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Polity: Income mobility

Written By: - Date published: 12:43 pm, November 21st, 2014 - 17 comments
Categories: David Farrar, treasury - Tags: ,

polity_square_for_lynnReposted from Polity.

Recently Treasury has published a paper showing that most people do not stay at the same point on the income scale for an extended period. That is assuredly true, and is also a good thing in as far as it goes.

DPF believes it goes really far, and thinks income mobility is a better measure than income inequality for measuring our health as a decent society:

I have often blogged that in NZ we should focus more on income mobility, and less on income inequality. An income inequality focus means you are comparing a 18 year old first time worker with a 45 year old experienced worker, and complaining they don’t get paid the same.

First off, nobody is arguing they should all be paid the same. That is a canard. There is widespread concern, however, that levels of inequality are getting wider and wider, particularly when you account for accumulated wealth rather than just annual income.

Also, income mobility has similar issues. Does it really tell you much about New Zealand to know that an 18 year old school leaver will very likely earn more once she is 26, or that a 60 year old worker will probably drop down the salary rankings when he retires? Those things demonstrate “income mobility” all right, but say nothing at all about the health of our society.

UPDATE: To be fair to the Treasury authors, they were wise to this issue and concentrated their analysis only on 25-55 year olds. But the examples I give above are simply the clearest cases of a continuous process. People acquire significant skills and experience, for example, between ages 26 and 34, and we would expect that those skills drive wages higher over that period, too. But that is still a lifecycle effect, not an indication of egalitarianism.

There is nothing wrong with the fact that some jobs and people get paid a lot less than others. What would be concerning is if those on low incomes stay there their entire life.

I agree. It is worth noting, however, from the Treasury report that “The movements in income groups were more likely to be of a short distance (to adjacent income groups) rather than long distance.” This means that while most people do not stay in exactly the same income decile for eight years, most people in the bottom, say, four deciles do in fact stay in that broader group, while most people in the top, say, four deciles stay in that broader category, too. “The poor” stay broadly poor, even if “the poorest 10%” don’t usually stay in the bottom 10%.

We need a focus on opportunity, not on outcome. Labour’s core policy is to try and ensure equality of outcome, while I believe it is equality of opportunity that counts.

Again with the canard. Labour has no belief that everyone should be paid the same, or even close to it. DPF is as delusional about Labour as he is about the income mobility tonic.

17 comments on “Polity: Income mobility ”

  1. tc 1

    Another DP weasel and shill for team shonkey who has been given a pat on the back and would be feeling pretty smug about getting at least another 3 years for more of the same.

  2. r0b 2

    Round we go and round we go on this “equality of opportunity” nonsense.

    Equality of opportunity

    Nats floundering on inequality

    • lprent 2.1

      I’m all for equality of opportunity. However the first step is to improve the income equality so that ALL kids have the opportunities.

      The DPF way of looking at things says that if kids from a poor family *could* if their parents were nearly unique and if they wanted to put themselves into a lifetime of debt and they happened to have some good teachers – that is sufficient.

      Of course he doesn’t look at it the other way which is to remove all ability of affluent families to pay directly or indirectly for their kids to get a good start. That is a whole lot easier to do.

      • Tom Jackson 2.1.1

        The problem with EOO is that actually doing it demonstrates how vacuous the idea really is. If we really controlled for all advantages save merit in order to equalise opportunities, we would end up with the sort of materially egalitarian society that people who promote equality of opportunity want to avoid (since the point of EOO is usually to try justify wealth differences whilst still maintaining a veneer of egalitarianism).

        It seems a gargantuan and hopeless task to make sure that opportunities are even approximately equal, since you would have to control for social connections, geography, parental quality and all sorts of other things besides wealth. Reducing inequalities of wealth turns out to be much easier, so we should probably do that.

        Some people are always going to receive unfair advantages, so we should probably stop believing in meritocracy as a principle of social reward and just get on with our lives. I don’t think you’re ever going to stop people gaining undeserved advantages at an acceptable cost, so maybe we should just stop treating their beneficiaries as somehow more morally deserving than everyone else. In the end, I think it’s just dumb to treat life as if it were a contest, and that’s what EOO does.

        • miravox

          Yep, equal opportunity is ridiculous as a concept unless everyone is starting in the same place with the same set of skills and the same context. It’s not just about income. I can’t see the ‘haves’ going for that either.

          I also have problems with the idea of a meritocracy. It’s ill-defined and can only be used after a certain poorly articulated baseline for social reward is met.

  3. Macro 3

    The simple fact is that social mobility has declined under the neo-liberal economy http://www.independent.co.uk/news/uk/politics/the-prison-of-the-minimum-wage-only-a-quarter-of-lowpaid-workers-will-move-up-the-income-ladder-9852461.html
    and its only going to get worse.
    Farrar et al can look to the past and think that that is what happens now – and Labour are just as much to blame as Nact, for our current poor situation. But “free trade” deals are not fair trade deals, and the exportation of work overseas only reduces social mobility. We now live in a society of “haves” and “have nots”. The “haves” mostly vote for themselves, and the “have nots” see no point in voting.

  4. ghostwhowalksnz 4

    I had a laugh when I glanced it this on Farragoblog, and I thought someone is going to rip him another one over this.
    I suppose he thought it safe coming from ‘Treasury’ but then he will ignore any Treasury fine print and show why he failed his only economics paper at Otago (taught by H2) and leaving without a degree.

    ( another thing he said that Grant Roberston had never worked for a company so was unqualified to be Finance Minister, forgetting that his mentor Bill English only paid employment was at Treasury)

    • Tracey 4.1

      if you buy or inherit a farm but never work it you can be called a farmer. apparently. bill is a career bureaucrat. an academic of the type the right decries in all but their own.

      • ghostwhowalksnz 4.1.1

        And Cullen before him never worked for a private business either, so its another Reductio ad absurdum approach from Farrar, which not surprisinly he is full of.

        • lprent

          It wouldn’t be hard to argue that Farrar himself never appears to have worked for a private business before either..

          He appears (to me) to have been a bludger on the state his entire working life.

  5. RedLogix 5

    Whenever some Tory quotes you a document:

    1. Probably they have not read all of it and have merely skimmed for a headline or selective quote.

    2. Or the source is hopelessly compromised by either vested or commercial interest.

    3. Or it’s such a shrill piece of drek that it’s been thoroughly debunked by others already.

    4. Or their argument is so thin that you feel embarrassed to type out the blindly obvious rebuttal.

    5. Or it’s Farrar in which case all four cases above probably apply.

  6. One Anonymous Bloke 6

    Income (or social) mobility is one of the variables in the GINI.

    There is nothing wrong with the fact that some jobs and people get paid a lot less than others.

    Yes, there is: the wider the gaps the worse the society, for everyone, even Princess Party goers.

  7. AB 7

    From the Spirit Level – social mobility was greatest in those societies which were already the most equal.
    Or put another way – GENUINE or SUBSTANTIVE equality of opportunity requires relatively high levels of pre-existing equality.

    Nats like to couch equality of opportunity in a purely formal terms – as in the absence of any legal restraints against pursuing any opportunity you want to.
    It’s self-serving tripe, genuine equality of opportunity would threaten their unearned privilege.

  8. Lindsey 8

    Farrar’s job – diminish, divert, distract. That is what he is there for.

  9. aerobubble 9

    Mutual benefit reigns our bodies, society, even our businesses. The common trading of goods and services where both parties benefit. Though the outcomes and effects arent necessarily good, self-suffient, sustainable, etc. Enter government whose role is to stop or deincentivize bad practices. Unfortuately the creed of the modern media political world ignores this bulk nature of this mutual benefit (even as it extols the virtue of markets), and replaces, frames, the debate solely around profits and growth, and sustaining wealth gains for the few (free markets govt butt out).

    Recently we’ve heard about how only wealthy companies will be able to sue governments, before judges of their own kind (ttp). Is it any wonder then that social decay, improvisement in a time of plenty could happen. That the same talking heads attract the great bulk of our time with their disingenious belief driven views.

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