Thursday, September 09, 2004

Labour and income inequality

JustLeft looks at the income inequality section of the Social Report, and concludes that

Labour's policy programme to date has not had a substantive impact on income inequality as defined by this data

While he doesn't intend it as such, that "as defined by this data" is an important caveat. As I point out here, the income inequality data in the Social Report is three years out of date. The reason Labour's policies don't seem to have had a substantive impact is because there are no data points since those policies have been implemented. The top tax rate was increased in 2000 - 2001, and looking at past data, the effects wouldn't show up until around 2002 at the earliest. The regular minimum wage increases will likewise take a while to feed through.

So, given the available data it is simply too early to tell whether Labour's policies have in fact reduced inequality. We'll get some indication when the next Household Economic Survey is released later this year, but we won't really know until someone takes a comprehensive look inside the data as was done in the Statistics Departments Incomes report, or tracks changes in decile shares historically, as seen in figure 4.5 in Brian Easton's The Whimpering of the State.