This version was revised in March 2006.

Keywords: Distributional Economics; Health;

Introduction and Summary

This paper brings together some recent research about the relationship between health status and income inequality. It focuses upon a set of propositions which challenge the conventional wisdom. They are:

1. That in a rich country poverty – low material standard of living – probably does not directly impact on health, but does indirectly through stress which income differences generate.

2. The increase in household inequality in the period of the late 1980s and early 1990s was more due to changes in tax, benefit, and government spending policies than it was due to market liberalisation. However, the market liberalisation increased stress on New Zealanders.

3. There is some evidence that income inequality may be increasing, due to factors such as globalisation and technological change.

4. The most common poor New Zealand household is a couple with children who are of Pakeha ethnicity, who own their home (usually with a mortgage), and who depend upon wages for their main income. There are other groups who have higher incidence of poverty, but because they are smaller they do not involve as many people. This means that effective poverty eradication involves working on a broad front rather than targeting minority groups.

5. Illness does not correlate well with income, unless age is controlled for. The sick in New Zealand are the elderly, although the paper goes on to argue that policies aiming to reduce poor health in the long term need to target those with low incomes and low in the socioeconomic status hierarchy.