Child poverty strikes a chord across the political spectrum, but the left will struggle to make inequality a major election issue because most New Zealanders are just getting on with it

What is the election going to be about? The froth and bubble of donations? Not very likely. The competence of the main players will undoubtedly feature. Or perhaps Bill Clinton's 1992 classic slogan "it's the economy stupid" will again prove true.

The past few months there has been a clamour on one aspect of the economy, at least on the left, and that is inequality in New Zealand. The debate relates to both the spread of income and the spread of wealth. The response of National is that inequality has not significantly changed over the last two decades. And if there is a problem to be fixed, it is best done by growing the economy and getting people into employment, not by increasing benefit levels.

But why has inequality become an issue of concern, when for the decade past it was barely on the political radar? There seem to be several reasons. There is substantial evidence that the inequality gap has become larger in many western countries over the last two decades. The GFC highlighted the extreme levels of remuneration in the global banking sector, seemingly far beyond any actual contribution to the economy. And that has flowed over to executive pay generally. As a result, at least for the left, the spread of wealth is seen as a pressing concern that will ultimately threaten the stability of society. Will citizens of 50 years hence see us as living in an ancien regime, heedless of the poverty around us?

Oxfam has stated that the top 10% of New Zealanders have 57% of all wealth. Perhaps this is not surprising, given that more than 30% of New Zealanders own very little, other than their clothes, some furniture and an old car. Since so much wealth is tied up in housing, for the 35% who do not own a house, they are unlikely to have much wealth.

The debate on inequality has also resulted in a number of books on the issue by left-wing authors, such as Pickett and Wilkinson, The Spirit Level, and Piketty, Capital in the 21st Century. Interestingly while these books have an avid readership on the left, most of my more conservative friends are blissfully unaware of them. They have a pragmatic view of the world and are not concerned with immersing themselves in academic arguments. They are getting on with their families and building their businesses.  

In New Zealand, the argument is focussed on the number of children living in poverty, said to be 250,000 or in other words a quarter of all children. And solving this real world problem is discussed right across the political spectrum.

The great majority of these children are living in benefit dependent families. If family poverty is defined as less than 60% of average family income, then inevitably all beneficiary families are defined as living in poverty. This kind of statistical analysis takes no account for instance of whether a family is living in a Housing New Zealand house, where rents are typically one third of market rents. And benefit-dependent families are at the top of the queue for Housing New Zealand houses.

I suspect that most voters are well aware that many poorer families receive the bulk of their income from benefits, and that many will be in Housing New Zealand houses. Voters will make their own judgement as to whether this constitutes a poverty crisis that can only be solved by increasing benefits.

So when the Children’s Commissioner argues that benefits be increased 50%, inevitably there will be some scepticism that this is the best thing to do. The gap between low income jobs and benefits would disappear, even at “living wage” levels of pay.

There may be more appealing solutions, such as extending free doctor’s visits, breakfasts and lunches at school, and ensuring better housing conditions, and of course encouraging people into paid employment.

A deeper reason why the inequality issue does not appear to have gained much traction is people’s own experience of the last decade or so. Does it seem that a large wealth gap has actually opened up on New Zealand over this time?

Certainly for those old enough to remember, there is a bigger gap now than 30 years ago, before the freeing up of the New Zealand economy.  Much of the shift occurred in the years between 1984 and 1992, with the end of many state monopolies, the end of compulsory unionism, the reduction in top tax rates from 66% to 33% (or 39% if Labour is in power). Telecom, New Zealand Rail, and the Ministry of Works, which were so dominant in 1984, no longer employ 75,000 people.

But how many New Zealanders would want a modern version of the pre-1984 world? Well, obviously some, or else the inequality debate would not exist. But is there enough concern for inequality to be the defining issue of the 2014 election? Or will be on the broader issues of economic growth, jobs and competence in managing the nation’s economy.

The next three months of electioneering will tell, but I suspect it would be a bold punter who would put money on inequality and benefit levels being the defining issues this election.

Comments (17)

by Dave Kennedy on June 24, 2014
Dave Kennedy

I guess if you are an economic conservative then having 25% of the population living in relative poverty is just what it takes to support economic growth and a strong enonomy.

"The debate on inequality has also resulted in a number of books on the issue by left-wing authors, such as Pickett and Wilkinson, The Spirit Level, and Piketty, Capital in the 21st Century. Interestingly while these books have an avid readership on the left, most of my more conservative friends are blissfully unaware of them. They have a pragmatic view of the world and are not concerned with immersing themselves in academic arguments. They are getting on with their families and building their businesses."

This is a highly revealing statement because it implies the following:

  •  The idea that those publishing research revealing growing poverty or the negative effects of poverty must have to be "left wing" and therefore not worth reading.
  • Academic research has no value in a 'pragmatic' world.
  • It is more important to focus on your own family and to create personal wealth than worry about poor kids.
Surely a successful economy should be one that serves the interests of all in society and not a small elite: http://www.nbr.co.nz/article/nz-politics-daily-rich-get-richer-and-more-powerful-ck-143437 
by william blake on June 24, 2014
william blake

"inequality has not changed over the past two decades".  not true.

http://www.eastonbh.ac.nz/2013/12/economic-inequality-in-new-zealand-a-u...

...then a wee trot out of trickle down economics; and thats where I stopped reading.

by Wayne Mapp on June 24, 2014
Wayne Mapp

Hi Dave,

The point I was making is that there is a lot more agreement across the political spectrum that the way to solve the issues of children in poverty is by focussing on free doctors visits, free lunches and breakfasts at school, and better housing, rather than on increasing benefit levels. And yes, these are pragmatic solutions.

While I expect there will be a big emphasis on child poverty during the election, I think it is unlikely that the debate will primaily revolve around benefit levels.

When I sought to discuss the two books with some friends, I was quite surprised that they did not actually know about them. So I have speculated on why that is the case.

I should have added they are also very active in their communities.

It has been well observed over the decades that many New Zealanders, including those with university education (all these friends had high level university qualifications) are nevertheless somewhat disengaged from the academic debates that occur in Universty common rooms.

by Matthew Whitehead on June 24, 2014
Matthew Whitehead

It's a distraction to claim that poverty, or child poverty, may or may not be defined badly in New Zealand. I agree that defining poverty as a percentage of average income is silly. It's much better defined by lack of access or affordability to services for people on lower incomes.

If you look at objective measures of what is acceptable or unacceptable for children, it's pretty clear that there are a depressingly large number of children who live in poverty, regardless of whether their parents might potentially have enough money to do better. Part of the counter-argument to the "rising tides lift all boats" nonsense that economic growth will help kids suffering in poverty more is that not everyone makes rational decisions with their money. In fact a lot of us more well off make just as irrational decisions, but it's ok for us because we have the money to waste. Things like kids not getting a sufficient number of meals, not having raincoats or lacking changes of clothes, or being cold, or their households having to borrow money to meet basic expenses, these are problems that need to be attacked at the source. Much of that source is that inequality for the poor in New Zealand is too extreme, and yes, that means inequality for the very rich likely is too. Some of the source of that is that there isn't sufficient support for low-income parents to make good decisions, or that bad, highly processed food is cheaper to buy (at least in the short term) than good, nutritious food.

And don't get me started on lack of internet access, which will undoubtably be appalling, but is increasingly becoming a metric for whether you're disconnected from society or not. A lot of people don't seem to get is a huge game-changer for people on low incomes. With access to the internet you don't need a course to learn something, if you're reasonably literate (which some people on low incomes are) you can apply for jobs locally or even in a completely different city if you can get the resources to move. Give it another five or ten years and access to the internet will be rightly regarded as more important than having a phone number for a household.

The real reason Labour's not having much effect arguing about inequality is because they don't have any credibility on the issue. They didn't attack the problem under Clark, and largely, this is still a party dominated by her shadow. The Greens and Mana do a lot better on this regard because at least people can trust that they care. I've been glad to see national tip-toeing into this issue, but all they're really doing is slapping band-aids on the problem. You can't feed the kids at school and expect things to improve if the welfare system is punitive and insufficient to help the majority of people relying on it back onto their feet, which means we are, for practical purposes, consigning a lot of the kids in our country to appalling conditions.

As for that quip about 1984, I'm not sure anyone who isn't already a die-hard National or ACT supporter really believes that the reforms of the mid-eighties were a good thing for our country, and I wouldn't talk too loudly about how many people really wanted them if I were you, because I think you'll find that the answer is "not many." There's a reason Labour thought they could fight an entire election campaign on against National's privatisation agenda- those reforms are still deeply unpopular, to the extent that even centre-right rural voters don't have a high opinion of privatisation. (of course, as most entirely negative campaigns do, Labour's flopped- that doesn't however suggest National sold the public on its policies, just that Labour didn't provide a more attractive alternative to enough people)

by Katharine Moody on June 24, 2014
Katharine Moody

I suspect that most voters are well aware that many poorer families receive the bulk of their income from benefits, and that many will be in Housing New Zealand houses.


Well indeed that is what defenders of neoliberal ideology would like us to think. But the key issue about inequality (which is not synonymous with poverty), Wayne, is the ongoing hollowing out of the middle classes as has been demonstrated exponentially since the Chicago School's neoliberal orthodoxy came into political practice in democratically governed nations (noting it was 'tested' under a number of dictatorships prior). 

So, the inequality issue isn't the poor versus rich dichotomy that you portray it as. It isn't about child poverty - that is a diversion. And yes, we need to address child poverty in many of the ways you suggest. But, that doesn't adress the much more broad issue of inequality .. furthering the spread of inequality in this more recent TBTF era of neoliberal reform. That turn is clearly aimed at the middle classes and the  impoverishment of much larger swathes of the population over time. 

If you've got the time, Elizabeth Warren does a great job of explaining that broader issue in this lecture;

http://www.youtube.com/watch?v=akVL7QY0S8A  


by Tim Watkin on June 25, 2014
Tim Watkin

Wiliam, to be fair to Wayne you left out the crucial word "significantly" from his quote. And thatis National's position. Working For Families made some difference under Labour, but only so much and it hasn't changed much under National, despite the GFC.

For me the latest horror figures around this are: More than a third of children in poverty now live in a household with an adult in paid employment. So poverty is creeping into the working family, which says surely something (I don't know what) needs to be done about wages.

And second, Jonathan Boston says about 18% of NZ children live in hardship while only 3% of the elderly do. Doesn't that stat alone make a pretty good case for some kind of universal child support?

And third, with no increase in benefit levels, the poor today are poorer than the poor pre-1984. That's just a fact. It may well be due to Douglas and Richardson more than Cullen and English, but when is it time to act? For all the other options you suggest Wayne, don't benefits have to rise at some point, however politically unpopular it'll be?

by Alan Johnstone on June 25, 2014
Alan Johnstone

Poverty defined as 60% of average wage is a meaningless metric. I don't disoute some kids are doing it hard in NZ and need help, but relative measures like this cloud the issue. 

If we were to increase the average wage somehow, some people will tell you it'll make more people poor and is therefore a bad thing.

 

 

by Tim Watkin on June 25, 2014
Tim Watkin

Alan, thing is the 60% measure is consistently used round the world and over time, so however flawed it does allow useful comparisons. I don't have the details to hand, but the 60% measure tells us that more NZers come under that line than they did a generation ago. Surely that's a spur to action. What are we to do about it?

by william blake on June 25, 2014
william blake

Yes you are right there Tim, the significant change (collapse) to equality happened in the 87 - 97 decade and hasn't changed much since, according to Eastons figures. Politically this proves that the Left is much the same as the Right in terms of economic policy, aiming at the middle / bourgoise voter, illustrating again the central flaw in democracy; the tyranny of the majority.

by Kat on June 25, 2014
Kat

"Telecom, New Zealand Rail, and the Ministry of Works, which were so dominant in 1984, no longer employ 75,000 people"

And certain polititians went to bed chanting the mantra: Government has no business in business.......And upon awaking repeated the slogan: Whats good for business is good for the country......

And now in 2014, thirty years later, certain polititians are spinning that the current inequality debate is just about raising benefit levels, nothing to do with an economy that is tilted in favour of the elite and go to bed chanting the mantra: Trickle down, trickle down, trickle down.....And upon awaking repeat the slogan: A Brighter Future.........

by Katharine Moody on June 25, 2014
Katharine Moody

So rents in Wellington (according to the Remuneration Authority) have risen 16.6% in the past year?

http://www.stuff.co.nz/national/politics/10199138/MPs-set-for-perks-boost

Oh the irony.

by stuart munro on June 26, 2014
stuart munro

The thing that you are trying to fudge Wayne, is that catering to the interests of the relatively overpaid proves to be the opposite of the much-touted objective of economic growth - that rising tide we're counting on to float all boats.

We may consider the risible economic figures produced by the tragically incompetent Mr English, four years out of five in recession, as a typical result. The wealthy are the equivalent of the misers of the classical period - instead of spending and allowing money to fulfill its destiny as a medium of exchange, they bury it in tax-neutral unproductive shelters, chiefly land and negotiable cabinet ministers, neither of which produce any public benefit - rather the reverse.

You need to look at the demographics over the term of the neo-liberal experiment - many or most working folk are going nowhere or backwards. Wage growth has been real-negative for decades, but the costs once kept in check by moderate, responsible governments have ballooned under privatised management. It's coming out of people's quality of life.

So, when you find yourself having to explain the demise of the Key junta (for a state that carries out paramilitary raids on its own citizens can be called nothing else) you will be right to paraphrase Clinton. It's Bill English's complete economic incompetence, stupid, you'll be able to say. Pity it won't bring our assets back you thieving scum.

by Alan Johnstone on June 26, 2014
Alan Johnstone

The inequality we see today is a result of the productivity revolution of the past 30 years, largely driven by IT and technology.

People who have found themselves on the right side of this now command large salary packages. $200k for senior technical and engineering positions isn't uncommon in Auckland.

The low value add jobs, have moved off shore.

Not sure how you fix this, you can't do it with taxation.

by Kat on June 26, 2014
Kat

Alan, it was more the actions of past governments ordaining the private sector as guardians of employment. That experiment has failed to work in New Zealand.

Taxation is just part of the mix. Policy that ensures all New Zealanders have dignity in a worthwhile occupation is paramount. The state must revisit a modern day MOW asap. Then we can get rid of dependancy and benefits for all but the truly deserving.

Unfortunately because of the neo-liberal experiment it may take a generation or two.

by Lee Churchman on June 27, 2014
Lee Churchman

Interestingly while these books have an avid readership on the left, most of my more conservative friends are blissfully unaware of them. They have a pragmatic view of the world and are not concerned with immersing themselves in academic arguments.

That's because conservatives tend to be stupid and incurious. "Pragmatic" is just another name for flat eartherism.

by Katharine Moody on June 27, 2014
Katharine Moody

That's because conservatives tend to be stupid and incurious. "Pragmatic" is just another name for flat eartherism.


Funny, made me recall Reagan's oft quoted statement as governor that "the state of California has no business subsidizing intellectual curiosity". 

by Lee Churchman on June 27, 2014
Lee Churchman

I mean FFS if we are to determine whether inequality is a problem and what's causing it, someone has to do the hard yards. It's called "doing your homework". If we don't know what's causing the problem, we are left in the position of people trying to treat cancer with aspirin. 

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