Poorest 10%Middle

Richest 10%

Richest 1%

Ann

ual i

ncom

e ($

)Inequality of income

0

100,000

200,000

300,000

400,000

1982 1984 1986 1988 1990 1992 1994 1996 1998 2001 2004 2007 2010 2011 2012 2013

Average income increase, 2009-14, different groups

0.0%

2.5%

5.0%

7.5%

10.0%

2nd tenth 3rd tenth 4th tenth 5th tenth 6th tenth 7th tenth 8th tenth 9th tenth Richest tenth

The last few years

Inequality of wealth

The rise, fall and rise of the 1%Sh

are

of n

atio

nal i

ncom

ego

ing

to th

e to

p 1% USA

UK

Canada

Australia

NZ

1920 1950 1980 2010

5%

10%

15%

20%

The World Bank The IMF The OECD The US president The Pope

Who’s worried?

Opportunity

A complex picture, but … IMF, February 2014: Over the long term,

more equal societies have better growth rates and are more productive

OECD, November 2014: Inequality has reduced NZ growth by 1/3

Reasons: stability, human capital, etc.

The Economy

As income gaps widen,so do the gaps in people’s everyday lives

Trust declines Community involvement withers Bonds, ties and cohesion are all

diminished or weakened

Social cohesion

Not globalisation per se: had "little impact" Technological progress: hollowed out workforce

80s/90s reforms Changing nature of work and power

Changing family structures Tax and benefit systems

What’s causing this?

Individual effort matters, of course. But… Think about the speed of change

Degree premiums etc Hard work ethos

Little evidence of change in upper-end ability

Individuals and education

Cause 1: Inequality in workReal average wage and GDP per capita

December 2013 dollars

0.00

8.75

17.50

26.25

35.00

0

12,500

25,000

37,500

50,000

1961

1962

1964

1966

1968

1969

1971

1973

1975

1976

1978

1980

1982

1983

1985

1987

1989

1990

1992

1994

1996

1997

1999

2001

2003

2004

2006

2008

2010

2011

2013

2015

Real average hourly wage including overtime (Left scale) Dec13$Real GDP per capita (December 2013 $ - Right scale)

IMF, August 2015: “ The erosion of labor market institutions is associated with the rise of income inequality…the decline in unionization is related to the rise of top income shares”

Benefits cut sharply Top tax rate halved

Working for Families Overall the welfare system does much less to

close up the gaps than it did in the 1980s

Cause 2: Inequality for all

Cause 3: Wealthy vs non-wealthy

From the Left Boosting skills/vocational training

Workplace issues: Living Wage, collective bargaining pay ratios, etc

Redistribution: taxes, benefits and the UBI

Competing agendas

From the Right Boosting skills/vocational training

Early years investment Wealth: CGT, housing

Workplace issues: ESOPs – and beyond? Indexation or a UBI?

Competing agendas

The debate: inequality.org.nz

In bookstores or at www.bwb.co.nz/books/inequality

The books