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Snapshot of a nation: inequality

Written By: - Date published: 8:00 am, May 24th, 2014 - 28 comments
Categories: child welfare, equality, health, housing, poverty, unemployment - Tags:

This report broadcast on Al Jazeera provides an overview of an unequal society under a regime of “austerity”.  It claims that over 50% of Spain’s young people are unemployed, and 30% of children live in poverty.

Spain unemployment

Children go to school hungry and poorly clothed.  They draw pictures of people scavenging for food in rubbish bins, and people shivering from the cold. Meanwhile the bankster-supporting economists talk of boom times coming, the media focus on tax evasion by the wealthy and corporate bribery of politicians, and people are more interested in major sporting contests than elections.

SPAIN-POLITICS-CORRUPTION-PROTEST

Spain has the 4th largest economy in the Eurozone, and the 2nd worst child poverty percentage in the EU (worst is Romania).

Spain child poverty

The wide inequalities that damage societies, as outlined by Wilkinson and Picket, are not just income inequalities. Income inequalities feed wealth inequalities (measured by financial and material assets like property).  And wealth inequalities tend to be far larger than income inequalities, and harder to wind back, as argued by Thomas Piketty . As reported in the New York Times

This means that the income from wealth usually grows faster than wages. As returns from capital are reinvested, inherited wealth will grow faster than the economy, concentrating more and more into the hands of few. This will go on until capital owners decide to consume most of their income and stop reinvesting as much.

The-spirit-level-bookcover

In an article in the Observer in March, Spirit Level authors Wilkinson and Pickett reflect on developments since their book was published.  They restate the original thesis of the book:

As we looked at the data, it became clear that, as well as health and violence, almost all the problems that are more common at the bottom of the social ladder are more common in more unequal societies – including mental illness, drug addiction, obesity, loss of community life, imprisonment, unequal opportunities and poorer wellbeing for children. The effects of inequality are not confined to the poor. A growing body of research shows that inequality damages the social fabric of the whole society.

Since the book was published such inequalities have escalated.

In New Zealand, Closer Together suggests ways government can lessen such inequalities.

Lift wages for those on the lower incomes; Raise welfare benefits; A fairer tax system

 10 Good Ideas To Reduce Inequality

1. Universal Child Allowance: $60 per child each week would lift most children out of the worst of poverty.

2. Raise welfare benefits to the same level as NZ Super: This would eliminate the worst of poverty for all those who cannot work, just as it already does for those aged over 65.

3. Raise the minimum wage above $16 per hour: The current minimum wage is too low and leaves many hard working people in poverty.

4. More affordable rental housing: income-related rents make the different between poverty and getting by for thousands of social housing tenants.

5. Adopt a living wage: firms and government choosing to pay all their employees above the Living wage rate of $18.80 per hour.

6. Financial transactions tax:

7. High Pay ratio of 8:1

8. High income tax bracket: starting at $150,000 income.

9. Capital Gains tax

10. Wealth Taxes: inheritance and death taxes

As too much investment in NZ goes into housing and other property, it is essential to increase the state and council housing stock.  Alongside this, an increase in community housing will be helpful.

Closer Together suggests ways we can help reduce the inequality gap:

Help build a community of change

Tell people about inequality

Write letters and emails

Your vote counts

(work via) Your organisation

(Consider) Are you willing to pay more tax?

people b4 profit

Wilkinson and Pickett interview on BFM this week.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

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I understand that TV3’s The Nation will be focusing on inequality this morning, and will interview Wilkinson and Pickett.

Update: TV3’s The Nation was focused on inequality this morning.

The evidence

They looked at the Labour and National parties claims: National’s that there is no rise in income inequality; Labour’s that there is a rise in income and asset inequalities.  Rob Salmond was interviewed.  Mainly the evidence shows the big increase in income inequalities was in the late 80s and early 90s in NZ.  The income inequalities have not decreased since then.

Brian Easton said that National was using the GINI coefficient, which does have problems. It measures the average difference in income.  Another measure compares the spending power of rich and poor households spending power compared.  Comparisons between the top and bottom 10% tend to show rising inequalities. Easton said this also needs to be treated with caution.  Comparisons between the top and bottom 20% are better, but show little rise in inequalities.

Labour argues the Gini doesn’t include capital gains. Rob Salmond said the top earners are increasingly reliant on capital income rather than wage incomes.  And this is hard to get stats on or measure, as there are fluctuations from year to year, and some evidence is not available.

A Salvation Army spokesperson said that the property boom has increased wealth inequality since about 2004/5.  This will lead to greater inequalities in disposable income.

Wilkinson and Pickett: video of interviewtranscript of interview

.. said the problem was more to do with unequal rises in pay of the top earners compared with those earning least.  While progressive taxes could correct this, it was as important to make gross incomes more equal.  Worker representation on boards, and via collective action are important to correcting this.

Colin Craig debated with Sue Moroney.

Craig sounded reasonable until he got into some red scare lines.  Moroney put Labour’s case well.

Humour break: Interview of the guy from the Civillian by Gower: poor to pay more taxes, rich less; Llamas for poor children and ice cream for all.

Panel with Max Rashbrooke and Matthew Hooton, and Lisa Owen and Patrick Gower.  Hooton ran spin lines about the politics of hate and envy.  His arguments were countered well by Rashbrooke and Owen: he argued that The Spirit Level does not show causality and that poor social outcomes could cause inequalities – Rashbrooke said that the book shows the rise in inequalities precedes poor social outcomes; Hooton said the aim of being as equal as Scandanavian countries was flawed as the top corporate tax rate in Finland is lower than in NZ – Owen said the top personal tax rate was much higher than in NZ. Gower took the line that policies to decrease inequalities would make a party unelectable – politics as game.  Such an approach ignores what is best for society, and for those struggling to live lives with few opportunities and poor life chances.

Note on pressure from the community: in the Bfm interview, Pickett said it is necessary for there to be a groundswell of public pressure for change.  Change won’t begin with the government.  On The Nation, she also talked about the need for people to learn more about the issues, because, generally people do not accept a large inequality gap.  Most people are unaware of just how large that gap is currently.

28 comments on “Snapshot of a nation: inequality”

  1. ianmac 1

    If the 10 points to reduce Inequality were on a ballot paper, they would get my vote for sure.

  2. weka 2

    2. Raise welfare benefits to the same level as NZ Super: This would eliminate the worst of poverty for all those who cannot work, just as it already does for those aged over 65.

    Raise the minimum wage above $16 per hour: The current minimum wage is too low and leaves many hard working people in poverty.

    I’m curious as to how they reconcile those two things. If $640/wk lifts a single working person out of poverty, how does $367/wk lift a single non-employed person out of the worst of poverty? I know it’s not as simple as that (the working person may not have a regular, stable 40hr/wk job for instance), but I wonder why they don’t also recommend investigation of a UBI.

  3. Minty 3

    Curious. Your ten reasons. The first 5 have merit and I couldn’t agree more that some or all of these aspirations should be hit. My question was how do you pay for it.

    Then as it read I slumped my head in my hands. I earn over 150k a year I pay my taxes I work incredibly hard and long hours to get to this level and you want to take more from me.

    Surely the best way to pay for this is improve the countries GDP and export sector. This need to be a long term plan rather than a short term tax. As we have seen people will find a way to avoid paying it.

    Simple fact if you started taxing me like that I would try and find a way to reduce the amount of tax I pay.

    The first solution should not be to tax it should be increase the economies strength, create new jobs and help companies grow not tax them into submission.

    • karol 3.1

      Minto, so it’s more about you than the impact on society and/or the least well off?

      What makes you think you have earned every penny of your gross income?

      Many people have been working pretty hard for little pay. The stats show that income inequality increased vastly in the 80s and 90s. Is the extra gross income now earned by the highest paid, the result of high paid people working 20-300 times harder than those on the lowest wages?

      Bottom line: people get paid the amount they can get employers to pay them. Since the mid-late 80s, the highest paid people have more influence over how much they are paid, while worker representation has weakened. So too many people are being underpaid, with respect to the effort they put in, and the resulting outcomes of their work.

      Many people have been working very hard for little or no pay, in order to make society better for all, and/or to improve the lot of the least well off in society. Many people don’t spend all their time gathering more money for themselves, while ignoring the well-being of others and the whole of society.

      Maybe you would understand more if, as many recommend, the gap between the gross income of the highest and lowest paid is decreased.

    • Colonial Viper 3.2

      Then as it read I slumped my head in my hands. I earn over 150k a year I pay my taxes I work incredibly hard and long hours to get to this level and you want to take more from me.

      Sorry mate a lot of NZers work just as hard as you, just as long hours as you, and only earn 1/3 that you do. You are earning more than 98% of your fellow NZers and here you are bitching about paying perhaps another $40 in tax a week. If you own a house in AKL that’s equivalent to about 3 hours of capital appreciation a week.

      Simple fact if you started taxing me like that I would try and find a way to reduce the amount of tax I pay.

      Given the facts above, and this statement you made, it says a lot about your mindset. Please get over yourself.

      The first solution should not be to tax it should be increase the economies strength, create new jobs and help companies grow not tax them into submission.

      Oh fuck off. Private capital in NZ has hoarded hundreds of billions in financial assets, property and bank deposits. Why should any of us continue to participate in trying to “grow” the economy when most of the benefits of that growth go straight to the top 1% to 2% of society – where you happen to be – and not to the majority of full time workers i.e. those who earn less than 42,000 p.a.

    • Colonial Viper 3.3

      One last comment – on your “taxing into submission” remark.

      What a crock. Taxes are not a punishment. Taxes are the membership dues you pay to live in a civilised country where a commonwealth of goods, services and culture are provided to the people.

      And if you earn more than 98% of your fellow NZers then you expect to pay far more in taxes within a progressive tax system.

      As a 2%’er you need to get your head around this concept.

      BTW the maximum income tax rate in the USA after WWII was 91%, or higher. It helped lead to a massive economic boom for the newly expanding middle classes.

      Not that you are apparently interested in such a thing, being one of the 2% club.

      • The Real Matthew 3.3.1

        If taxes are the price we pay to live in a civilised society Monaco would be a war zone.

        I’ve heard it’s anything but.

        • karol 3.3.1.1

          Monaco doesn’t have income tax, but it does generate taxes on profits from various businesses and enterprises. It encourages tourism and people with money to go to live in Monaco, and probably enables a fair bit of money laundering and tax avoidance in other countries.

          It also has some state monopolies that generate income for the state. You OK with that?

        • Draco T Bastard 3.3.1.2

          http://en.wikipedia.org/wiki/Monaco#Economy

          It doesn’t have income taxes, doesn’t mean that it doesn’t have taxes.

      • TheContrarian 3.3.2

        “Taxes are the membership dues you pay to live in a civilised country where a commonwealth of goods, services and culture are provided to the people.”

        Exactly. A good way of stating it. Taxes are the price of admission.

    • Murray Olsen 3.4

      I make a bit less than you, Minty, and pay all my taxes happily except for the student loan repayments, which I still pay. I just don’t see how paying twice for education – once through taxes, then once more with commercial interest rates because universities have been run as businesses since the 80s, can be a good idea.

      I also pay tax in Australia, but I plan to return home soon. I’d be happy to pay more so kids could get a school lunch, the poor could see GPs, and we could start a state housing program. I’m not happy to pay for corporate welfare. We’ve tried your way and when companies grow, they lobby governments more to get more corporate welfare. I’d be happy to pay more tax for a good corporate investigations unit in IRD – after all, if sanity reigns and drug offenders get released from prison, we’ll need some group to help fill Serco’s coffers. Tax evaders would fit the bill admirably.

    • Tracey 3.5

      minty, using gdp stats since 1970, can you showing how rising gdp has closed the gap between rich and poor.

      i note that even in recent boom times agriculture is about 8% of our gdp but financial services are 28%. does that suggest a possible problem to you?

    • Mike S 3.6

      Congratulations, you are among the top 1% of income earners in the country. Your income has risen faster and by a much larger increment than the vast majority of the population. You have probably also accumulated more wealth than the vast majority. Should you be paying more tax? Yes.

      “The first solution should not be to tax it should be increase the economies strength, create new jobs and help companies grow not tax them into submission.”

      It’s hard to increase the strength of the economy when people aren’t paying their fair share of tax.

  4. karol 4

    On the Nation now: So Rashbrooke & Hooton are going to debate inequality on The Nation panel. Will Hooton let Rashbrooke get a word in.

    Wilkinson & Pickett were pretty good – they suited an interview that allowed for fairly long replies. i thought Pickett was more on the ball wth her replies – faster off the mark.

    Wilkinson said some good things about worker representation etc.

  5. karol 5

    The Nation: Colin Craig vs Sue Moroney: Craig sounded very reasonable… til towards the end he got into red scare mode – everyone being made the same, Berlin Wall keeping people in and out of the country.

    next up – The Civillian Party! – tax the poor, decrease taxes on the rich – Llamas for poor children, icecream for everyone!

    Next Up: Hooton vs Rashbrooke with Lisa Owen and Gower.

    • David H 5.1

      And what’s with Gower? Talk about creepy just staring at the camera. Must be waiting for the hamster to spin the wheel up so the current reaches the brain circuit’s, then engages the mouth.

  6. David H 6

    Why does Hooton make me want to throw things at his image whenever he opens his mouth?

    • karol 6.1

      He was just ranting – using the old “politics of hate and envy” line. He tried to over talk people with some seemingly valid criticisms, only to have Rashbrooke and Owen calmly state facts that demolished Hootons arguments – but he still kept on with them – I guess it’s the thing of saying things often enough, people will beielve them:

      Hooton criticism 1: Spirit Level doesn’t show causality – it could be that social problems cause inequalities.

      Rashbrooke answer: actually, no. The Spirit Level shows that the inequalities precede the rise in poor social outcomes.

      Hooton criticism 2: Those wonderfully equal Scandanavian countries: some like Finland, have a higher corporate tax rate than NZ.

      Owen’s response: but those Scandanavian countries have a much higher personal tax rate than NZ.

      • aerobubble 6.1.1

        Its the trends. Higher energy costs, resource scarcity, higher recycling, all mean a more engaged and cross supporting society. Hooton says no, he’d rather Key’s legacy be that of a foolish man who couldn’t see the obvious. That divided we fall. Its sad that such smart men are such fools.
        The historical reason for high taxes on the richest was to do away with the ghettos and workhouses, remove those taxes and we return to the insipid growth and lost potential of those times. Times when growth was wanted, when busineses wanted the new ideas, when the wealthy knew they had a duty to the rest of society for their circumstances. Hooton says NO! he doesn’t owe anyone anything, always the petulant child.

  7. captain hook 8

    hooton is a parvenu. he is like the sad little righties on Radio New Zealand. They want money but never had any and they think if they suck up hard enough something might rub off. but the reality is you have to earn it.

  8. aerobubble 9

    Yes, there always have been inequality and will always.
    And for sure there are those who don’t believe there
    is any inequality, and so peddle arguments the shutdown
    discussion about said inequality, and its trends.
    There is a second group, who can’t argue, so peddle
    nonsense to back their point, i.e. Hooton who argued
    that shareholders would not notice if the CEOs suddenly
    had their remuneration slashed (either way, as
    increased dividends or falling share price).
    Or Hootons joke, that pure feudalism, pure communism,
    pure neo-liberalism, don’t work so neo-liberalism does.
    So now let’s deal with the third type, the liar.
    Key and Colin are self man men, coming of age in
    an era of welfare-ism they argue they did okay, so
    welfare can be done away with, lol. Now
    Key’s beautiful turd blossom…

    So what does inequality look like? Well the richest
    would be able to pay their taxes, who pay more of the
    tax bases as inequality grows. Housing would become
    scarcer as the poorest couldn’t afford houses, lower
    demand for decades would mean less houses being built,
    and housing prices for the remainder would rise
    further. Roofs over the head, food and health care
    would be monetized, being based on how much capital
    you have, and workhouses for the poorest.

    So what did Key say? That there is not
    equality and the richest pay the most of the tax base.
    At best a oxymoron, at worse a turd blossom designed
    and delivered with all the nastiest spin possible.
    The rich paid 66% taxes and higher because we
    wanted to do away with the work houses. Key
    is bring them back, government pays landlords to
    put up families in one room apartments, and private
    homes garages become bedrooms.

    Now for the final type of debate, you would not get
    on The Nation. Inequality happens, inequality will
    worsen as energy and resource scarcity rises. As
    inequality grows, more and more spend their time
    and effort just getting by, not innovating to the
    point where markets can add value and create global
    brands. i.e. not a lot of money in innovative solutions
    to poverty, and a lot less patents for wealthy to
    trade in. A less equal society would not need family
    tax credits, higher minimum wages, etc, to shore up our
    exports and keep the masses rising and throwing out stupid
    at the next election. At their core, these policies are
    designed to lower costs and place the burden on the poorest.
    If the poor all leave to OZ, you’d be very worried, as you
    could be the new poor, we need plebs you see, and not
    to pay them a fair share. That’s the politics of National,
    nt to pass on the wealth we, even the poor, contribute to.

  9. Johnm 10

    “The new aristocracy in Britain
    23 May 2014

    Remarking on social conditions at the end of the 18th century, Thomas Paine wrote, “The contrast of affluence and wretchedness continually meeting and offending the eye is like dead and living bodies chained together.”

    More than 200 years later, Paine’s scathing critique of social inequality can be applied even more forcefully to modern day Britain, as the release of the latest Sunday Times annual Rich List last weekend proves.”

    http://www.wsws.org/en/articles/2014/05/23/pers-m23.html

    Radio Live’s Duncan Gardner with a british corespondent reported this fact ( Over the past decade, the number of billionaires has trebled, giving the UK the dubious distinction of being the country with the most billionaires per head of population in the world. ) and both quickly asserted it was good news for the economy! Right wing outrageous spin.

    “The uncritical acceptance of the repugnant levels of social inequality by all the major political parties is striking. All sections of the political establishment are bought and paid for representatives of the financial oligarchy and have been pursuing right-wing nostrums for years proclaiming social inequality to be the natural order of things. According to this schema, the rich rise to the top because of their talents and success, and the rest of society must be grateful for what wealth generated then “trickles down.” Ever since Thatcher began her offensive against the working class in the 1980s, this has proved devastating for working people.”

  10. “..in the Bfm interview, Pickett said it is necessary for there to be a groundswell of public pressure for change..”

    that was one of the takeaways from that lecture series..

    ..pickett was passionate in her call to the 1200 strong audience..

    ..for them to do all they can to make these changes come about..

  11. The Real Matthew 12

    As evidenced by this article the left needs to up it’s game.

    You need to come up with more inventive solutions than tax and spend.

    • karol 12.1

      TRM, have you read the post and followed the links?

      Closer Together focused more on tax issues.

      Wilkinson and Pickett also talk about the need for more worker representation, more grass roots communication about what they want, most democratic workplaces.

      Also, if you are talking about left political parties generally – try looking at the policy section of Green, Labour, Mana party websites.

    • Draco T Bastard 12.2

      I figure that tax and spend is better than the cutting taxes and spending well beyond income as National have done.

      Of course, the real problem is that neither you nor National like to admit that wealth comes from the nation first and that it needs to be paid for.

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