Time to recognise inequality is on the rise again

“It is time to recognise that income inequality is on the rise again,” says Bill Rosenberg, CTU Economist. “Rising inequality means that even if the economy is growing, the income from it is not being fairly shared.”

The Ministry of Social Development’s Household Incomes Report shows a rise in inequality on several measures since 2007. It has been higher than in 2007 in every year since then. On some measures, it is the highest it has ever been since the series began in 1982. On another, it’s the highest with the exception of a blip in 2011. “While one year cannot be taken in isolation, the trend is clear,” says Rosenberg.

This is consistent with the poor growth in wages and salaries since 2009. The Household Incomes Report says two out of 5 poor children come from families where at least one adult is in full-time work or is self-employed and around half the children in material hardship are from working families.

“Recent research from the International Monetary Fund found that the weakening of unions is one of the strongest factors in increasing income inequality. It found that the effect in New Zealand was one of the greatest in the OECD. About half of the increase in net income inequality between 1980 and 2010 was due to the fall in union membership in advanced economies. This affected not only union members but all workers, and reflected income being moved from wages and salaries to investment income received by those with the highest incomes,” Rosenberg says.

“It is therefore very likely that the weakening of unions under a succession of recent legislation in New Zealand will be contributing to the rising inequality,” Rosenberg said.

ENDS

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