Thursday, April 22, 2004


The Whig takes issue with my claim that the 80's and 90's showed that not everyone shares in growth:

I get sick of the "failed policies" claim being made without statistics and facts. Social democrats don't provide them because they know it's rhetoric and the evidence doesn't support it.

OK, here's some statistics and facts, sourced from the Department of Statistics' report New Zealand Now: Incomes (1999):

  • New Zealand's gini coefficient (a common statistical measure of income inequality) rose significantly between 1986 and 1996, indicating greater inequality. This happened no matter how you slice it, whether you look at individuals or households, market, gross or disposable income.
  • Over the same period, the percentage of total income going to the top three deciles of income earners rose while everybody else's fell or stayed stagnant (Figs 2.15, 3.16, 3.17). The same results are mirrored in household data (Fig 4.9). This indicates that the fruits of growth were unequally shared, with most going to the already rich, and everyone else missing out.
  • But it's worse than that, because the same trend is evident in people's actual disposable incomes. Only the top three deciles of personal income earners earned more in real terms than they did in 1986. Everybody else got poorer, and in some cases remarkably so (Fig 4.7 - though I should note that this is market income and doesn't take transfers into account. The actual interpretation of those low deciles halving their market income is more people driven onto benefits)
  • The same trends are evident in household data (Figs 4.9 and 5.5). The report has this to say:
    the top deciles have increased their level of income significantly while there has been a decrease in incomes for those households in the middle of the income distribution. Average income in the bottom decile has not changed significantly over the study years [because they receive benefits - I/S]. The increase in income inequality has therefore been driven by the increase in income at the top end of the distribution and the decrease in income for those in the middle
  • Between 1986 and 1996, average household incomes rose, while median household incomes fell (Fig 5.1). That means that the rich got richer (pushing the average up) while more people got poorer (pushing the median down). This is backed up by the distribution of household income relative to the median - the curve flattened, the middle was squeezed, and while some people got richer, the general effect was to drag the middle down.
  • Poverty has increased - in 1986, only 16% of families fell below the 1996 lower quintile benchmark. In 1996, it's by definition 20%.

This is not just rhetoric. Rogernomics and Ruthanasia increased income inequality in New Zealand. They undermined the middle class, and drove people into poverty. And they directed what growth there was into the wallets of the already wealthy. The Whig points out that this makes perfect economic sense - inequality is a great incentive to work - however, past a certain point, it is politically insane. The thrust of my "cake" post was that people have no incentive to vote for or work towards policies that do not benefit them - and the policies currently promoted by National and ACT as promoting growth benefit nobody but the rich.