Does inequality matter?

A survey of New Zealanders’ wealth published by Statistics New Zealand in 2006, following the most recent Census,* indicated that in 2004 the wealthiest five per cent of New Zealanders collectively had seven times more wealth than the poorest 50 per cent. This survey also showed that the wealthiest one per cent of Kiwis owned three times more than the poorest 50 per cent. While the recent misfortunes of the property and financial markets may have reduced the personal fortunes of the richest New Zealanders, it is highly likely that a huge gap remains.

Richard Wilkinson and Kate Pickett’s book The Spirit Level examines the impact of inequality in various western countries, including New Zealand. They match inequality to a number of indicators of well-being such as life expectancy, children’s literacy and youth crime. They show fairly convincingly that less equal societies are less successful across most social and economic indicators. Crime rates are higher and literacy levels are lower in counties with greater inequality, such as United States, Portugal and New Zealand, than they are in more equal counties, such as Norway and Japan.

Everyone living in unequal countries is less well off as a result of inequality, and not just the poor in these countries.

To some extent, inequality and the poverty levels that result are political choices. They are outcomes of tax policies and public programmes that governments run or choose not to run. When taxpayers’ money is given to investors in failed finance companies and when children in poorer communities have no access to an early childhood education centre because there are none available, the government is making a choice about whose interests are important and whose aren’t. Similarly, when as a society we agree to pay older people a retirement income while they continue to work, and then at the same time offer little to unemployed young people, we are giving a clear indication of who we value and who we don’t.

Many social programmes are put in place to offset the effects of economic inequality, and by doing so can be seen to support this inequality. For example, the government needs to pay families extra money through the Working for Families programme because the amount they can earn in paid employment is not sufficient for them to pay for a basic standard of living. Government tops up tenants’ incomes through the Accommodation Supplement because rents are too high relative to wages. Should we not be asking why it is that wages are too low and rents are too high for hundreds of thousands of Kiwi families to live decent or even adequate lives?

Perhaps one of the basic underlying problems is that we have not thought very much about our collective ambitions for the economy. The standard political prescription for our economy is that we should focus all our energies on ‘growing’ it. ‘All boats rise on the rising tide’, so the saying goes. Thus, the best way of overcoming poverty or under-funded public services is to expand the economic cake so that there is more to share around. While economic growth might be offered as the panacea for inequality, we seldom stop to think about whether or not we are achieving a fair distribution between the various groups and interests in our society. Increasingly, this is left to the market to decide, rather than it being a conscious choice through democratic processes like voting.

Elections are one of the few occasions when ordinary citizens can exercise a choice over the direction their country or community should take, and over the values we should embrace. Unfortunately, our recent election campaigns have become less and less about values, and the visions which these inspire, and more and more about the personal qualities of political leaders and their ability to deliver memorable 30-second sound bites on television.

*These are the latest Census statistics available, as the 2011 Census was cancelled due to the Christchurch earthquake.

Questions to think about before you vote:

• why does inequality in New Zealand matter? What does it mean for society as a whole?
• What do the various offerings from our political parties mean for the most vulnerable and the least well off New Zealanders?
• what should we be doing to be sure the poor do not become excluded through political expediency, or worse by vague and empty promises?

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