Written By: - Date published: 9:29 am, April 12th, 2014 - 28 comments
Categories: assets, bill english, class war, cost of living, david cunliffe, david parker, election 2014, john key, labour, national, poverty, spin - Tags:
All inequality measures are not equal. The GINI Coefficient is widely used to measure inequality, enabling the production of some clear graphs and comparisons between countries, as well as comparisons over time within countries. However, it has its limitations, and doesn’t necessarily show the impact of vast increases in inequality between the most and least well off sections of the population. Focusing solely on one way of measuring income inequality, can divert from the fact that too many Kiwis are experiencing hardship: and focusing solely on income inequality can mask the vast inequalities in wealth and asset ownership.
These are some of the things I learned this yesterday following Pete George’s comment on open mike yesterday. Pete’s post was about the latest article on the new Politicheck website looking at differences between the way Labour and National MPs talk about inequality, especially as represented in a recent exchange in the House. As political fact checking goes, this is a pretty mediocre effort, looking at limited and selective evidence and providing some shallow analysis. Furthermore, the Politicheck article focuses too much on David Parker’s reference to a NZ Herald Digipoll in which the majority of those polled stated they thought that income inequality in NZ is rising. Clearly, when looking at statements by the Davids Cunliffe and Parker over the last year, they are using other statistics as evidence for their conclusions.
Some of the most recent press releases from David Parker refer to a significant mix of income inequality and asset inequality. On 30 January 2014, in the House David Parker asked Bill English points to the way income inequality (even if not rising in itself, can result in rising asset inequalities.
This NZ Herald article of 28 January 2014, the author Adam Bennett concludes that both Cunliffe and Key’s claims on inequality in their state of the Nation speeches, are not supported by the evidence. Then there is this statement about the kinds of evidence Cunliffe and Parker draw on:
With no clear trend, the ministry analysis doesn’t support Labour’s view that inequality is increasing but Labour argues that work doesn’t tell the full story. It argues the data it is based on doesn’t include much of the income more well-off New Zealanders get from realising assets.
There have been other previous analysis and reports of NZ’s income inequalities: ones that used statistics such as those provided by the GINI and that provided a more in depth and more reliable an analysis than that on the Politicheck site. For instance, there was this post and discussion on the NZ StatsChat website, last December. And the CTU did a fairly in depth analysis in August 2012, drawing on a range of statistical measures, including the NZ Household Economic Survey and the GINI index. Among other things, it showed greater inequalities in market income, before redistrubitive measures are accounted for; such measures as occurring via taxation and Working For Families which go a long way to reduce inequalities.
One of the main conclusions of the CTU report includes consideration of changing levels of hardship experienced. Hardship covers things like access to essentials like having enough food to eat. The report also makes comparisons between those on the top and bottom levels of income.
The changes in income were not evenly spread: the top third of households by income saw increasing incomes. The bottom two-thirds had falling incomes –some falling steeply.
The most significant, and clearest indication from NZ’s results on the GINI, is that income inequality rose markedly in the late 1980s and the 1900s, and that it has remained high ever since. This strongly indicates that the “neoliberal” consensus in play since the late 1980s, has been a significant driver in the heightened level of inequality. Labour and National can debate whether it was more or less high under each of their watches. But the clear indication is a need to move away from the neoliberal consensus. Measures are needed to counter the high levels of hardship and inequalities in income, wealth and asset distribution amongst the most and least well off.
Too much reliance on the GINI measure of income inequality can mask increases in the severity of hardship people experience and/or the numbers of people experiencing such hardship. This is included in the Wikipedia outline of the limitations of the GINI. It’s also included in the World Bank overview of different ways of measuring inequality and poverty.
Share of income/consumption of the poorest x%: A disadvantage of both the Gini coefficients and the Theil indices is that they vary when the distribution varies, no matter if the change occurs at the top or at the bottom or in the middle (any transfer of income between two individuals has an impact on the indices, irrespective of whether it takes place among the rich, among the poor or between the rich and the poor).
They state that measuring the top and bottom 10% or 20% would be more reliable. Today’s NZ Herald provides further evidence of the increase in inequalities between the top and bottom 10 % in NZ.
The pay gap between the highest and lowest earners is getting wider. It’s a trend that, says one researcher, can be traced back to the 1980s.
The OECD report, Society at a Glance 2014, says the highest-paid 10 per cent of workers in New Zealand earn 32 times more than the poorest 10 per cent – a 32-to-one pay ratio.
There’s figures point to real impacts on real people’s lives – where too many people in NZ are experiencing hardship. This is an extremely important election issue.