Economic inequality

21 conclusions on inequality from new report

The NZ Initiative has published a report on inequality. They make 21 conclusions:

  1. Increased housing costs are hitting those on low incomes hardest, and to a very severe degree. (Figure 28.) Getting more houses built is a critical issue, regardless of economic inequality.
  2. There is substantial material hardship in New Zealand households.? Specifically, around 4% of the population are ?doing without? to a severe degree and 11% to a less severe degree.? For children the proportions are higher, at 8% and 18% respectively. ?For the elderly they are lower, at 1% and 3% respectively. The overall proportions are similar to an average for a group of EU countries. (Table 5 of the Poorly Understood report.)
  3. It is wrong and potentially counter-productive to conflate relatively low incomes with poverty or hardship.? Claims that quarter of a million of children or more (25%+) are living in poverty because they are in relatively low income households are gross exaggerations.
  4. Economic inequality rose markedly from the mid-1980s to the mid-1990s on all three of the main measures: pre-tax market income, disposable income and consumer spending. The share of the top 1% rose sharply in particular. Changes in household structure, socio-demographic attributes, employment outcomes and economic returns could account for perhaps 50% of the rise in disposable income inequality during this period.
  5. Current income is a poor indicator of hardship. Specifically, only around 40-50% of those experiencing relatively low current incomes are also experiencing hardship, and some on higher incomes are experiencing hardship.One reason is that low income is a temporary situation for a considerable proportion of households, another is that the elderly can be asset rich but income poor. But a real difficulty is that unanchored relative income measures don?t tell us anything about actual living standards, eg poverty. Our Poorly Understood report shows that current welfare benefits are much higher, inflation adjusted, than what was deemed to be an adequate wage for a labourer to earn in order to be able to support a dependent spouse and three children back in 1936. The Ministry of Social Development?s authoritative annual statistical reviews of well-being and inequality show that real income growth has markedly reduced the proportion of households falling below an earlier real income threshold.
  6. Consumer spending is a better indicator of living standards. ?More recent Motu research?has found that it is also a much better indicator of self-assessed wellbeing. ?? Read more »

Alarming rise in reporting about inequality, it’s a hockey stick I tell you

Peter Cresswell blogs at Not PC.

Firstly a bit of history and some facts. Inequality is not rising.

The last few years have shown a sharp rise in the number of newspaper articles devoted to inequality. ? Inequality is clearly seen as a serious and rising problem.The only problem with that is that the data says otherwise.

Yeah…not rising.

Work by both the Ministry for Social Development and Treasury shows that while inequality rose through the reforms of the late 80s and early 90s, it since plateaued or even dropped. The Ministry of Social Development concluded that there has been no rise or fall in income inequality in the last twenty years across a range of measures.

Treasury work by Christopher Ball and John Creedy found, in addition to a mild decline in Gini measures of income inequality since 2001, there has been substantial reduction in consumption inequality. Inequality in consumption has, since 2010, been rising mildly, but is currently below 1984?s level.

What is rising though is the media pimping the poor to set a narrative:

Yet as inequality has either flattened or declined, media conversations about rising inequality has exploded ? as the graph below comparing media mentions with the actual data. Clearly, their campaigning against rising inequality may be motivated by many things, but one of them is not the evidence ?

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Are the left lying to us about inequality?

The left-wing parties claim that New Zealand is becoming less equal, that inequality is rising and that nasty Mr John Key, when he isn’t snacking on babies, is plotting with banksters to make things worse.

It is plausible to desperately stupid people but the reality is far from that:

New Zealand needs to “change its tune” on inequality, think tank The New Zealand institute says.

The group, which is supported by many leading business people, made the call following the publication of a Treasury paper which found inequality in this country has, with some variability, largely remained constant for the past 20 years.

The Treasury paper follows close on the heels of an ?OECD report which found income inequality in New Zealand was above average for the group, which includes many of the world’s most advanced economies.

Last December the OECD also said the Gini co-efficient – a broad measure of inequality – rose faster in New Zealand than in many other OECD countries between 1985 and 2011. Growing inequality meant New Zealand’s economy had only grown by 28 per cent between 1990 and 2010, rather than the 44 per cent growth it should have had.

The new Treasury report acknowledged inequality in this country did rise from the late 1980s to the early 1990s. But it said that since then inequality had – with some variability – remained either constant or had fallen slightly.

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Busting Oxfam’s spin on the 1% now owning 50% of the world’s wealth

The other day Oxfam claimed via some highly questionable figures that suggest the richest 1 per cent will soon own over 50 per cent of the wealth.

Predictably the left-wing were all over this as some kind of truism that capitalism is inherently evil and the government must act somehow to stop this.

The mere notion that Oxfam puts forward is silly in the first instance and wrong in the second.

Fraser Nelson at the Spectator explains.

The hijacking of Oxfam by the politicised left is nothing short of a tragedy. It?s heartbreaking to see a charity that has built up so much goodwill from so many people being used by activists as a vehicle for global class war. As a result, Oxfam?is switching its focus away from global poverty towards something very different: wealth inequality.

It has today come up with some questionable figures suggesting that the richest 1 per cent will soon own over 50 per cent of the wealth. Here is Winnie Byanyima, executive director of Oxfam International, with a message she intends to give before she heads off to Davos:

?We see a concentration of wealth capturing power and leaving ordinary people voiceless and their interests uncared for? The scale of global inequality is quite simply staggering and despite the issues shooting up the global agenda, the gap between the richest and the rest is widening fast.?

She didn?t have space, it seems, in her Guardian interview or in the Oxfam research to point out that right now global poverty has been?declining faster than at any point in human history.

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Even if Oxfam?s forecast?came?true, you have to ask: isn?t the charity?supposed to be worried about the poor, rather than obsessing about the rich? Its adverts want to you believe that age-old (and laughably incorrect) trope that the poor are poor because the rich are rich: that wealth is a pie, and the powerful are helping themselves to an ever-larger slice. In fact wealth is something that people generate, and on a global basis more of it is being generated than ever before. This ought to be celebrated, because the pie is bigger than ever before -?this is translating into fewer hungry people than ever before.

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About that income inequality thingy the left always bang on about

All last year we heard various Green and Labour politicians go on about income inequality…and how the “poor” of New Zealand are sooooo hard done by.

On top of that they claim that National is evil incarnate and the poor are being hammered by National just for shits and giggles.

They point to all sorts of weird economists who have written books that upon examination the facts don;t stack up.

Buy that has never stopped the left-wing pushing a massive lie on the people, just look at global warming by way of an example.

Since they like quoting reports and overseas facts how about they report this one…the one that says that inequality isn’t growing, it is reducing….and has been for 20 years. (Kind of like there has been no warming for 20 years also)

Income inequality has surged as a political and economic issue, but the numbers don?t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet?income inequality for the world as a whole has been falling for most of the last 20 years. It?s a fact that hasn?t been noted often enough.

The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history.

Of course, no one should use this observation as an excuse to stop helping the less fortunate. But it can help us see that higher income inequality is not always the most relevant problem, even for strict egalitarians. Policies on immigration and free trade, for example, sometimes increase inequality within a nation, yet can make the world a better place and often decrease inequality on the planet as a whole.

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So-called OECD report into inequality slammed by Rodney Hide

In the NBR Rodney Hide does what no mainstream journalist apparently bothered to do, actually read the co-called report by the OECD into the economy.

Andrew Little and Russel Norman were involved donkey deep in slamming the government over the “report”, but it appears they didn’t read it either.

Rodney Hide did however.

[W]hat a proposition! That inequality hampers growth.

It sounds nonsense, but is it? I thought on your behalf, dear readers, I should wrap a wet towel around my head and find out.

The first thing I noted was that it?s not an official OECD report. It?s a working paper. ?The opinions expressed and arguments employed are those of the author.? ?OECD Working Papers should not be reported as representing the official views of the OECD.?

Ok so not a report at all, just a working paper from some womble.

The study itself starts badly saying it?s not known whether inequality has a positive or negative effect or whether it has any effect at all. The author has no theory. There is no testable hypothesis.

Undaunted, he dives into 40 years of data across 31 countries. His trusty computer and statistical package grinds away.

Aha, out spits a result. It?s significant! But it makes no sense. Especially the bits that didn?t make news.

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More good news

The opposition talked down the New Zealand economy constantly, probably will continue to do so, and constantly demand to know why the recovery isn;t being shared.

Except it is.

There is something for everyone in the latest annual income figures from Statistics New Zealand.

A defender of the status quo can point to a 6.2 per cent rise in the average household income from all sources over the year to June 2014.

A critic of the status quo can point a rise of 1.7 per cent in median hourly earnings for wage and salary earners over the same period, or just 0.1 per cent after adjusting for inflation. The year before median hourly earnings had risen 3.5 per cent.

The statistics suggest the best chance of maximising your income is to be a European male, aged 50 to 54, with a postgraduate qualification and living in Wellington.

The figures come from a survey of around 30,000 people in 15,000 households taken in conjunction with household labour force survey.

Median weekly income from all sources, for all people, increased by $25 (4.3 per cent) to $600. This was the largest increase for seven years and partially due to more people receiving income from wages and salaries and fewer receiving income from government transfers.

Over the year the number of full-time workers grew 70,500 and the number of part-timers 20,200.

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Oh no, another of Labour’s mantras of misery destroyed

Labour continues to run a mantra of misery about New Zealand, despite their claims of a positive campaign.

I think they think that if they say it enough it will become a truism rather than the Nasty party reputation they have built.

Unfortunately for them their campaign is built upon problems that are slowly coming right as the economy grows and their mantra of misery is becoming tiresome in teh face of facts.

One?area that they have harped on about, inequality is also coming right according to latest reports.

Child poverty has dropped back almost to pre-recession levels, as New Zealanders’ jobs and incomes finally climb out of a five-year downturn.

The Ministry of Social Development’s latest annual report on household incomes says the number of children in households earning below 60 per cent of the median wage fell by 25,000 to 260,000 last year, the lowest number since 2007 when there were 240,000 children in poverty. ? Read more »

Labour supporters believe that taxes are to punish the rich, not to raise revenue

Daniel Hannan blogs at The Telegraph about taxation and how Labour supporters believe that?taxes are to punish the rich, not to raise revenue.


Ponder the graph above. Sixty-nine per cent of Labour supporters would want a top rate tax of 50 per cent even if it brought in no money.

I?m sure they?d dispute the premise. I?m sure they?d insist that it did bring money in. And, on one level, they?d believe it; it?s human nature to start with the result we want and then rationalise it to ourselves with what look like hard data. I think their rationalisation would be false, obviously ? once the behavioural consequences of the tax are factored in, it becomes a net drain on revenue ? but I might be subject to my own confirmation bias in the other direction.

Anyway, this isn?t a blog about the statistics ? I?ve already posted one of those. No, this is a blog about the mind-set of people who see taxation, not as an unpleasant necessity, but as a way to punish others.? Read more »

Too stupid to get on in life

It is refreshing to have politicians like Boris Johnson…who tell it how it is.

Economic equality will never be possible because some people are too stupid to get ahead, Boris Johnson said on Wednesday night.

Natural differences between human beings will always mean that some will succeed and others will fail, the Mayor of London said in a speech.

Read Mr Johnson’s speech at the Margaret Thatcher lecture in full

Despite calling for more to be done to help talented people from poor backgrounds to advance ? including state-funded places at private schools ? Mr Johnson said some people would always find it easier to get ahead than others. ?Whatever you may think of the value of IQ tests, it is surely relevant to a conversation about equality that as many as 16 per cent of our species have an IQ below 85, while about 2 per cent have an IQ above 130,? he said.

Addressing the Centre for Policy Studies in London, Mr Johnson suggested that economic inequality was useful because it encouraged people to work harder.

He said: ?I don?t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses and so on that it is a valuable spur to economic activity.?? Read more »