Again with Inequality

By Bill Kaye-Blake 07/10/2013

I have already written about Inequality: A New Zealand Crisis, here on the introductory section and here in relation to evidence-based policies. Today, I’ll finish with it.

I still don’t buy the idea that inequality is bad for everyone (p. 13):

in less equal societies nearly everybody, not just the poor, is adversely affected.

The book cites The Spirit Level in support of these claims, but I’ve already addressed the weaknesses of that book. But then, the authors of Inequality don’t really believe this idea, either. Max Rashbrooke reviews the data on income equality and the divergence since the 1980s, and shows clearly how the top income decile has done well. Robert Wade explains how the divergence has been worst for the bottom 40%, best for the top 10%, and relatively neutral for the other 50% in the middle. Even amongst Maori, some have done better than others through the claims settlement process, according to Evan Te Ahu Poata-Smith.

They agree that some people do just fine out of inequality, thank you very much.

The book is good at making the case that inequality is more important than poverty. It runs through some of the standard arguments — that lack of options or access is necessarily comparative, that people need a minimum to participate fully in their society, that recognition of fundamental human rights requires greater equality. What convinced me more was that ‘poverty’ is othering, whereas ‘inequality’ recognises that we are all bound up in the process.

Several chapters are by economists: Robert Wade, Ganesh Nana, Paul Dalziel and Nigel Haworth. Wade does a good job of explaining the international context for New Zealand inequality and the zeitgeist that lies behind it. Nana wanders away from economics, which reduces the impact of his chapter. He calculates that the unemployed cost the country $27 billion in lost production. But his assumption relies on the idea that the unemployed would be averagely productive, even as the other chapters tell us about poor education and training. He forgets that better training would cost money, too. Dalziel (a former colleague of mine) focuses on what he knows well — education-employment linkages for school leavers — and provides some realistic ways to improve the situation.

Haworth has an interesting chapter. The central idea is one of path-dependence: New Zealand has become locked into a low-wage economy. Businesses are organised around low-skill, low-wage work, so workers don’t train or work more efficiently, and the process reinforces itself. Changing the situation requires pushing the whole country in a new direction, a la Singapore or Finland. Now, I’m not interested in living in either of those countries, but the idea of path-dependence is interesting.

The book could be better organised. For example, Dalziel provides a good framing statement but it is buried on pp. 187-188:

Inequality is entrenched in all five pillars of New Zealand’s welfare state — employment, income, housing, health and education.

Also, Jonathan Boston’s chapter is very good for setting up the whole notion of inequality — well, equality – but it’s several chapters in.

Another issue is focus. The book clearly starts with an intended focus on income inequality. Rashbrooke explains that income inequality is a key issue — income allows people to participate fully in society, and it is a clear outcome measure. Some chapters — like one on prisons and crimes — stray a bit too far from the central premise.

The book also doesn’t get its story straight. Gareth Morgan and Susan Guthrie tell us that

New Zealand superannuation delivers recipients a level of well-being that is exceptionally high by international standards.

But this statement comes soon after Mike O’Brien says:

This is not to argue that payments for superannuitants are too high: the evidence suggests that those living only on New Zealand superannuation (with no other income) are close to or below the poverty line.

So, the book is uneven. It covers the right material for people who are already concerned about inequality in New Zealand. I’m afraid, though, it isn’t well constructed enough to prod more people to do anything. It also doesn’t provide many recommendations, so it’s not clear what they should do and why.