Editorial: Opportunity - key to a more equal society

A man sleeps outs the shops on Queen Street. Photo / Brett Phibbs

Our series on social inequality in Auckland this week has brought a defensive response from many readers who take a more judgmental view of the poor.

The series largely reflected social research that tends not to question people's personal decisions but concentrates on public policy and statistical outcomes.

When people were asked about their different circumstances, as reporter Simon Collins did, the issues were not as clear cut.

From statistics compiled from the spread of suburban incomes it appears the gap between rich and poor has widened markedly over the past 25 years.

That is the period since the economy was exposed to global competition, income tax rates were lowered, welfare benefits were cut in 1991 and unions were weakened by the Employment Contracts Act.

But it is also a period which saw great social change with the movement of women into the workforce and a consequent rise in living standards. The two-income household became the norm. Couples who lost one income, or split, were likely to be much worse off. Yet it was a period of rising divorce rates too.

It was also a period of great technological change. Computers displaced manual labour in many workplaces and an educational qualification became more essential.

Any answer to poverty cannot afford to ignore the personal decisions people make but it cannot afford to ignore public policy influences either. Many countries also open their economies to the world and took similar competitive measures over the past 25-30 years, but our tax system is said to have been made more lenient than most on those who make money.

Our top rate of 33 per cent is lower than all other nations in the OECD when other income taxes are taken into account. We have no effective tax on capital gains and our GST, a flat tax on all consumers, has few exemptions. Many might welcome those findings in the interests of national competitiveness but there is a social cost in inequality which the country would be foolish to ignore.

Inequality, according to recent researchers, has a cost in economic terms too. They attributed the global financial crisis to lending by those with high savings to those who could not afford the repayments, though it is probably more accurate to blame the parcelling of bad risks with good.

Inequality expresses itself most sadly to doctors and teachers. Regardless of whether poverty has been caused by personal or political decisions, children are its innocent victims. Doctors see high rates of infectious diseases in children from poorly insulated homes that are also overcrowded because rents in Auckland have risen so high. Teachers see children in unwashed clothing, without shoes, and more reading difficulties than are associated with relative poverty in other countries.

The proportion of children in poverty - defined as households with less than 60 per cent of the median income to live on after paying housing costs - has risen from 16 per cent in 1990 to 26 per cent today.

Inequality might be reduced by higher taxes on the well-off, if they could not avoid them, and strengthened union bargaining at a cost to business and employment. But the country has known that sort of equality and it was not satisfied. A better economy may be built by improving opportunities for wealth creation for everyone.