I reviewed “Inequality: a New Zealand Crisis”, Max Rashbrooke (ed) in “The New Zealand Listener” of 10 October, 2013. (<>http://www.eastonbh.ac.nz/2012/11/is-new-zealand-still-fair/).
It elicited the following letter and my reply.
Keywords: Distributional Economics; Statistics;
We welcome Brian Easton’s review of Inequality: A New Zealand Crisis (“Books & Culture, October 19) and his acknowledgement that it begins “a valuable discussion”.
However, as the book’s editor and its advisory panel chair, we question several points he raises. He claims the book is “not up to date with the research”, without providing evidence. In fact, the book drew extensively on a wide range of domestic and international sources, including the latest data from the Ministry of Social Development, the OECD and the World Top Incomes Database.
Easton also says we fail to explain that “almost all” of New Zealand’s rise in inequality is the result of tax and benefit changes. However, data compiled by the Treasury in 2012 show that market incomes – before taxes and benefits are taken into consideration – have become significantly more unequal over the past 25 years. If we adjust for household size and composition and take into account inflation, we see that market incomes have fallen since 1987 for many households at the lower end of the distribution and have not changed for those in the middle. In contrast, market incomes have increased significantly for those at the top.
This growing inequality is the result of many forces, including changes to the structure of the economy, the process of globalisation and the diminished bargaining power of many workers. Admittedly, as Easton points out, the tax-welfare system has also become less redistributive since the 1980s – which is why the book has a chapter on how benefits and taxes could be reconfigured to reduce income inequality. But we cannot ignore the role played by increased gaps in market incomes.
Max Rashbrooke & Jonathan Boston (Wellington)
Max Rashbrooke and Jonathon Boston complain that my review of their book Inequality: A New Zealand Crisis does not provide evidence for my statement that it is not up to date with the research. (Letters, Nov2). There was not enough space.
There is a survey of the research evidence now going through the scholarly process of evaluation. When it is released to the public, Rashbrooke and Boston and their self-appointed experts will be embarrassed by how much they left out and how much they got wrong.
However the survey confirms that New Zealand income inequality has risen in the last three decades. When once we were in the bottom half of the OECD for income inequality; we are now in the top half.
Rashbrooke and Boston cite evidence that inequality in market income has been recently increasing. They have misunderstood that research while other evidence shows the share of top market incomes has not greatly increased in the last two decades.
I too, was surprised by the conclusion. But as Keynes said when faced with a fact which contradicted a hypothesis, ‘I change my mind. What do you do?’
Brian Easton (Wellington)
The Survey refereed to in my letter is published in The New Zealand Journal of Sociology , Vol 28, Issue 3, 2013, pages 9-66. A summary of the paper will be found at http://www.eastonbh.ac.nz/2013/12/economic-inequality-in-new-zealand-a-users-guide-summary/