Fallow says rising inequality largely a myth

July 19th, 2013 at 9:00 am by David Farrar

Herald Economics Editor writes:

The idea that New Zealand has become one of the most unequal societies in the developed world is just not supported by the data. It is a belief that is in some danger of hardening into received wisdom.

The data being:

The Ministry of Social Development has just updated its comprehensive (200 pages) and careful report, Household Incomes in New Zealand: Trends in Indicators of Inequality and Hardship, to include the results of Statistics New Zealand’s 2011/12 household economic survey (HES).

While the report debunks the notion that New Zealand is conspicuous among developed countries for inequality, it is far from providing a defence of the status quo or grounds for complacency.

In terms of the top vs the bottom 10%:

Another way of measuring is to look at the income of the top decile or 10 per cent of households (when ranked by income) and compare it with the bottom decile’s.

The average over the past four household economic surveys is that the top decile have received 8.5 times the income of the bottom one, after tax and transfers.

That puts us in the middle of the OECD rankings, and lower than Australia and Canada (8.9 times), Britain (10 times) and the United States (16 times).

 

Also:

Between the 2008/09 HES and the 2011/12 survey market income for New Zealand households fell 2.6 per cent in real terms, similar to the declines seen in the US, Britain and Australia.

But the net change in median disposable income (after tax and transfers) was a rise of 0.5 per cent over that three-year period as tax cuts and increased New Zealand superannuation compensated for the decline in market income.

Called taking the edges off the recession.

“For many OECD countries, lower income households tended to lose more, or gain less, than high income families,” the report says.

For New Zealand, however, there was a small gain for bottom-decile households of 1 to 3 per cent and a net fall, of around 8 per cent, for the top decile.

Please remember this data when people go on about how the rich have done best under National. Simply not true.

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37 Responses to “Fallow says rising inequality largely a myth”

  1. Pete George (21,798 comments) says:

    It is a belief that is in some danger of hardening into received wisdom.

    Too late. It is widely stated as indisputable fact across left wing blogs, and by Mana, Greens and Labour.

    I know that is not necessarily “wisdom”, but it is a common perception and the message is strongly and frequently repeated.

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  2. scrubone (2,971 comments) says:

    The rich are getting richer, and the poor are getting flat screen TVs on HP.

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  3. hemihua (28 comments) says:

    Comparing the top 10% to the bottom 10% is utterly meaningless. It is the shape of the distribution that matters. It would be more of a concern if there was a large disparity between say the bottom 10% and the next 10% after that. 10% (or 1% for that matter) isn’t a large enough proportion to bid up prices of everyday consumables hence do little to affect price levels and affordability. People seem to forget how pricing and money work.

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  4. dime (8,746 comments) says:

    well well well, who would have thought the left would turn out to be full of shit

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  5. Harriet (4,007 comments) says:

    You will always have people at the bottom, but 90% of those people will eventually move further on up.

    Students are the best example of that.

    Individual tax returns are the single best indicators of debunking the myth of ‘disparity’.

    The sooner that the Tax Office shows that an individual’s income increases over time, then the sooner we can move on from the left’s pathetic attempt to regain government by demonising employers and other so-called ‘rich pricks’! :cool:

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  6. bhudson (4,720 comments) says:

    Hmmm, those salient facts don’t appear to have informed Max Rushbrooke’s book much…

    http://www.bwb.co.nz/books/inequality

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  7. Redbaiter (6,464 comments) says:

    The left are corrupt and they corrupt everything they touch.

    Truth is merely a silly notion to the left.

    If lies are what it takes to gain power they will lie without the slightest compunction.

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  8. Nigel Kearney (747 comments) says:

    We have to reject the premise that inequality is a problem to be solved. Rewarding people according to their ability and effort inevitably leads to inequality. Not doing so is the socialist approach which inevitably leads to mass suffering and you still have inequality as well.

    If the government was doing a good job, the absolute standard of living of those at the bottom would increase and the gap between them and the top group would also increase.

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  9. unaha-closp (1,033 comments) says:

    We aren’t printing enough money and giving it to rich people.

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  10. peterwn (2,933 comments) says:

    ‘Inequality’ is the latest fad among welfare and poverty advocates. It is being cited as justification to turn NZ into a hard socialist (almost communist) nation.

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  11. Albert_Ross (172 comments) says:

    Harriet, you might be interested to have a look at this research on income mobility in New Zealand

    http://www.treasury.govt.nz/publications/media-speeches/media/09may12

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  12. Tom Jackson (2,235 comments) says:

    People believe journalists?

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  13. bringbackdemocracy (350 comments) says:

    There is inequality in New Zealand, an inequality of work.
    Some people work a lot and some don’t do any, this is unjust, unfair and unsocialist.

    We don’t need a redistribution of wealth in NZ, we need a redistribution of work!!!!!

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  14. Redbaiter (6,464 comments) says:

    And the whole concept of income equality is just one more Marxist hoax anyway.

    Incomes will never be equal, and least of all will be made that way by the efforts of politicians.

    Its just the same old same old obsessive compulsive leftist bullshit on EQUALITY, the leftist’s holy grail.

    Leftism is a mental disease, and all the left ever do with their madness is white ant our economic situation and our cultural and social condition.

    A plague of loons.

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  15. queenstfarmer (696 comments) says:

    I’m waiting for Labour & the Greens to demand an inquiry into why 50% of kiwi workers earn below the average wage!

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  16. bhudson (4,720 comments) says:

    It is worth reminding all just what equality means for the Left. As Winston Churchill put it:

    “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

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  17. fooman (38 comments) says:

    “I’m waiting for Labour & the Greens to demand an inquiry into why 50% of kiwi workers earn below the average wage!”

    qsf: A few questions for you: There are 10 people. 9/10 people earn $10 per hour. 1 person earns $100 per hour. What is the average wage? What percentage of the people earn less than the average wage? Do you know the difference between “average” and “median”?

    dpf: As mentioned above, it would be very interesting to have a look at the distribution within the top 10%. Combined, my wife and I are well within the top 5% of household income, but we are nowhere near the top 1%!

    FM

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  18. tristanb (1,133 comments) says:

    I’m sick of inequality.

    Those on the dole get 52 weeks paid holiday – and they only work 0 hour weeks!
    That is blatantly unfair. There’s a fast discrepancy between the free-time rich and the free-time poor. I only have 2 free days that I can go the beach in summer and eat a meal of fish and chips – there are those amongst us who can do this 7 days per week.

    Some poor business owners don’t get any days that are completely free, and have much less time to spend with their family and friends. Most of us can’t even sleep in to 10am on a Monday – yet there are free-time rich people who get to do this every day!

    It has been said that 90% of the free time in NZ is used by 10% of the population. Well, we are the 90%, and I demand a change.

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  19. dime (8,746 comments) says:

    fooman – why do you have to be a dick?

    im sure most ordinary kiwis would realise he meant median..

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  20. hj (5,674 comments) says:

    “Creating wealth, security and financial freedom is often an investor’s ultimate goal. 90% of millionaires get there by investing in real-estate”
    New Zealand has strong population growth due to its progressive immigration policy and birth rates. Many parts of the country are experiencing housing shortages translating into strong tenant demand and price growth. This trend is expected to continue with recent population projections by the New Zealand Department of Statistics forecasting up to 64% growth over the next 17 years. Auckland city is predicted to almost double its population in the next 40 years. For property investors, this represents outstanding potential growth in demand and return on investment. New Zealand’s property prices are also relatively undervalued compared to its closest neighbour Australia.
    http://www.nzps.com/

    SWG Report:
    The Government’s role
    Clearly, there are serious questions to be asked about New Zealand’s economic policy and how we got into this mess. Why was it not better designed and managed, and more focussed, coordinated and strategic? Did the electorate simply get what it voted for, without realising what was really happening, or have New Zealanders not been well served over the years?
    Underlining the current difficult situation, the government is spending at an unsustainable level and running large deficits (the opposite of saving). As a result, it is borrowing a hefty $300 million a week. It needs to return the Budget to a surplus of no less than 2% of GDP as soon as possible.
    Looking ahead over the next 20 years or so, the government will face increasing costs from the effects of an ageing population. If the government is to keep its borrowing within a sustainable level (as it must) over this period, its options are to: substantially increase tax revenue, reduce government spending, or increase government sector productivity and performance. The first two options are clearly unpalatable. However, modelling shows that if the government can lift its performance and increase productivity by 2% a year for five years and 1% thereafter, there would be no need to raise taxes or cut government services. The SWG strongly recommends this.
    On other government policy issues, SWG recommendations include:
    - A much more strategic and integrated approach to policy generally.
    - Serious consideration of the impact of the level and variability of immigration on national saving, and the impact that this might have on the living standards of New Zealanders. There are indications that our high immigration rate has pushed up government spending, house prices and business borrowing.
    - Improving data on household and business saving.
    http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

    The left are mostly pro immigration and on the other side you have the powerful, rich, influential property sector.

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  21. queenstfarmer (696 comments) says:

    @fooman: yes, but if you insist on being humourless about it then I shall have to point out that your example of “9/10 people earn $10 per hour” would be unlawful because it’s less than minimum wage :-P

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  22. duggledog (1,102 comments) says:

    Inequality is the human story. Good luck with ‘fixing’ that

    Those who would try to make us ‘more equal’ would only ever do so by putting their thieving little handses into my pocketses.

    So they can fuck off.

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  23. dishy (199 comments) says:

    The so-called gap between the so-called rich and the so-called poor is as nothing compared with the gap between the truth and the crap peddled by Labour and the Greens.

    I find it ironic that the lefties bleat and lie about income / wealth inequality: if it wasn’t for such inequality (which is actually about results and not opportunity) there’d be no fuel for the politics of envy that beset the leftist mindset.

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  24. scrubone (2,971 comments) says:

    I’m waiting for Labour & the Greens to demand an inquiry into why 50% of kiwi workers earn below the average wage!

    Back in 2006, I recall reading an article on London’s bankers and the obscene bonuses they earn.

    It contained (from memory) this sentence:
    “But what these bankers have to understand is that 25% of the population of London is in the bottom quartile.”

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  25. Anterelic (1 comment) says:

    This is sleight of hand.

    1) There was little change in the last three years. Does that actually prove anything of interest? Two very tight data points and there there is no analysis here in terms of significance or trend. Lets look at the last 30, the last 50, and be honest about where our grand economic ideologies are taking us, rather than being drawn into a Nat/Labour tittle tattle side show.

    2) As others say, lets look at the top 1%. (you think these policies are working for you? Really?)

    3) Finally, as the original analysis itself says, the figures here nothing to be proud of. Chose a future where you revel in your new fridge behind the razor wire of your gated community if you like, but high inequality will have a negative impact on all of us.

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  26. doggone7 (487 comments) says:

    “It is a belief that is in some danger of hardening into received wisdom.
    I know that is not necessarily “wisdom”, but it is a common perception and the message is strongly and frequently repeated.”

    I ponder those applauding Brian Fallow and acclaiming the truth he reveals being some whose received wisdom informs them that 20% of kids leave school illiterate.

    Beliefs, wisdom and perceptions are fine as long as they suit the story you want told and drive the world towards where you want it to be. A bit “My beliefs are based on true myths.”

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  27. Black with a Vengeance (1,552 comments) says:

    Fuck your OECD bulkshit… reality speaks differently!

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  28. Manolo (12,617 comments) says:

    Great communication skills from a distinguished Pasifika exponent.

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  29. Yoza (1,346 comments) says:

    queenstfarmer (453) Says:
    July 19th, 2013 at 9:54 am
    “I’m waiting for Labour & the Greens to demand an inquiry into why 50% of kiwi workers earn below the average wage!”

    A lot more than 50% of workers earn less than the average wage.

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  30. Yoza (1,346 comments) says:

    dime (6,760) Says:
    July 19th, 2013 at 10:21 am
    “fooman – why do you have to be a dick?

    im sure most ordinary kiwis would realise he meant median..”

    queenstfarmer (453) Says:
    July 19th, 2013 at 10:49 am
    “@fooman: yes, but if you insist on being humourless about it…”

    I see someone has already picked out Q.St.F’ers mess, at least I got a laugh out of it.

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  31. Yoza (1,346 comments) says:

    dishy (139) Says:
    July 19th, 2013 at 11:09 am

    “… if it wasn’t for such inequality … there’d be no fuel for the politics of envy justice that beset the leftist mindset.”

    Welcome to the revolution, comrade!

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  32. dime (8,746 comments) says:

    “Fuck your OECD bulkshit… reality speaks differently!”

    lmao unless we are talking something like education. then its all about how great we are doing in the oecd

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  33. Yoza (1,346 comments) says:

    I notice Max Rashbrooke, also in The Herald, provides a more balanced analysis of the data produced by the 2013 Household Incomes Report:

    People in the upper reaches, those just below the top 10th, have had a decent – $2000 or so – increase in their discretionary cash. They get most of their money from salaries, and those higher salaries have grown despite the tough times. But the top 10th have seen an 8 per cent dip in income, owing to lower returns on their investments, which make up more of their income.

    As a final point, it’s also worth remembering that none of this changes the overall picture, which is that in the last 30 years, incomes for those at the top have doubled, while those at the bottom have stagnated. Someone in the lowest 10th of the country has, after housing costs, just $11,500 a year to spend. That figure (adjusted for inflation) in 1982? $11,000.

    That’s why inequality is now such a live issue.

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  34. Dazzaman (1,114 comments) says:

    The idea that New Zealand has become one of the most unequal societies in the developed world is just not supported by the data.

    This is true….we’re mostly all shit poor & working our arses off just to keep the wolf from the door.

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  35. Ryan Sproull (6,661 comments) says:

    I’m waiting for Labour & the Greens to demand an inquiry into why 50% of kiwi workers earn below the average wage!

    Hahahaaha, yeah, Labour & the Greens can’t do maths like you can, buddy!

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  36. Reid (15,506 comments) says:

    If you want to solve inequality, make this book compulsory in every school in the country.

    http://www.scribd.com/doc/59028234/F-Tupper-Saussy-The-Miracle-On-Main-Street

    Of course, they won’t do that, because it doesn’t mention govt subsidies.

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  37. Tom Jackson (2,235 comments) says:

    lol. Fallow got creamed by the noobs on the Standard. Have to be really hopeless to get whupped by that lot.

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