Roger Partridge: The inequality debate we should be having

New Zealand has a serious inequality problem.

OPINION

The debate about inequality is one of the most impassioned in contemporary politics. It touches on core beliefs about justice, rights and the ideal structure of society.

Important philosophical differences fuel the debate, each stemming from divergent worldviews and principles. Equality of opportunity versus equality of outcome. Individualism versus collectivism. Meritocracy versus structural determinism. The debate spans the gulf between the political left and right and between advocates and opponents of the politics of identity. In an earlier column, I argued that the way the inequality debate has been framed in New Zealand is wrong. And I explained why the narrative about increasing income and wealth inequality is inconsistent with the evidence. The column prompted more feedback than almost any I have written. Unsurprisingly, the feedback revealed strongly diverging views.

In this column, I try to reframe the inequality debate. My goal is to induce violent agreement.

I’ll start by stating that New Zealand does have an inequality problem. It is a serious one. It contributes to poverty. It undermines wellbeing. And it harms social cohesion.

The problem can be described in just three words. Education. Housing. Health. And the issues that plague all three have a common source. Each can be traced back to failings of the state.

Let’s start with education. A high-quality education system is the foundation of social cohesion. Education provides young people with a sense of cultural location. It enables them to obtain better jobs. And it acts as a circuit-breaker on intergenerational poverty and welfare dependency.

Yet our once-world-leading state education system is now barely mediocre. Objective international measures show a two-decade decline in literacy, numeracy and science.

Recent domestic trials of new NCEA standards for literacy and numeracy are also alarming. Only two-thirds of the 14 and 15-year-olds who participated in the trial met the reading standard. Just over half met the numeracy standard, and an abysmal one-third met the writing standard.

Underlying these statistics is evidence suggesting that the New Zealand education system is one of the most unequal in the world.

Recent evidence ranks New Zealand at 33rd out of 38 developed countries for overall educational inequality. A 2019 Government-funded review of the state school system led by educationalist Bali Haque concluded “the current system has failed to address the persistent disparities in educational outcomes”.

And all this despite spending per student having increased in real terms by more than a third over the past two decades.

A succession of reports from The New Zealand Initiative and others suggests the blame for the education system’s failings lies firmly at the feet of the Ministry of Education. For decades, official policy has been dominated by the ministry’s ideological beliefs rather than evidence.

Problems in curriculum, assessment, pedagogy, teacher training and remuneration, incentives and accountability have all contributed.

To address educational inequities, New Zealand needs a national conversation about the education system’s failings – along with politicians brave enough to tackle them.

The housing inequality problem is different – but its consequences are similarly serious.

New Zealand’s housing affordability is among the worst in the world. Most international assessments suggest housing is affordable when the median house price is about three times the median household income. In New Zealand, that multiple is now close to 10.

Unaffordable housing divides the nation into homeowners and those permanently locked out of the housing market; into those who have prospered from rising house prices and those who have not.

This division mars social cohesion, creating an intergenerational divide between the housing haves and have-nots.

As The New Zealand Initiative showed in its 2016 report, The Inequality Paradox, rising housing costs have devastating effects on low-income households.

The report showed that housing costs aside, New Zealand does not have a problem with increasing income inequality. But it revealed that the effects of increasing rent and mortgage costs have been so great that they cancel the benefits of rising incomes in low-income households.

The implications of this are clear. A housing unaffordability crisis exacerbates the country’s poverty challenges and is a big contributor to inequality. Solving the housing crisis is critical to solving both.

As with education, the fault lies firmly with the state. The initiative’s research reveals a combination of planning laws and restrictions on local government funding and infrastructure financing are to blame.

But until politicians accept that successive governments have created the housing market’s inequities, we will not solve them.

Inequality also plagues healthcare – along with problems of productivity and financial sustainability.

Health outcomes are affected by a complex mix of factors. Unsurprisingly, these factors include inequality in housing and education and an array of other social determinants.

Yet inequality in treatment also provides a useful lens for examining our health system’s failings.

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Inequality in treatment arises based on whether patients are suffering from illness or injury (ACC only covers the latter). Or on their geographical location (the so-called postcode lottery). Or on whether they have private healthcare insurance or not.

Health inequality contributes to reduced work capacity among the unwell, exacerbates poverty and decreases productivity. It also breeds mistrust in the system and affects mental and social wellbeing.

It is hard to attribute the cause of New Zealand’s health inequality to the level of spending. New Zealand spends a higher percentage of GDP on healthcare and a higher dollar amount per capita than Singapore. Yet, in international league tables, Singapore consistently ranks as the country with the best-performing healthcare system in the world.

With government spending accounting for around 80 per cent of total healthcare spending, inequality in the provision of healthcare is very largely the responsibility of the state. It is little wonder successive governments – including the current one – have had healthcare reform firmly in their sights.

Unfortunately, a chorus of health experts has expressed doubts that Labour’s health reforms will lead to better health outcomes. The criticisms relate to the structural focus of the reforms when success may require changes to the incentives and accountability mechanisms within the healthcare system.

Like the problems with education and housing, poor health policy choices appear destined to perpetuate the health system’s inequities rather than solve them.

So yes, New Zealand does have an inequality problem. It’s just not a problem with income or wealth. The problem is second-rate state services.

The wealthy and those with high incomes may be able to escape the state’s substandard offering by paying for private education, high-cost housing and private healthcare. But the problem does not stem from their high incomes. And it won’t be solved by wealth taxes or the politics of envy.

It is a problem concocted in Wellington by politicians making poor policy choices.

The sooner we face up to the real problem with inequality, the sooner we can fix it.

By NZ Initiative’s Roger Partridge.