payments to and benefits from central government” = disposable income plus in kind services.
Gini coefficient changes greatly reduced from 34 (disposable income) to 26 (final income).
Implication from this is that increased targeting of government expenditure to lower income deciles has greatly reduce overall “final inequality”.
Note however, how tax “burden” has changed. The higher deciles pay a slightly higher proportion of total tax take (30.2%) than they were in the 1980s but while average market incomes for highest decile increase by 40% over the two decades, average tax (across all deciles) increased by only 2.8%. So, while the rich continue to pay the highest proportion of tax, they are paying a lot less tax overall.
Growing Income Inequality in OECD Countries: What Drives it and how to tackle it” OECD Forum May 2011
Income inequality across the OECD countries rose over the decades from mid-80s to mid-2000s and appears to be converging at a common and higher average
- Globalisation, skill-biased technological progress & institutional and regulatory reforms have all impacted in distribution of earnings
- changes in family formation & household structures have had an impact on households earnings and inequality
- tax & benefits systems changing distribution of household incomes
There is a forthcoming publication on this from the OECD (November 2011)
More for Less: what has happened to pay at the top and does it matter? (UK High Pay Commission, May 2011)
Looking at the top 100 UK listed company executives charts the excessive increases in rewards they have been receiving that bear no relation to company performance. CEO remuneration has quadrupled in past 10 years while share prices have fallen!! There is little evidence of “executive poaching” and risk is not high. Poor oversight by Boards and regulatory bodies of the remuneration of executives (and Boards themselves) and lack of shareholder power are identified as issues.