Inequality in Aotearoa: an idea whose time has come

A major feature of the UK election campaign whose results we’ve all been hanging off (and by the way why would we even contemplate a return to FPP given the grossly disproportionate result it’s produced over there?) was the importance of inequality.

One of the Liberal Democrats’ key campaign planks was a tax-free threshold of ₤10,000, a measure widely acknowledged as one of the most effective ways to use the tax system to address inequality: everyone gets a tax cut, but those on the lowest incomes benefit most.

Instead of cutting the top tax rate for the highest income earners – particularly reckless in light of an OECD tax report out today – John Key’s Government should be looking at tax changes that promote more equality, not less.

Among other strange things about the UK election campaign was the irony of the Conservatives producing this billboard:

Clearly, inequality, and the need to reduce it, has become a major political issue in the UK. People there are beginning to recognise that reducing inequality is in everyone’s best interests, not just the worst off.

I think there are promising signs that the same sea change is happening here.

A couple of week’s ago, The Listener’s cover story was about inequality (a preview is available here, but the full content won’t be online until 22 May).

It’s great to see the issue of inequality getting such high-profile attention.

The story itself is interesting. It argues based on updated research by Massey University Department of Marketing’s International Social Survey Programme that New Zealanders don’t care as much about inequality as we used to, even though the gaps have widened. (Sample result: Are income differences in New Zealand too large? In 1992, 72 percent said yes; in 2009, 62 percent).

Though I’m sure the research is accurate (and the results are very interesting) I’m not sure that it’s right to conclude from this that inequality is a dead issue for Kiwis. I suspect that inequality drops off the radar for many people during economic boom times, but becomes starker and more pronounced in recessionary times like those we are currently experiencing.

Also, research like that of The Equality Trust shows plainly why inequality is an issue we all need to care about: it affects every one of us. The implications of this research are catching on in the UK and I think they will catch on here too.

New Zealanders have always thought of ourselves as an egalitarian nation where everyone gets a fair go. If we want this to be a reality going forward, it’s decision time.

I choose a better, fairer, more equal society. What about you?

48 Comments Posted

  1. I totally agree with a taxfree threshold and increase of minimum wages as these are the only measures that will improve people’s lives. How National is trying to undermine every attempt for social justice is beyond belief. They tried to drag nurses into by saying they were amongst the high income earners. Here is what I had to say to that.(Letter was published in Timaru Herald)
    Tuesday 18.02.2010 Prime Minister John Key is quoted saying ” those on the top rate ….are critical for our economy, they include …. NURSES. What planet is he on, did Jo Goodhew tell him that? Even if you are a well paid nurse working for the DHB you do not get anywhere near $70.000 a year. If that was the case I would be more than happy to pay 38% tax on the part OVER $70.000! Because that is what we are talking about. Rich people pay the same tax as lower income people on their income under $70.000.
    Rest assured that you are not meeting a rich person when you next meet your nurse on the ward, in the doctor’s practice, in a nursing home or the district nurse. It is a disgrace how this government tries to woo their corporate friends, be it bankers, factory farmers or large corporates taking their labour overseas by telling the underprivileged, pensioners, jobless New Zealanders, people with mental health issues and New Zealanders trying to cope on minimum incomes that they have no value in this country. Not once during the recent debates and question time sessions have I heard Jo Goodhew say one word in defense of those constituents. NURSES are confronted with the results of current policies and we do not need a loss of trust by our clients because they think we are in it for the money!
    Am I angry, you bet I am.

    Gerrie Ligtenberg, Primary Health Care and Gerontology Nurse

  2. Heavens, while chat above about tertiary education interesting, and investment in eductaion/students is important – something Key and Bennet took away with removasl of Training Incentive Allowance for DPBers, but Meteria’s peice is about the need to be concerned about the degre of inequality here.
    Tis about priorities,yes The Nats and Act have theirs, but surely it is ultimately about good public polkicy. The best advantage for most, and if a few face a cost, so damned what! The first $10,000 tax free would mean the entire UB of a single person becomes tax free, meaning a gain of $23. For a single uBer over 25 the gain is about $25. The loss of income tax revenue is made up through increased GST revenue.
    Other changes will clearly address child poverty. Take off yuour biased vision of the parents of poor children folk. It is estimated that to feed an adolescent child s between 65-80 sa week… FTC for first child barely covers this. It does not if there are two children.
    Policies that entrench inequality ensure we all suffer….. It is why we stopped rulers having the right to rule simply by accident of birth, why eventually we all got the right to vote, why we were taught to read.
    Fundamental stuff. Stuff that helps us all gain.

  3. You can have a free society…or an equal one….you can’t have both.Free men are never equal and equal men are never free.An equality before the law is all one can demand…and deserve.

  4. @saminuela

    I did actually just check – I didn’t have time to run over it in the edit after I noticed it might not be entirely true however, I didn’t mean it to be inflammatory at all and I rely on people such as yourself to call it out if it does seem to be completely wrong!,

    In saying that…
    Guess what?
    Ngati Tauira get $166,782 of Student money in the SA fees that students pay at VUWSA
    at the UC there is also a quota on restriction as I know also exists at Victoria that demands that around 10 students or 10% (not too sure on the Vic position) get spots in the restricted courses are restricted purely to Maori students regardless of grades (I know because a friend got in on one where others failed) and also to cap there is a 10 student spot quota for international students, It is one thing to let them in at the educational expense of NZ students another entirely to give them the spots! oh of the new 600$ levy at the UC around $20per person will be paid to a Maori/Pacifica Development levy – I have absolutely no idea what that entails at all though
    I can’t be bothered checking the other Univeristies, primarily because some of them don’t put their figures up online, and secondarily , they tend to hide the figures within their own reports if they do

  5. samiuela,

    1. we don’t have that many graduates compared to other OECD nations.
    2. we don’t spend as much as other OECD nations on education including the tertiary sector.
    3. have we really replaced skilled worker jobs with jobs “pushing buttons”, most production jobs went OE (we have only retained skilled worker positions developing low production level niche products – R and D work production using advanced technology).

    The answer is probably to increase fees (increase funding to universities) – after all the fee debt is interest free for those who stay locally and we can bring in debt write-off (increasingly effective if fee debt is higher) to better retain the health and education sector workers we lose now.

    Uuniversity administrators oppose interest free debt and want the money for themselves instead (like typical capitalists looking to only line their own nests they have no concern about loss of graduates overseas – no loyalty to the local economy), they would do better to argue that the existence of interest free debt supplemented by some debt write-off (in public sector areas) allows higher fees.

    The idea that we can get away with providing fewer tertiary places than we have and than do other OECD and developing nations is incredibly luddite, it reminds me of National cutting back on skills training back in the 90’s and we know how silly that was.

  6. stephensmikm,

    “also remember around 10% of fees at least some if not all of our universities go to Maori “Student Associations” and iwi from my understanding (I’ll have to check that)”

    The golden rule is to check before you write. This claim is bullshit. You are saying that if fees are $4000 – $6000 per year (thats a typical value for most courses), $400 – $500 goes to Maori Student Associations? You know this is not true; you deliberately wrote this to inflame the argument. It also says something not very nice about yourself.

  7. As a student I can see what the problem is so easily – it’s simply that Unis need to be able to raise their course fees by an extra 100bucks or so to be able to cover the costs of these students, also remember around 10% of fees at least some if not all of our universities go to Maori “Student Associations” and iwi from my understanding (I’ll have to check that) and there is a vast difference between course costs , some being as little as $400 up to $1000 per semester/trimester for Domestic students. Universities have to pay their staff so its no wonder they have to cap students nunmbers if they are going to have to pay more to lecturers and hire more tutors and subsequently cleaners and administrators- letting them in simply won’t cover the true costs of the courses which is far more in the field of what the international students pay. There are 4 choices to get more students into uni:
    1. Raise fees and remove the Cap
    2. Raise levies and remove SA fees.
    3. Stricter thresholds and more non-open entry
    4. Raise taxes

    or have what is happening at the moment

    @SPC – that’s the best way I’d be perfectly happy with them raising the threshold of the restricted courses I did last year by 5-10% (there are courses which you can pass with 39% at present) – higher threshold makes better students , also run off effect of less binge drinking (maybe drug taking though…)

  8. What happened this year at Victoria is not unique, back in the 1970’s during sinking lid (funding restraint) they simply increased the fail rate for first year exams (over 60% were failed in some courses). And that was for those who met the stricter entry criteria of those times. I know, I failed one of those courses.

    samiuela, skilled workers in industry did not go to university then, they went to polytechs.

  9. John-ston,

    Getting into university before 1989 was not particularly difficult. Even if you fluffed UE or later on Bursary you had an opportunity to go to university a few years later as an older student. That seems fair enough to me, it is necessary to set standards to ensure the incoming students can cope with the level of work at tertiary level.

    There are several reasons why there were less university students in the past. The main probably being that it was easier to get a reasonable job with only a secondary school education. Another reason is that training for jobs such as teaching, nursing and so on was in separate non-university institutions.

    An interesting question is do we really need as many university graduates as there are now? Many jobs are actually becoming less skilled with the introduction of new technologies (pressing buttons instead of skilled manual work). Is a university education really necessary for many entrants to the work force? Its a pretty expensive way to effectively just rank job applicants.

  10. Johnston: I am not saying that it should be easy to get into university, no it shouldn’t be, it has to turn out people proficient at their job. I am not suggesting that it should be watered down, but it should be only available to those who can cut the mustard regardless of background!

    Educations should be provided for the whole of society from apprenticships to skilledtradesmen to the professions.

  11. Unequality mean more haves and even more have-nots. Getting a decent tertiary education should be a given in any good country like ours and NZ was doing that, but this govt in now pulling the plug on that.

    Getting a job in this economy is not easy so of course the students and others leave NZ.

    Taxing the heck out of the have-nots who remain is really not fair either.

    The solution? Policies that work. Tax the rich of course. Those making millions pay NO TAX. Now if the govt was fair they would close the loopholes and collect from the rich. Otherwise the have-nots have no hope in hell as they continue to pay tax and prop up the rich.

  12. Yes you right BJ: – I have become for too used to underestimation as being the norm – it has fooled me into a travesty of logic – soon, I fear, I shall cease speaking at all, even in this switch on/switch off world of cyberspace

  13. “You can’t underestimate the effects of good education”

    Surely you mean OVER-estimate? I see this structure often here in NZ, and it is a little frightening.


    Estimate the effects.

    Under estimating means that the value of the education is taken as less than it really is.

    This is surely not desirable and is at the same time quite possible.

    Over estimating means that the value of the education is taken as MORE than it really is.

    Which, if it is “impossible”, extends the meme that the value of education is greater than we know how to express.


  14. Drak; funny but the echelons of oxford and princeton proclaim (quietly) the same advice.
    You can’t underestimate the effects of good education on the human mind – an issue that conservatives would like to shut down.
    Better the poor remain (I)gnorant slaves….otherwlse they may not remain slaves.

  15. Drakula, from what I understand, it was very tough to get into University in the days prior to 1989, so it wasn’t all roses back in the good ole days.


    If I was asked to sum up a solution for the inequality problem in one word, I would say education.

    What the last two governments have been practicing with regards to education is absolutely criminal.

    Education is the keystone to everything, it is a right not a privilege. The brightest among our very humble classes have the right to persue their potential right to the top. From kindy to a doctrate.

    We had that right in NZ in the bursary examinations and it was taken away because some rich bastar!s don’t want to pay their share of tax.

    We can even have that system again and even improved it with a bond/exchange system that will insure that skilled labour does not rush out of the country.

    I feel sorry for the younger generation I hope they re-connect with my generation and re-learn about the Chicaco Convention, Cohn Bendit 1968 Paris and start asserting themselves on the streets!

  17. Yeah right, the tax credits flow across all income groups – thus because of WFF we have low taxes on incomes.

    The problem we have is low wages not high taxes on families.

    This is relevant to the issue of reducing inequality – which inbeds itself across generations when it occurs within families.

    And most single adults will have (or have had) partners and children at some point.

  18. Re, but not really to, SPC:

    We have the lowest tax on a one income family of two children on the average wage in the OECD.

    I wonder whether this is a relevant question. If the average wage goes with the average number of workers, then that’s probably almost two, so this fact possibly affects relatively few people. I’d certainly be surprised if it affects many single-adult households.

  19. I’d like to see a token tax threshold of say 3-5k to give students a little tax break considering the problems currently within the under 20 employment issue…but that’s just from my perspective

  20. Yep, concur with your calculation john-ston, give or take a couple of hundred million.

    Taxing realised capital gain on all assets other than the family home as income, which is Green policy, would easily pay for that in the longer term, although not in the initial years due to the lead time before gains are realised after the introduction of the tax.

  21. The calculations are probably out there in some report on tax, just can’t very quickly find it – thanks john-ston! Quite a lot there – of course it wouldn’t be done in one fell swoop, but even $5,000/$1.75 billion is a bit to make up. Methinks one would have to raise taxes on the ‘rich’ quite high to make up for that. Maybe I need more imagination!?

  22. StephenR, I have done a very quick back of the envelope calculation, and I would estimate that a $10,000 tax free threshold would cost $3.5 billion. I used the data provided on the Key Facts for Taxpayers page ( I took the number of people earning more than $10,000, multiplied it by the tax they would pay on the first $10,000 (12.5%) and added the figure shown for the amount of tax paid by those who earn between $0 and $10,000

    Personally, I would like to see the Working for Families package and the IETC scrapped and replaced with a very generous tax free threshold (one could possibly get it up to $20,000).

  23. No one is going to be opposed to a tax free threshold (of course parties have their priorities). A factor in implementing it is of course the cost – how much would 5 or 10 thousand cost (i’m sure someone on the internets has figured it out)? How would the Greens make up the difference?

  24. @samiuela

    Just remember the Brits put two BNPs into Brussels, I think the right might have won but at a significant cost (and I don’t mean the quite awesome coalition ) 😀 (Hope Clegg gets education or Innovation and Skills!)

  25. I am more pessimistic,

    We’ve had more than 25 years of neo-liberal policies from both major political parties. The messages we have been immersed with during this time have centred on looking after oneself, consuming without regard to the consequences and so on.

    Think about this … there is a whole younger generation who have been born after 1984, and are now eligible to vote (indeed have been for 7 or 8 years). Have the right won, not because of their policies as such, but because our youth have been indoctrinated?

    I hope I’m wrong.

  26. Well, I just up-ticked Bryce, that’s a first. Careful, or you’ll ruin your reputation, Bryce.

    Issues of inequality are now of rising political significance, so we might see politicians catching up on this in 2011.

    I think that is an important point. In the past, the inequality issue and it’s effects on society seemed intuitive, but harder to quantify. With books like The Spirit Level, much better data seems available. That could be just me of course. The Greens are certainly trying hard to raise awareness of the issue and getting good traction too, so that bodes well for 2011. Election year campaigns are of course about votes and parties will feature their policies they think register with the public, so hopefully the time for this one has come.

  27. The problem has not just been the discrimination based on income source, but the compensation to beneficiaries for cost increases via the CPI has been insufficient. Costs of necessities, such as food and power have increased at a greater rate than the CPI average – so those on benefits are now worse off in real terms than they were after the 1991 benefit cuts.

    There needs to be another index used for assessing benefit rate movements, one which is based on neccesities. Given the cost of power will continue to rise and the global demand pressure for upward prices for dairy and meat/fish this will only continue.

  28. I definitely agree that we should have some sort of tax-free threshold in New Zealand, and I would certainly welcome the introduction of a tax-free threshold up to the $10,000 mark. The average New Zealander pays more income tax than the average Australian because across the ditch, there are significantly lower taxes at the lower end of the scale, and there is limited point in having a bureaucracy that is necessary to ensure that incomes at the lower end of the scale are properly assessed for tax.

  29. jh-I actually find myself agreeing with some things you are saying! One of the inequalities in our urban environments is the creation of socio-economic blocks within a city. I think real estate agents and decile rankings of schools create perceptions of areas that become self perpetuating; sought after area, close to a “good school”, low value housing, low decile area…etc. Suburbs in my own city have become reclassified because of their proximity to low decile schools and once grand homes and high quality housing have lost value and are becoming run down.

    We need to not only make sure all our housing meets minimal standards (insulation and construction quality) but control the property speculators, developers and ruthless landlords. When new suburbs are created they almost predetermine who will live there; high class, gated communities or streets of prefabricated little boxes. It seems more pronounced than when I was young where you would often get a range of housing on one street.

    In his book “Stuffed and Starved” academic Raj Patel describes how fast food outlets, and liquor outlets etc predominate in low social-economic areas and much looser standards of what is commercially acceptable are allowed. We need stronger town planning to ensure equity is applied to urban planning too.

  30. Metiria, the “right people” are the people that the policy is aimed at – struggling families.

    Labour wanted to introduce this type of policy but decided against it because it was not an effective use of money – assuming the purpose is to make families better off-

    For the amount that this policy would cost, the benefit is only marginal for struggling families.

    That was what my point was… and that is what Treasury said to Labour

  31. Kia ora, thanks for all your comments. I agree Valis, I am not sure who the “wrong people” are that OliverI talks about. For someone on the minimum wage, a tax free band of say $10,000 means they pay tax only on a bit over half their income. These are often people working in services like aged care or hospitals and schools. What is it about those people that suggests they are not entitled to some serious tax relief?

    But there are other things we can do to especially to relieve the family poverty that SPC refers to, I agree that we have to remove discrimination based on income source.
    cheers, Mx

  32. Sorry, I was referring to the passing reference of the 10,000 pound tax free threshold.

    Of course everyone having a lower tax is a good thing. I just assumed that the people that this sort of policy is supposed to be targeted at is families that aren’t well off.

    However, while poorer families would benefit in some way from a tax free threshold, the majority of people benefiting are part time workers trying to get some extra pocket money, not families.

    All I was saying is that this sort of policy is not the most effective way of using the cost to help inequality.

  33. There was a Samoan family on Campbell live who took in a runaway Chinese boy called Ghou. The mother had 7 kids and one on the way. While they were a nice family I don’t believe assistance should be given on a flat basis of “you have as many as you want” and it won’t make any difference. I have heard Meteria say (however) that every child is entitled to this and that “the same as everyone else”. I don’t believe the equality thing is of itself a panacea without some conditons on personal responsibility. Intuitively I feel that you will just breed an entitled class of person and the demands of this group will grow… it doesn’t seem healthy to me. By all means narrow the gap (like Japan).

  34. Why are they “the wrong people”? What “efficiencies” is Treasury concerned about? Do you think they have the same goals in mind as Metiria espouses?

  35. The reason that the treasury advised the Labour Government back in the day against having a minimum non tax threshold is because it was overly expenses and rewarded the wrong people.

    The most efficient use of the money that it costs to fund this type of policy (if the objective is to reward families) is middle income tax brackets. This 10,000 pound non-tax threshold sounds great, but in reality is clumsy and rewards the wrong people.

    Just my two cents though 🙂

  36. A problem with tax free income is the same with lower rates of tax for those on lower incomes – the government excludes beneficiaries. Thus those in family poverty get no help.

    While we have to defend WFF which ended most of the working family poverty (from those socio-pathic Randian’s who aspire for a society based on individual selfishness – thus oppose any help to families or to lower income families) there is a family poverty cause which tax free income will not address.

  37. One thing I’ve noticed is incomes stalling but house prices increasing and one quick off the mark section having been able to position themselves as landlords with minimal input. Also waves of migrants picking the eyes out of the property market and a general trend of intensification that cheapens the urban environment (ie it is harder to live somewhere nice*). A land tax (Ontario Greens) would have bought some sanity.
    *the “unprepossessing fishermens cottages” at Redcliffs became upmarket housing etc.

  38. It’s always an issue, but I think globally it’s lately getting some more acknowledgement and importance, both in elections and in books such as the widely publicised ‘The Spirit level’.
    In many ways I think we in NZ have a society that ignores much of the inequality, by looking after enough people to a reasonable extent we miss out/ignore/don’t acknowledge those who are homeless or struggling or at least we don’t see them everyday. However too many people, for a country with so many ‘rich’ simply dont get the opportunity to live comfortably. How do we make it a major issue in NZ?

  39. Yes, it is certainly a problem that New Zealanders appear to care less about inequality than in the past.

    Partly this is explainable by the fact that political parties and politicians haven’t campaigned on such issues for quite some time – which means inequality hardly ever gets politicised. Yes, some politicians and parties such as the Greens and Labour might sometimes talk about it, but when it comes to election campaigns they never prioritise issues of economic equality at all.

    Certainly the Greens didn’t make inequality a key campaign issue in 2002, 2005 or 2008. In fact I don’t think the Greens have ever prioritised it. Hopefully this will change – Metiria’s blog posts give me some hope. Labour are also rediscovering some of these issues, despite not caring much during their time in govt. Issues of inequality are now of rising political significance, so we might see politicians catching up on this in 2011.

  40. Nice, the LD party being bought off with AV and not even fighting for SM to enable the Green Party to escape dependence on its one “Coromandel” seat to retain a voice in parliament.

    We can expect to be disappointed on the tax free threshold as well.

    They probably have a GMFI (for a couple with a child/children – tax credits and such), so this would reduce the cost of GMFI tax credits as an individual programme. This increases affordability.

    I suppose it’s a matter of getting to this level in steps 2500, then 5000, then 7500 and finally 10,000. But one wonders whether this idea is one the LD would bring into the coalition government orbit, or whether it was one they only expected a Labour partner to deliver on – which explains the hostility of many supporters to going with the Tories.

    We have the lowest tax on a one income family of two children on the average wage in the OECD. Cool.

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