Tuesday, December 06, 2011

A world leader in inequality

Congratulations! New Zealand is again a world leader! But not in anything we want to be. Our gap between rich and poor widened more than in any other developed country in the past twenty years:

Figures from the "Divided We Stand" think-tank [actually, the OECE - I/S] show the income of the richest 10 per cent of Kiwis is now more than 10 times that of the poorest 10 per cent.

This is up from a ratio of around six-to-one in the 1980s and higher than the average income gap in developed nations of nine-to-one.

Using an inequality index called the Gini coefficient, where zero means everybody has the same income and 1 means the richest person has all the income, New Zealand rated 0.33.

That was up six percentage points from 1985, when it measured 0.27. The only other OECD country to make such a jump was Sweden, up to a much lower 0.26.

That runaway growth in inequality was only just beginning to stop in 2008, thanks to increased transfers from Working For Families. But with the current government handing out whopping tax cuts to the rich, while shrinking WFF though inflation, its likely to be on the rise again. Conveniently, they've cancelled the Social Report, so we won't be getting an annual reminder of the toxic effects of their policies.

Meanwhile the OECD repeats the old lie:

The main driver behind rising income gaps has been greater inequality in wages and salaries, as the high-skilled have benefitted more from technological progress than the low-skilled.
But as Paul Krugman has shown, that's not the case. The income share in the US of the 81st to 99th percentiles - the top 20% minus the top 1% - has remained stagnant. The inequality is driven by the rise in incomes of the top 1%. And its the same story here (though to a lesser degree). This isn't about increased benefits to university graduates (especially given the devaluing of tertiary education in the employment market) - its about the gang of oligarchs at the top making out like bandits at the expense of the rest of us.

A decent government would make it their mission to close this gap, to restore the social contract, with redistributive taxation and wealth taxes. But we don't have a decent government, we have National - led by a man who is part of the problem and wants to continue upwards redistribution for as long as he and his cronies can get away with it.