Nats floundering on inequality

Written By: - Date published: 7:16 am, May 25th, 2010 - 35 comments
Categories: bill english, budget 2010, class war, dpf, equality, tax - Tags: , ,

Pointing out that a “rich get richer” budget is going to increase inequality in NZ seems to be making the Nats uncomfortable. Bill English:

Rich-poor gap basically same after Budget, English claims

A Budget that delivers thousands a week in tax cuts to the super wealthy and a few dollars to those on the minimum wage will leave the gap between rich and poor “about the same”, Finance Minister Bill English said yesterday.

“Basically” the same and “about” the same mean “not” the same don’t they Bill. The gap between rich and poor will increase – that’s what happens when you give big tax cuts to the rich (see the excellent No Right Turn). Why so evasive about it?

“We’ve achieved a shift in our tax system without making that problem significantly worse in a static sense.

Not “significantly” worse? “In a static sense”? Why the weasel words? Why not have the courage of your convictions, and just come right out and say it, like Michael Laws:

On Thursday, this Key/English administration decided to abandon the pretence that we are an egalitarian society, or that we should ever attempt to be so.

That’s what Bill wants to say too. Screw inequality – too bad. The reason he can’t is that inequality is so provably damaging to society. I wrote about this before the budget, here’s the take home message (from “The Spirit Level” by The Equality Trust):

Over a huge range of important social indicators, the more unequal a society is, the sicker it is. The facts are well known, and so post-budget inequality is becoming an issue. Bill’s only choice is to wave his arms about and try to deny the obvious.

But he isn’t the only one. Into the breach leaps the comically ill prepared National spinster DPF:

So I reject many measures of income equality as unsophisticated and even counter productive.

DPF would rather flee the issue and waffle about something else. Imagine my surprise.

The measure that I would like more emphasis placed on is social mobility.

Unfortunately for DPF, this topic isn’t going to work out very well for him either.

In a society with very low levels of social mobility, I can understand why reducing inequality is more important. But in a society which does have opportunities, I want the emphasis to go increasing social mobility, rather than merely the blunt instrument of inequality. If you take inequality to extreme measures, then you end up like the old USSR where cleaners and surgeons get paid much the same.

The data on social mobility in NZ is fairly sparse partly because you have to measure it over extended periods of time. But that is where I would like more focus to go.

Don’t worry DPF, there is NZ data and we’re here to tell you about it! Last year Marty G wrote about this Stats NZ data. Short version – not a lot of income mobility in NZ over recent 5 year snapshots. But you don’t have to read The Standard – even the business section of The Herald could have told you about the links between inequality and mobility in NZ:

Also, social mobility is lower in countries with high inequality, such as Italy, the United Kingdom and the United States. New Zealand comes in at number 6 on the list.

The picture is pretty consistent internationally. From the OECD:

Countries with a wide distribution of income tend to have more widespread income poverty. Also, social mobility is lower in countries with high inequality, such as Italy, the United Kingdom and the United States, and higher in the Nordic countries where income is distributed more evenly.

Or this study:

There is a strong positive relation in a cross-section of twelve OECD countries between the extent of intergenerational earnings mobility and income inequality (Figure 3). In general, the countries
with the most equal distribution of income at a given point in time exhibit the highest earnings mobility across generations.

There are any number of academic studies with the same message:

We investigate the relationship between inequality and intergenerational mobility. Proxying fathers’ earnings with using detailed occupational data, we find that sons who grew up in countries that were more unequal in the 1970s were less likely to have experienced social mobility by the late-1990s.

Or see The Economist, or hell, even Wikipedia.

So, Sorry Bill, but your half-assed denials don’t even begin to hide the truth. Your tax cuts for the rich will make this country a more unequal place, and inequality is hugely damaging to society. And sorry DPF, your lame attempt to shift the focus to social mobility instead only lands you in even deeper hot water, as inequality and social mobility are inexorably linked.

Nats – you’re floundering about with this issue because you can’t acknowledge the truth. The truth is that you don’t give a dried and salted rat’s anus about inequality. It isn’t on your radar. You don’t care. If you cared, you’d be making things better, not worse.

35 comments on “Nats floundering on inequality”

  1. an excellent piece r0b.

    The reality is that the Right is all about dividing up the economic pie more in favour of the wealthy. The truth is that the pie grows faster, with better social outcomes, when it is shared more equally.

    In fact, GDP growth has been an average of 1% a year higher under Labour governments than National ones.

  2. vto 2

    Have to admit r0b, you do put together some pretty good arguments backed up with evidence sometimes. Dunno about your fourth last sentence though – where on earth did that one come from??

    • r0b 2.1

      Have to admit r0b, you do put together some pretty good arguments backed up with evidence sometimes.

      It’s not so hard, because the evidence is on my side. It’s the other team that have a tough job arguing that black is white.

      Dunno about your fourth last sentence though where on earth did that one come from??

      Come on vto – I always link my sources.

    • Pete 2.2

      It just wouldn’t be the same if it wasn’t salted, I’m sure…

  3. lprent 3

    Great post. I will have a closer read of the links when I get on a bigger screen than my iPhone

  4. Pascal's bookie 4

    Good stuff r0b.

    I wonder what dpf would think about a stonking great ‘death tax’. That’d help the mobility.

  5. tc 5

    Great Post……full of those annoying things the NACT hate like facts and evidence based on research and historical observations……that’s unfair why don’t you stick with strawmen, illogical rhetoric and statements from your spinsters to make the argument like for like.

    Lets face it with the likes of DPF required to help sell the unpalatable you’ve got a uphill struggle on your hands…….gosh maybe Sideshow should go on RNZ to ‘balance it up’…..yeah right !

  6. PK 6

    ***Over a huge range of important social indicators, the more unequal a society is, the sicker it is.***

    If you look at that graph it also seems that the more ethnically homogenous a country the better it does on the health index?

    Interestingly, Hong Kong & Singapore are ranked 1 & 2 for income inequality amongst developed countries (ahead even of the US) but come last in terms of intentional killings.

    http://www.geoexpat.com/forum/thread59357.html

    Intentional homicide rate per year per 100,000 inhabitants these are the lowest ranked countries.

    Hong Kong [36][47][58] 0.56 0.73 0.63 0.49 0.49

    Japan [35][47][58][60] 0.50 0.53 0.59 0.64 0.44 0.44

    Singapore [35][36][47][58] 0.92 0.57 0.49 0.48 0.39 0.38 0.38

    http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

    I’m not sure about their obesity levels etc, will check later.

    • PK: “If you look at that graph it also seems that the more ethnically homogenous a country the better it does on the health index?”

      Rather you might note that largely the countries colonised by the UK sit at the top, something poisonous about the what they did it which sets up counties which spew out toxic, selfish, disgusting filth like Michael Laws, Garth McVictim, David Farrar and most of kiwiblog.

      (or you could read the book and see why both of these arguments about discounted as insignificant)

      • PK 6.1.1

        *** Killinginthenameof wrote

        Rather you might note that largely the countries colonised by the UK sit at the top,***

        And where would they be if they hadn’t been colonised?

        ***(or you could read the book and see why both of these arguments about discounted as insignificant)***

        Seeing you’ve read it perhaps you could summarise?

    • PK 6.2

      Again, Singapore & Hong Kong are at the top of the list for low infant mortality rates despite having the highest income inequality. Does the book address this?

      http://en.wikipedia.org/wiki/List_of_countries_by_infant_mortality_rate

  7. RedLogix 7

    Reading “The Spirit Level” gives the whole picture. For most of the data they present there are outlier cases which are often quite far from the regression lines. While it’s interesting to speculate on the underlying reasons for these outlier cases, overall the case for inequality being a root cause of social dysfunction is from a statistically perspective exceedingly sound.

    Buy the book and read it. I’m not being snarky, it’s a genuinely fascinating, indeed uplifting read.

    • Bunji 7.1

      Great post R0b.

      The Greens are doing some great stuff off “The Spirit Level“. Labour should do more too. I want it to be the book that changed New Zealand. Maybe we could send John Key a copy?

      captcha: opportunitys (I think captcha needs some education opportunities…)

      • Bill 7.1.1

        Does it really require international research to understand that people living in a ‘dog eat dog’ environment of competition will not flourish as well as those who are living in an environment of co-operation?

        Seriously. Why should/does it require the publication of a book to bring the blindingly obvious to the attention of chatterers and politicians? Do they have nose rings, I wonder?

        • Draco T Bastard 7.1.1.1

          Apparently so – especially to the politicians who’ve spent the last few centuries promoting dog-eat-dog societies. Even after all the evidence is in there will be quite a few that will still promote the dog-eat-dog paradigm as being better. They exist mostly in National and ACT but I’m sure you’ll find some in the supposed left leaning parties as well.

        • RedLogix 7.1.1.2

          Bill

          The authors agree, that most of their case will be intuitively, blindingly obvious to most people.

          The point is that their research and methodology proves the intuition correct, and more importantly it points out wrong turnings we have taken and pitfalls to avoid.

          • Bill 7.1.1.2.1

            I kind of get all that Red, but this interminable bullshit of [insert ‘the obvious’ of your choice] ‘doesn’t count’ unless it is coming from a deference to academia is just really fucking…well, it’s time it was knocked on the head.

            The fact I can’t catch fish of the size and in the quantity I used to is all the proof I need that the seas don’t support the stocks of yesteryear. I do not need an academic to prove it for me. I do need them to maybe figure out why so that possible actions I take do not exacerbate the problem.

            Meanwhile, I do not want to be bound to polite and civilised interaction with fuckers who are saying there’s nothing wrong as they pour shit on top of shit into my sea and haul thousands upon thousands of tonnes of living creatures from my sea only to throw thousands of tonnes of dead or dying creatures back in.

            I don’t want nice safe liberal litigation and meetings and good faith and sniggering little idiots playing for time on the basis of a lack of ‘evidence’…ie academic proofs.

            I want baseball bats and little money grabbing bastards whimpering. Know what I mean?

  8. ianmac 8

    A great piece of research Rob.

    PK:” If you look at that graph it also seems that the more ethnically homogenous a country the better it does on the health index?”

    In those countries there is also a much smaller “failing tail” of Literacy and Numeracy. NZ has a very diverse ethnic community. (By the way the “tail” is about 7% and not Anne’s 20%.)

  9. ak 9

    Top job r0b, as per usual. Yep, the scales are slowly but surely falling from the public’s eyes. Not that long ago, no Nat politician would ever dare voice such subversive socialist concepts as “rich-poor gap”: that English has been forced to mount a flailing defence is a victory in itself.

    Funny thing is, it’s often the tories’ own gene-pool that is hit hardest by their own deliberate moves to concentrate wealth into fewer and fewer hands. Back in the day there was a glimmer of truth in the crusty notion that “anyone could do it if they just got off their arse”, but as even the sons and daughters of traditional inherited privilege find it impossible to compete with Big Money, retail chains and corporate agriculture – or even to aspire to owning a home – there’s a growing cynicism even within their own ranks for those old tory distortions of “aspiration” and “fairness”.

    Falling from height hurts bad: some of the saddest cases are those who pinned all their insecurities on Helen, but now find nowhere to loathe. Some will continue to recycle the usual targets – maori, women, gays, “communism” etc – but with every repeat, hatred yields a diminishing rush. As the targets run out, it’s the clear, clarion call of researched and rational argument such as your own that eventually prevail. Well done, and keep it up.

    • RedLogix 9.1

      Whenever I spot a rare comment from you ak I make a point of reading it carefully. I’m seldom dissapointed.

      • ak 9.1.1

        Thanks Red, love your stuff too, will try and find time to be less rare but the “standard” has risen so much round here it’s hard to just keep up witht he reading! Onya all Standardistas:)

    • ianmac 9.2

      When “they” make derogatory comments here about past Labour demeanors, they have to go back a long way into the 80s, skip the inequities of the 90’s and point to the miniscule negatives of the 2000s. A bit desperate ?

  10. r0b 10

    Thanks all for the kind words and encouragement!

    • The Baron 10.1

      i don’t think i’ve ever seen soooo many comment BJs being biffed around.

  11. Draco T Bastard 11

    So I reject many measures of income equality as unsophisticated and even counter productive.

    On Thursday, this Key/English administration decided to abandon the pretence that we are an egalitarian society, or that we should ever attempt to be so.

    Considering the clear indication that inequality causes pain and suffering such sentences as these, and the passing of a budget that increases such inequality by NACT+MP, are clear signs of psychopathy.

  12. PK 12

    ***Considering the clear indication that inequality causes pain and suffering such sentences as these, and the passing of a budget that increases such inequality by NACT+MP, are clear signs of psychopathy.***

    That’s a slightly extreme claim – pain and suffering? If you have a welfare safety net, health care & education etc – how is pain & suffering being inflicted?

    Also, in terms of health outcomes intelligence is a major factor which I’m not sure the Spirit Level controls for?

    “Our findings suggest that measured IQ does not completely
    account for observed inequalities in health, but, probably
    through a variety of mechanisms, may quite strongly contribute
    to them. This implies that efforts to reduce inequalities should continue
    to be broadly based, including educational opportunities and
    interventions directed at early life.7,41

    The latter may also elicit improvements in IQ, although results are mixed.42
    Given that the general learning and reasoning ability captured by IQ tests may be
    important in the successful management of a person’s health, it
    may be that individual cognition levels should be considered
    more carefully when preparing health promotion campaigns and
    in the health professionalclient interaction.12

    In conclusion, in this, the first study to examine the explanatory
    power of controlling for IQ on the socio-economic positionmortality
    gradient relative to adjustment for classic risk factors, IQ
    offered explanatory power above these traditional indices of risk.”

    http://eurheartj.oxfordjournals.org/content/early/2009/07/14/eurheartj.ehp254.full?ijkey=67c476f65760629157c80fea8825464bf797c952

    “Implicitly, if not explicitly, the study of Batty et al.2 addresses itself to this second type of question: what, apart from these recognized risk factors, could account for social inequalities in mortality? Their answer is intelligence, a factor that involves the ability to reason, solve problems, and learn. This continues the impressive work by Deary showing, in numerous studies, that intelligence predicts death.6,7 Like any good answer it leads to more questions. If, indeed, intelligence is important, what does it tell us, to pick up the authors’ justification, about both understanding and potential interventions? ”

    http://eurheartj.oxfordjournals.org/content/30/15/1819.full

    • Puddleglum 12.1

      Detailed work in neurodevelopment puts an entirely different slant on the question of intelligence. To put it simply, intelligence develops, it is not ‘in the genes’. Inequality, that is, can be both cause and effect when it comes to all personality factors.

      As H. Clark Barrett (2006, p. 216) puts it in his chapter on ‘Modularity and Design Reincarnation’ in the book The Innate Mind: Culture and Cognition, “The modularity debate, as it currently stands, is frustrating because both sides should agree that innate structures, as our intuitive ontology construes them, do not exist. Gene-environment interactions always occur, by design, in the construction of phenotypes, and for good reason. The environment is an important source of information that one would expect evolved developmental system to exploit, not ignore.” The modularity debate he was referring to concerns the evolution of mind – mental modules, if you like.

      What this means is that it gets the argument nowhere to suggest that inequality is ’caused’ by intelligence.

      In addition, read Gladwell’s book ‘Outliers’, especially the chapters on ‘geniuses’ and why, after a threshold level, I.Q. just doesn’t predict success.

      • PK 12.1.1

        ***To put it simply, intelligence develops, it is not ‘in the genes’. Inequality, that is, can be both cause and effect when it comes to all personality factors.***

        Of course there’s an environmental interaction, but a substantial component of the variation between individuals is due to differences in their genes (this applies to siblings too -Nature Reviews Neuroscience 11, 201-211 (March 2010) ). The things that depress intelligence are environmental toxins such as alcohol in the in utero environment, lead, lack of iodine, physical trauma & poor nutrition. Inequality, per se, doesn’t cause those things. Unless the baseline of welfare etc doesn’t allow people to buy food, get healthcare or send people to school.

        ***In addition, read Gladwell’s book ‘Outliers’, especially the chapters on ‘geniuses’ and why, after a threshold level, I.Q. just doesn’t predict success***

        I’ll take the view of Harvard Psychology Professor Steven Pinker over that of Gladwell.

        “The common thread in Gladwell’s writing is a kind of populism, which seeks to undermine the ideals of talent, intelligence and analytical prowess in favor of luck, opportunity, experience and intuition. For an apolitical writer like Gladwell, this has the advantage of appealing both to the Horatio Alger right and to the egalitarian left. Unfortunately he wildly overstates his empirical case. It is simply not true that a quarter­back’s rank in the draft is uncorrelated with his success in the pros, that cognitive skills don’t predict a teacher’s effectiveness, that intelligence scores are poorly related to job performance or (the major claim in “Outliers’) that above a minimum I.Q. of 120, higher intelligence does not bring greater intellectual achievements.”

        http://www.nytimes.com/2009/11/15/books/review/Pinker-t.html?_r=1&pagewanted=2

  13. Draco T Bastard 13

    how is pain & suffering being inflicted?

    Psychologically.

  14. Fisiani 14

    Hon BILL ENGLISH: The cost of lowering personal tax rates is estimated at just over $4 billion per year by 2014. About two-thirds of this cost was used to reduce tax rates in the lowest two tax brackets—that is, people earning up to $14,000 on the lowest tax rate, and people earning up to $48,000 on the next lowest tax rate. This distribution demonstrates the Government’s commitment to making tax cuts across the board. The reason for that is we believe that the incentives matter for people who are on the minimum wage as much as they do for people who are above the average wage.

    Today in parliament. Totally debunks the blinkered ideological premise of this post
    Slam Dunk.

    • Marty G 14.1

      no Fisiani. You see, the money he is talking about goes to the first $48,000 of everyone’s earnings, including the rich. And those that earn less than $48,000 (which is over 75% of taxpayers) don’t get a full share of that two thirds of four billion.

      then, you’ve got to take into account the GST increase.

      Basically, you need a 2% income tax cut to make up for a 2.5% GST increase. So, the million plus taxpayers with incomes below $14,000 nearly nothing because their income tax went from 12.5% to 10.%. The next million and a half (between $14,000 and $48,000) get a small amount (about 1.5% for every dollar over $14,000), less than $10 a week.

      The people over $48,000 and below $70,000 get that $10 or so plus 1 cent for each dollar over $48,0000. The people in the top tax bracket get all that and a net 3 cents for every dollar over $70,000.

      I’ll do the table for you.

    • Draco T Bastard 14.2

      No you idiot, it doesn’t.

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