Social problems linked to wealth gap: study

Inequality raises the likelihood of criminal offending. Photo / Bay of Plenty Times

The greater the gap between rich and poor, the more likely people will grow up a drug user, a criminal, less educated, obese, pregnant while a teenager, even less trusting of others.

That is the main thesis of The Spirit Level: Why More Equal Societies Almost Always Do Better, by British researchers Richard Wilkinson and Kate Pickett, which tracks income inequality against social indicators including health, education and crime.

The topic was the subject of a Victoria University-run forum on inequality last week, which invited academics and Treasury analysts to see whether Professor Wilkinson's ideas resonated with New Zealand data.

The Spirit Level - praised by left-leaning parties - shows Japan as the most equal country in terms of the gap between the richest 20 per cent and the poorest 20 per cent. The US and Singapore bring up the rear.

New Zealand used to rank among the best in the world in terms of income inequality, but the book ranks it 17th in a list of 23 developed countries; less equal than Italy, Israel and Greece but more equal than Australia and the UK.

Treasury senior analyst Ben Gleisner told the forum that income inequality had risen sharply from the mid-80s to the mid-90s, which coincided with the Rogernomics years of neo-liberal economic policies. The trend has reversed slightly since 2000.

He presented several graphs with New Zealand data. As the income gap widened, teenage pregnancy rates, obesity and the imprisonment rate increased. But life expectancy and the rate of secondary school qualifications improved, while the number of homicides dropped (although it spiked last year).

"In some cases there are strong positive relationships, and in some cases it's negative. It's not as universal as Wilkinson's thesis suggests, although we have to be cautious."

A number of factors must be considered when interpreting the results, he said, including:

* The lack of data points for some statistical sets.

* Time lag issues (any effect on life expectancy, for example, could take decades to show up in data).

A cause and effect view, therefore, was difficult to prove, which is one of the criticisms of the book. Others have challenged Professor Wilkinson's data and the countries he included, and used different countries to show different conclusions.

Professor Wilkinson has defended his thesis. Unexpected results for health data - suggesting, for example, greater inequality leads to longer life expectancy, for example - had to be viewed across countries, rather than within a country.

Public health Professor Philippa Howden-Chapman, from Otago University, showed that NZ's infant mortality rate before the mid-1980s was comparable to Denmark, but was now almost twice as high as Denmark.

She also presented data on the change in hospitalisation rates due to close contact infectious diseases.

"The period when our income inequality started to rise very rapidly ... there's a strong association with the way this terrible disease [meningococcal disease] took off in New Zealand. It should not occur in a developed country."

Professor Howden-Chapman suggested that the rise was related to families becoming poorer and moving into smaller and more crowded housing.

Forum chair Jonathan Boston, the director of Victoria University's Institute of Policy Studies, said there was enough evidence to support the general thesis in The Spirit Level.

"My personal view is that we can have some confidence that more equal societies - other things being equal - have better social outcomes across a range of measures. It may not be absolutely conclusive, but I think it's reasonably persuasive."

Policies tackling unemployment and lifting wages would lead to greater income equality - but that was not easy to achieve. Working For Families had made an impact, not only with assistance but also in bringing sole parents into the workforce.

"To put in place the sorts of policy measures that were likely over time to reduce inequality, one would need a very strong political consensus that that was desirable," he said.

"At the moment there is no such consensus."

Mr Gleisner said the overall picture was not as clear as the book suggests. His data used household income, but different income definitions - individual income or final income (taking government services into account) - yielded different results.

Equality issues are also complicated; two households on the same income are not as equally wealthy if, for example, one has more occupants than the other.

He did not say that Professor Wilkinson had cherry-picked his data, but rather that more data was needed to have more robust results.

Mr Gleisner said he would like to see more work on wealth inequality, which includes assets and financial liability.

"We talk a lot about income inequality, but its wealth inequality that's the main issue. Half of the population doesn't have any wealth.

"For income, the top decile (top 10 per cent of income earners) has 25 per cent of the total income, but the top decile [for wealth] has about half of the wealth, and the next has a third.

"One of the issues I'd like to see more work on is persistent income deprivation, the people stuck at the bottom and can't move."

How equal?

Best:
Japan
Finland
Norway
Sweden
Denmark

Worst:
New Zealand
Australia
UK
Portugal
USA
Singapore

- Source: UN development programme