Trying to disentangle the poverty and inequality issue – WORD Christchurch

WORD Christchurch Writers and Readers Festival featured two people who have worked hard to dissect the issues of poverty and inequality in New Zealand – political scientist Dr Bronwyn Hayward and journalist and author Max Rashbrooke.

Cover of InequalityBoth have recently had books published on these topics and provided some interesting insights about the nature of inequality and poverty in NZ.

Unless you have been hangin’ with the Taliban in a cave somewhere in the arid Afghani wilderness, you’ve probably been hearing lots about the political and economic topics of Poverty and Inequality in New Zealand. Particularly Child Poverty.

Poverty and Inequality are labels which Kiwis probably never thought would be applied to economic and social life in our precious little liberal democracy here in the South Pacific, besides, as long as we have alcohol, rugby, league, cricket, Richie McCaw, hair straighteners and sunny summers, then everything else just seamlessly plops into place right? Well, um, no. Not really.

The reality of inequality in New Zealand is a bitter pill to swallow, and after years of seeing the adverts of aid organizations on TV depicting skinny and deprived children born into environments of famine or conflict (or both) throughout the world, people seem to find it insulting to hear we have poverty here.

Maybe whoever started the discourse on poverty should have given it another more palatable title, like, um, Chronic Economic Deprivation, or Ongoing Financial Insufficiency, but chances are people wouldn’t accept this either. Perhaps its because poverty and inequality are hard things to define and measure , and we can probably blame academics for providing too many working definitions with no continuity. However, one place to start is with the assertion that in the last 30 years in New Zealand, “incomes for people at the top 10% have doubled, while those at the lowest end have barely increased” according to Max Rashbrooke’s website Inequality.org.nz.

Cover of Children, citizenship, and environmentBoth Dr Hayward and Mr Rashbrooke point out that much of what we see now in terms of inequality can be traced back to around 30 years ago, when we were told by various economists that “a rising tide will lift all boats”. Basically, the Labour Government, under the financial direction of Finance Minister Roger Douglas, drove us into an era of “Neo-Liberalism” (or “Rogernomics”) which “rolled back the State” with a program of deregulation, the removal of government subsidies and tariffs to various sectors of the economy (such as agriculture), and other key changes.

One significant change was to reduce the marginal tax rate from 66 cents in the dollar to 33, and as taxes were cut for the top earners in the country (with those at the bottom paying more via GST etc) we were hoping that those enjoying the “rising tide”, such as businesses and top earners paying less tax and facing less outgoings, would have more money to throw around and people at the bottom end would be employed and paid more as a result. However, income disparity and inequality has arguably increased ever since.

Both Dr Hayward and Mr Rashbrooke contend that the issues we are facing now in New Zealand (and other parts of the world) are fundamentally manifestations of these “neo-liberal” economic policies, and that there are two key dimensions to the inequality/poverty issue:

A. People have less to live on than ever, and everyone in society is paying the price regardless of how well off you are, due to crime and mental, emotional and physical health issues which affect us all.

B, richer people with more discretionary income enjoy a higher degree of political agency than the rest of us because they have more time, money, resources and connections through which they push their economic and social preferences at us all via lobbying government.

Its hard to get a clear picture on all this, as there are a plethora of indicators and measures relating to the subjects of poverty and inequality in New Zealand, however, some findings do suggest there was some positive change in NZ for a period, which some political and economic commentators point to as progress, confusing us all the more.

Key findings about income according to the Ministry of Social Development (MSD)

From a longer term perspective, median incomes fell in real terms from the late 1980s to a low point in 1994, and have been steadily rose at an average of 2.5% pa. By 2001, the median income had just returned to its 1988 levels.

According to the MSD, from 2001 to 2007 median household incomes rose 14% in real terms, but interestingly, from 2004 to 2007 “incomes for low to middle income households rose much more quickly than incomes for higher income households”

The MSD goes on to state that on all measures, the poverty rates for children declined from 2004 to 2007.

– The child poverty rate fell from 23% in 2004 to 16% in 2007. This reduction continued a downward trend that began in 1994 (35%), stalled from 1998 to 2001 and has continued downward from 2001 (29%) to 2007 (16%).

– Poverty rates for children in families with at least one adult in paid employment almost halved (from 15% to 8%) from 2004 to 2007, while for children in families with no adult in paid employment the rate remained steady at close to 60%

– In 2004, of all children identified as poor, around half were from households where at least one adult was in full-time paid employment – in 2007, this proportion had dropped to just over a third.

– Poverty rates for children in sole parent households fell from 56% to 49%, and for children in two parent households the rate almost halved, from 17% to 9%.

Interestingly, reported information from other OECD countries shows that with the child poverty rate for New Zealand being around 15.1%, New Zealand has a ranking of 20th out of 30 countries, a rate a little above the OECD median (12%) and similar to that of Ireland, Germany, Canada and Japan.

Which leads us to another thing.

New Zealand entered into recession in 2007/8 before the Global Financial Crisis (GFC). So, in a way we arguably led the world in economic mismanagement. Further to that, according to the NZ Treasury’s 2008 Pre-Election Economic and Fiscal Update, the effects of the GFC started to set in to the New Zealand economy. And then there were the Canterbury earthquakes. So, the perfect economic and social storm began to ferment over N.Z., and the economy and the citizens which dwell therein have been layered and laced with economic hardship for which few of us, or our government, seemed prepared. This caused the progress in poverty and gains in the median household income (which fell by 3% in the space of a year in 201-2011) to go backward according to the MSD, and this at the worst possible time when the price of many key essentials (housing, food, petrol) has gone up markedly in a small space of time, according to Statistics New Zealand.

Therefore, while there is debate about the nature of economic deprivation in NZ, what has become clear is that despite fluctuations in household incomes over the years, when Kiwi households do experience (internal/external) financial and economic shocks, poorer households are not insulated from such problems in the same way that the rich are. And it doesn’t take long for things to go sour for many of us.

For a more in depth picture of what’s going on, be sure to check out Bronwyn Hayward’s and Max Rashbrooke’s books and other works.

Key links

Bronwyn Hayward – Children, Citizenship and Environment

Max Rashbrooke Inequality: A New Zealand Crisis

Statistics:

 

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