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Poverty is falling and income inequality is not rising

Media Release

1st September 2014

ACT Leader Dr. Jamie Whyte

The Left is wrong: poverty is falling and income inequality is not rising

“A Roy Morgan poll shows that the issue people are most concerned about is income inequality. This just goes to show how the persistent repetition of a lie bewilders the public. Income inequality is not in fact rising. And the child poverty rate has been declining for nearly 20 years, falling from 35% in 1994 to 16% in 2007 and recently returning to pre-global financial crisis levels in 2012” said Dr Whyte.

“Those who advocate socialism have exploited the public’s concern about a rising number of people being trapped into a cycle of dependency. The Left’s repeated claims that New Zealand is getting more unequal are simply false and divert attention from policies that would help people out of dependency.

“Prior to the recent recession, there were 15 years of steady growth in median household incomes driven, in part, by the steady increase in the number of two-parent households where both parents are in paid employment (3% pa).

Figure 1: Real household income trends before housing costs (BHC) and after housing costs (AHC), 1982 to 2013 ($2013)

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014).

“The net income gains from the mid-1990s to 2013 were similar for all income groups, so income inequality in 2013 was also similar to the mid-1990s” said Dr Whyte.

Figure 2: Real household incomes (BHC), changes for top of income deciles, 1994 to 2013

Source: (Perry 2014).

“The Gini coefficient – the most common measure of inequality – shows no evidence of a rise in income inequality since the mid-1990s. The trend-line is almost flat.

Figure 3: Gini coefficient New Zealand 1980-2015

Source: (Perry 2014).

“The Top 1% of income earners in New Zealand earn such a modest share of total earnings that the Occupy movement is left with nothing to protest about. The incomes of NZ’s top 1% of earners make up 8-9% of total incomes, as they have since the mid-1990s. It was only in the USA were the share of the top 1% continued to rise strongly, from 13% to 19%. New Zealand’s top 1% is performing so poorly that even the Swedish top 1% is set to overtake it”, said Dr Whyte

Figure 4: Top 1% income shares, USA, New Zealand and Sweden, 1970-2012

Source: The World Top Income Database at http://topincomes.g-mond.parisschoolofeconomics.eu/#Database

“Reducing inequality would not help to reduce poverty. The causes of poverty are complex but failure to get an education is one. Our one-size-fits-all education system has failed children from deprived homes for many years. Charter schools have successfully lifted educational achievement for children in poverty in many countries. Yet the political left is against this ladder,” said Dr Whyte.

“Who doubts that if New Zealand had its own Bill Gates, the country would be both more unequal and more prosperous? We need policies that encourage hard work, enterprise and success. ACT is the only party advocating such policies.

“The last time there was a significant increase in income inequality was in the early 1990s and this spike in inequality was immediately followed by a 15 year long economic boom” said Dr Whyte.

© Scoop Media

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