Widespread increases in income inequality have raised concerns about their potential impact on our societies and economies. New OECD research shows that when income inequality rises, economic growth falls. One reason is that poorer members of society are less able to invest in their education. Tackling inequality can make our societies fairer and our economies stronger.
This argument has been bubbling away for a while, but it is always helpful to have the OECD’s stamp of rigour and authority on a finding.
The OECD goes further than this in New Zealand’s case, estimating that the rapid increase in New Zealand inequality since 1985 has caused growth here to be only about two thirds what it could have been if inequality had stayed the same. This is the biggest negative impact of rising inequality in the OECD, costing every person in New Zealand an average of around $4,000 per year.1
And, here’s the kicker, the OECD also finds that tackling inequality directly, through well designed tax-and-transfer programmes, does not harm growth at all.
New Zealand needs leaders who get all this. Let’s see if National do…
1. OECD growth comparison figures, my multiplication to get to dollars