The political left has been successful in putting economic inequality firmly onto the public agenda and making it a key election-year issue. But that doesn’t mean the issue is ‘owned by the left’, nor does it mean that the debate is going to be won by the left. The political right is now fighting back strongly on inequality and related issues. Not only is the National Government launching initiatives that claim to target inequality, but rightwing columnists and bloggers are now putting forward rebuttals to the leftist agenda on issues of poverty, the living wage, the minimum wage, welfare and higher taxes.
The most audacious rightwing opinion piece published recently is Damien Grant’s Herald column from yesterday, Go softer on tax cheats – they are society's contributors. He makes the case for greater veneration of the wealthy – including those who cheat on tax – and for an appreciation that the rich contribute more to society than the poor.
The response has been strong on Twitter – see my blogpost, Top tweets about Damien Grant’s defence of tax cheats. For a considered leftwing response, see Greg Presland’s blogpost Damien Grant thinks tax fraudsters are more worthy than beneficiary fraudsters.
Arguments about the extent of inequality
Who’s to blame for inequality? To determine whether the current Government is guilty of increasing the gap between rich and poor, it first needs to be established whether or not inequality is worsening. Until now, the political left has been winning that argument based on the widespread assumption that inequality is indeed increasing. John Key has recently been fighting back on this, asserting that the Opposition is ‘constantly trying to make the case that inequality is widening, when in fact the official stats don't support that’. Similarly, Radio New Zealand reports the Minister of Finance saying that ‘income inequality is the same under National as it was under the previous Labour-led Government’ – see: English rejects claims inequality worse.
So, who’s right? Labour or National? For the best account of measuring and evaluating inequality, see Pattrick Smellie’s article Gap between rich and poor a muddy margin. This is a very good short history of inequality in New Zealand (largely based on Brian Easton’s Economic inequality in New Zealand: A user’s guide). See also Adam Bennett’s Disputed statistics on income inequality.
Statistician and blogger, Andrew Chen, has also gone through the official information to look at the competing political claims about inequality. His glum conclusion is this: ‘Income Inequality is stable in the long-run. It has not significantly improved or worsened in the long-term, and that is unlikely to change. The National-led Government can't claim a victory here. The Labour-led Opposition can't claim a victory here either. Everyone loses’ – see: Income Inequality – Better or Worse? See also, David Farrar’s Mitchell on income inequality.
For a practical snapshot of the state of inequality in New Zealand, Martyn Bradbury has reproduced a very interesting chart titled ‘How much money do they really earn?’, which compares the incomes of some key occupations against the minimum wage. Backbench MPs are said to earn five times the minimum wage, while the CEO of ANZ apparently earns 146 times the minimum wage – see: This is what inequality looks like in NZ – beneficiaries vs CEOs.
Minimum and Living Wages as a solution for poverty
Using the minimum wage as a solution to poverty is currently being debated internationally, after US President Barack Obama proposed giving the wage rate a significant boost. As always, there are warnings that increases will create ‘disemployment’ – see Eric Crampton’s blogpost, Minimum Wages.
The minimum wage debate could get tricky for the Labour Party, too. Labour has for quite a while differentiated itself from National over its support for a much higher minimum wage. But the Government is due to announce an increase that will see the minimum wage rise to perhaps more than $14 an hour. This leaves Labour’s promise of a $15 minimum wage looking decidedly less radical and different. The problem is that Labour doesn’t have a policy of inflation-adjusting its manifesto promises, and the party has been promising a $15 wage for four years now. Graeme Edgeler (@GraemeEdgeler) has calculated that, based on current trajectories, if National is re-elected this year, it will also implement a $15 minimum wage, like Labour. For more on this see Tova O’Brien’s Minimum wage hike puts pressure on Labour and Briar Marbeck’s Minimum wage debate: $14 an hour 'not fair'.
So, although it might seem that the political parties are worlds apart on issues of inequality, a closer look shows that there are increasing similarities. This is a point well made by the latest Listener editorial, Here’s lookin’ at you, kid. The key part is this: ‘The reality is that left and right are for the first time dangerously close to a new consensus on the key needs of children. Whoever is elected next, paid parental leave will become more generous. Failing schools will get more attention, with more status and pay for some teachers and principals. Families with children will continue to have their incomes supported through tax credits. Rental housing will be subject to stricter health-related criteria. And our most vulnerable children will get extra support, such as free child care’.
At the local government level, there’s been a burst of enthusiasm for introducing the so-called Living Wage of $18.40. The latest authority to consider this is the Christchurch City Council – see Lois Cairns’ Council considers Living Wage. For objections to this, see The Press editorial Complexities of a living wage, and David Farrar’s Will Christchurch City Council join the stupidity?
Debates against increasing taxation
With income redistribution being pushed by the left as a mechanism to combat economic inequality, many on the right are attempting to discredit such arguments. For the most hardline argument against increased taxation, see Rodney Hide’s column Greed behind tax threats.
The efficiency and effectiveness of taxation is also being questioned by members of New Zealand’s elite. For example, according to Radio New Zealand, ‘Dame Rosie Horton says increasing the rate on the wealthy to provide services for lower income New Zealanders would just discourage hard work’ – see: Philanthropist dismisses 'rich tax'.
David Farrar has also lampooned some of the arguments for higher taxes on corporates, pointing to flaws in leftwing arguments that focus on corporate revenues instead of profits – see: Let’s call it a living tax campaign!
There is no doubt that the introduction of a capital gains tax will be a major topic of election debate this year and Geof Nightingale makes a useful contribution to the debate in his opinion piece, We need a capital gains tax – or do we?.
Welfare and poverty
We might also expect to see an increased focus from the political right on state welfare in relation to inequality. The most recent example of this sort of critique is Karl du Fresne’s Benefit meant for downtrodden, not to fund lifestyle choices.
But are beneficiaries really to blame? Leftwing unionist Mike Treen argues that recent Labour and National governments have ‘punitively’ kept genuinely unemployed people off benefits, which both increases inequality and reduces the official statistics on unemployment – see: Billions of dollars stolen from the unemployed. This argument is also well conveyed in Matt McCarten’s column Rose-tinted view cruel fairy tales.
Who should pay for inequality?
Satirist and social commentator Dave Armstrong, has written his weekly newspaper column on a subject that – on the surface – appears to be yet another condemnation of public holiday café surcharges, but it actually goes much deeper than that – see: No justification for coffee surcharges. Armstrong argues that ‘our low-wage economy’ is the problem, and that the state gives huge hand-outs to the rich with its various welfare provisions that effectively subsidise the cost of labour for businesses. This is his argument: ‘The Government also subsidises employers to take on low-paid workers, who also get Working for Families and other forms of welfare. This indirectly makes businesses that pay the minimum wage one of New Zealand’s biggest welfare recipients. If the Government stopped subsidising low-paid workers, I suspect there would strikes in every cafe, hospital, old folks’ home and cleaning company in the country’.
This leads on to today’s must-read item about inequality, welfare and taxation – Colin Espiner’s Scrap Working for Families, raise wages. Espiner surveys many of the issues relating to minimum wages, living wages, welfare and inequality, and comes up with the radical solution of shifting the responsibility for eradicating poverty from the state to the private sector, who he says needs to pay higher wages without state subsidies.
Finally, for a more in-depth discussion of the issues of inequality and its putative solutions, you can listen to Radio New Zealand’s very good 27-minute Insight programme from yesterday: Does the Rich-Poor Divide Matter?
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