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May 25, 2014 | by  | in Features | [ssba]

Inequality & Poverty

This year’s election campaign will focus on inequality in New Zealand, and which party will do best to address it. For all the noise, it doesn’t seem anyone in the debate is saying much apart from buzzwords. Duncan and Cam asked some questions to get to the heart of the issue.

In this year’s budget, the Government announced free doctor’s visits for every New Zealand child under 13. It made no changes to the current superannuation scheme which is available to every New Zealand aged over 65. Both of these policies seem great because they provide help to all people equally. In fact, these policies are unequal. Because all of Kim Dotcom’s kids can now get free doctor’s visits despite his exorbitant wealth. Because people in the top tax bracket who are over 65 currently get over half a billion dollars that could have helped those who need it more. Inequality is a deeper issue than is portrayed.

But inequality is always a bad thing. Isn’t it?
The starting point of the debate is to make sure we are all on the same page. There are different types and measures of inequality and poverty.

So you’re saying that you think some inequality is good?
Well, not necessarily good. But some inequality in society is natural and desirable. Like dynamic inequality.

What’s ‘dynamic inequality’?
As the Treasury’s Chief Economist explains it, it’s easiest to think of society like a multilevel building, with the rich on the top floors and the poor on the bottom. As students, we are relatively poor compared to everyone else in society. We are on the ground level. So there is inequality. But that’s okay, because getting a degree will allow us to make more money in the future and ride that elevator to the top. Similarly, some people are born into very poor families that live in the basement. But as long as there’s nothing in the way of them moving up, it’s not so bad (so the argument goes).

Is it easy to move up the floors in New Zealand?
No. It’s possible – social mobility is relatively attainable here in Godzone. But lots of our policies trap people in the basement. More on that later.

When else could inequality be acceptable?
Some people say that there is nothing wrong with unequal outcome of income distribution, so long as the means by which the distribution occurred were just.

What does that even mean?
Well, it’s like this: if everyone had a dollar, and everyone in the world paid their dollar to Beyoncé to see her live in concert, she would become a lot richer than everyone else. Massive inequality would exist. But it would be unjust to take the money from her and give it back to everyone, some say, even though that would restore equality. Everyone gave their money of their own free will – they chose to give up equality so they could put a ring on it. If the means are fair, then the ends must be (or so the argument goes).

Is the distribution of income fair in New Zealand?
No. Some of it is. Paying for tickets for last year’s Beyonce concert was probably fair, even though her and Jay are worth a billion dollars. But there are some serious issues with other areas – more on that later.

Where does poverty fit in in all of this?
Good question. There are two types of poverty: abject and relative.

What’s the difference? Isn’t poverty the same for everyone?
No, it’s not, and it’s important that we realise this. Abject poverty is a starving African child. Relative poverty is different, in that it is tied to the wages of people in the country in some way. Here in New Zealand, it is indexed to the average wage: if you earn less than 60 per cent of the average wage, you are considered to be living in poverty. That likely includes most students.

Some people say this is a bad metric – a millionaire would be considered poverty-stricken if he lived in a place full of billionaires, like Monaco. It also means that if the average wage in New Zealand was a dollar a day, someone earning 75 cents a day wouldn’t be considered poor. Others say it is bad because it conflates the two types of poverty.

Another issue is that some measures of poverty, like the stats we hear about the “poorest 50 per cent of the world”, aren’t particularly accurate. For example, they would suggest that most students are actually poorer than African children, because we have debt where they don’t. Students are obviously poor, but not that poor.

So when people say there are 500,000 New Zealand kids living in poverty, they’re being sensationalist?
Not at all – the fact that these kids are better-off than people who are starving to death definitely doesn’t mean everything is fine and dandy. Far from it.

What’s your point then?
The solution to the problem of starving African children is a very different solution to the types of poverty we have in New Zealand. By labelling them as the same, we make a huge mistake. We assume that the poor in New Zealand are helpless and need hand-outs. Actually, they’re not helpless, and they just need a hand-up. We assume that we can just throw money and food at them and everything will be better, when actually we need to make sure that the response is meaningful and long-lasting, like improving access to education and healthcare.

Okay, so now I’m just more confused than I was to start with.
That’s okay. We’ve just talked about abstract theoretical ideas about inequality and poverty. Now we can get into the actual situation in New Zealand.

Is this where you say inequality and poverty need to be addressed?
Yep. Remember when we talked about moving up and down the building?

Yeah, it was just a couple of paragraphs ago.
Well, in New Zealand, there are a whole lot of rules which trap some in the basement, and allow others to keep adding top-floor penthouses. Sam Morgan, the guy who made Trade Me and sold it for hundreds of millions of dollars, pays hardly any tax. He says that the tax system is unfair to workers and the lower class. If you’re rich in New Zealand, you can avoid paying the tax that everyone else has to pay. New Zealand also doesn’t have a capital gains tax. That means that people who make their money by buying and selling houses don’t get taxed on the income they earn from the sales. Who can afford to avoid tax in this way? The well-off.

That bloody one per cent.
Right. It wouldn’t be so bad that they were getting richer if everyone else was too. But that’s not the case.

Why not?
Well, there are a lot of barriers to the poorest moving up in society. Some people born into poor areas have to go to the local school. If you’re born in South Auckland, you are forced to go to one of the dozen or so schools that have police officers stationed in them. Rich people can buy houses in the good school zones, or send their kids to private school. Education is identified by the Treasury as a key way to ensure people have the ability to break out of poverty. For a lot of young adults, the cost of university is prohibitively expensive. Even with allowances and loans, it’s hard for the poorest people to access university.

This all sounds too hard. I’m kind of fine as a reasonably poor student, and soon I’ll be earning money. Why should I care about all of this?
Because there are children in Porirua getting Third World diseases like mumps and rubella, going to school without shoes and raincoats and food (if they get to school at all). Because 50 per cent of Māori males leave school without passing NCEA Level 1 English. Because poverty means more people experiencing homelessness, more people experiencing mental-health issues.

But I’m not going to be poor. Won’t I be fine?
Well actually, an unequal society hurts everyone, not just the poor. Studies have shown that a more unequal society has higher rates of violence and crime. A hugely unequal society harms people in the middle and at the bottom, as the top are able to dominate politics and commerce. They may be coming for the poor now, but it will be us next.

So what am I supposed to take out all of this?
That it’s difficult to find a solution to inequality and poverty because there are just so many people shouting their ideas at each other. It’s hard to talk about solutions because people are (rightly) so emotionally involved in it. We need to treat it as the complex issue that it is. We need to stop saying that those who disagree with us hate poor people and don’t want to help end inequality. That reductivism gets us nowhere. Society will continue to talk about inequality and poverty. Let’s make sure it’s the right conversation.



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