All Things Being Equal

NZ Listener, May 1-7 2010 Vol 223 No 3651
Cover Story: “All Things Being Equal”
by Staff Writers

NOTE: Subheadings and emphases added by this blogger.

New Zealanders once prided themselves on being an egalitarian society, but research shows we not only tolerate increasing income disparity but appear to welcome it.

Massey University professor of marketing Philip Gendall has been tracking attitudes to social inequality for 20 years as part of the International Social Survey Programme. And what he has found surprises him.

In 1992, 70% of respondents to the survey said income differences in New Zealand were too large. By the most recent survey, that had fallen to 60%, even though New Zealand has become more unequal over that time. This comes at a time when figures show New Zealand is seventh in the OECD for income inequality, just a nose ahead of the United Kingdom with its entrenched class system.

Inequality rising everywhere, especially here

In the Western world, inequality rose everywhere in the last couple of decades of the 20th century, but in New Zealand it rose the fastest.

And although we may have recoiled from excessive salaries and ostentatious displays of wealth during the global recession, responses Gendall has collated suggest we are putting more emphasis on personal aspiration and responsibility, and less on collective well-being and ­support from the state.

For example, respondents were also asked whether it was the Government’s job to reduce income differences between people. Back in 1992 more than half said yes. But more recently, that figure has also fallen: a majority no longer think it’s up to the Government to do this.

Perceptions have also changed about what pay should be based on. Both now and a couple of decades ago, New Zealanders agreed that performance, how hard people worked and the responsibility they shouldered were the most important factors in determining what they should be paid. But 20 years ago, more New Zealanders believed that workers’ pay should also be influenced by the cost of supporting a family, or whether they had children. Those beliefs have dropped away sharply (see table next page).

Individualism replacing Collectivism

Jill Caldwell, an expert in plotting social trends, believes we are seeing “a fundamental shift” in values. “There’s a really big cultural change emerging piece by piece that will potentially change our inter-relationships quite dramatically.”

Caldwell, director of research company Windshift and co-author of 8 Tribes: The Hidden Classes of New Zealand, thinks the change is partly because of the dwindling of the World War II generation, who grew up in times of much greater equality and accepted that society was a joint rather than individualistic enterprise.

“If you go back to 1991, the year of Ruth Richardson’s Mother of All Budgets, people really felt the Government had tipped them out of the nest, like little birds. People felt the Government ought to take a strong role in managing risk, managing inequality and making bad things go away.

“Now what you see is less and less of a belief there is a role for the Government as a backup, to address the inequalities or do anything at all. People have become very individualistic. There’s a much stronger sense now that we can look after ourselves. It’s a bit Darwinian in a way.”

Kiwis have become used to the idea of managing risk, with dual-income households to smooth the risk people might lose their jobs, and lots of debt to smooth out other bumps along the way. And for younger people, that sense of individual responsibility is particularly keen.

“People under 35-45 just feel so much more able to make their own way in the world and that they shouldn’t ask for help,” says Caldwell. “When you talk to people under 25, they can’t believe that Telecom was started by the Government. It had to be started by some guy. They just don’t have a sense of the collective enterprise of a country. They just think everything is about what an individual can do.”

Just a Utopian Folk Memory?

Gendall has noticed another big change and it’s in attitudes to tax, something that might give heart to the Government with its plans for tax reforms in the upcoming Budget. More people are becoming sympathetic to every­one paying the same proportion of their income in tax – in other words a flat tax. In 1992 almost three out of four backed New Zealand’s progressive tax system, agreeing with the statement that people on higher incomes should pay a greater share of their income in tax. But by last year, only half said yes.

“We seem to have lost some of the egalitarianism we used to have,” says Gendall. “Maybe we have taken on a version of the American Dream, that people accept the economic changes because they see it as a chance for them personally to progress. They want to be part of the top group.”

He says his survey – returned in the mail by about 1000 people out of a random sample of 2000, is likely to have a bias towards the middle class and therefore may miss out on those further down the social spectrum who may have stronger concerns about inequality. He says one striking feature of his results is that the elderly are more opposed to in­equality than those in younger age groups, suggesting a generational change is occurring.

Don MacRaild, a research professor who taught at Victoria University in the early 2000s, says if New Zealanders no longer care about egalitarianism, something has changed “at the pith of New Zealand society …

“The idea that New Zealanders forged this new and equal society in the South Seas, the idea of a utopian dimension to New Zealand history and culture, is a very important part of folk memory for New Zealanders.”

And although there are caveats, particularly for Maori and women, New Zealand historically was genuinely much more equal than other places in the English-speaking world, says MacRaild, now at the University of Northumbria’s Department of History. “I would rather have been a working man in 1890s New Zealand than 1890s Britain, or 1950s New Zealand than 1950s Britain.”

But he also believes that New Zealanders still find it too easy to mistake being small with being egalitarian.

New Zealanders are not alone in claiming egalitarianism as a national trait. Australian National University professor of history Melanie Nolan points out in The New Oxford History of New Zealand, published last year, that the ease with which people could move through social classes in democratic frontier countries – such as the US, Australia and New Zealand – seemed to promote political stability.

Of course, communist countries might also argue they are, or were, egalitarian, although socialism by edict is far removed from concepts of social mobility. Many of New Zealand’s early British migrants wanted to shuck off the class system not because they wanted to be like everyone else, but because it operated like the ­so-called glass ceiling of today.

MacRaild thinks part of the key to historical equality in New Zealand was not simply government-imposed measures like wage arbitration, which tried to create fairness around pay, but also that New Zealand had cheap food prices, which allowed most people to have a good-quality, if relatively simple, lifestyle.

However, those caveats on exactly how egalitarian we were are important.

“None of it applied to Maori, who lived in poverty, lacked education and tended to be rural until forced urbanisation in the 1950s allowed them to benefit from societal features like healthcare and education. However, we know that also resulted in a cultural loss.

“Also, women, generally speaking, were historically not working as much in New Zealand as they were in some other places, so if you were a woman and/or Maori, then the wage-based egalitarian system didn’t apply to you.”

Nolan says inequality did not suddenly appear in New Zealand in the 20th century, but “there has been a trend since the 1970s of rising inequality, with the rich and new mega-rich getting richer. The poor aren’t getting poorer – the rich are just getting richer.”

However, Nolan points out that the proportions of wealth owned by the rich and very rich are similar now to what they were in the 1920s, after which the gap narrowed before widening again.

She says part of the problem in discussing egalitarianism is defining it. “Sometimes historians have taken it to mean early and universal political equality, and equality of opportunity, rather than everyone ending up with the same share economically.”

MacRaild says the trend for the rich to get richer – even though it’s a move away from equality – is not necessarily unfair. And in the “jet age”, global comparisons also become important.

“If you don’t pay your top people well, they will just go to Australia and work for the same bank, but for about three times as much money. The electrician will go to Brisbane, rather than stay in Wellington, and so on.”

But the wage gap will also mean some features of Kiwi life, like doing your “OE” or having an overseas family holiday, will be closed off to those on modest incomes, he says. Average income ­earners, with three children, could probably not afford to take a family holiday to the UK, for example. But it would not cost the equivalent percentage of average UK salaries for a British couple with three children to have a similar holiday in New Zealand.

Glitches, Democratisers, Decline in Compassion

MacRaild says home ownership could become another concern around a loss of egalitarianism. “When I was in New Zealand, people could borrow stupid amounts of money in relation to salary, and they had to if they wanted to own their own homes. There is a real problem there.”

Chris Brown, who co-authored 8 Tribes with Caldwell, also identifies home owner­ship as a possible glitch in New Zealand’s egalitarian beliefs, especially for the generation in their twenties, many of whom will struggle, at current rates of unaffordability, to own their own homes.

However, he thinks our society is represented in the media as being increasingly egalitarian, rather than less. “It’s in celebrity culture where people with incomes and lifestyles far beyond our own are presented to us by the media as people who are just like us, and we buy into it. So I see Brad Pitt’s gone back to Angelina and I think, ‘Yeah, I’ve been having a struggle with my missus, too.’

“The absurd worship of celebrities is the deification of the individual at the centre of society, which is what egalitarianism is, essentially. But it’s almost like we’ve taken it too far, so it’s no longer about being equal. It’s about an entitlement, as an individual, to aspire to live a life as good as anyone else’s.”

Brown says social networking via the internet, using such things as Facebook, has also been a great democratiser. “It’s completely flattened out so many of the old social barriers that used to separate us.”

A lot of the 8 Tribes material came out of Brown’s experience as a pupil at Christchurch’s Burnside High School, whose catchment area encompassed state housing, the edge of exclusive Fendalton and newly wealthy suburbs. “But the dominant culture was egalitarianism and the belief that no one was better than anyone else.

“There was a school jubilee at Easter and there were Prime Minister John Key and Air New Zealand’s Rob Fyfe, who were both old boys, and you think maybe there was something in that egalitarianism at school after all. The cultural things we learned there equipped us pretty well for public life in this modern world.”

As income inequalities have widened, Caldwell’s focus group research has found New Zealanders becoming less curious about others. “People have become more and more myopic. People have less and less opinion about things that don’t directly concern them.”

During the prosperous last decade of the 20th century, Caldwell noticed a decline in concern for our fellow citizens. She saw an echo of John Kenneth Galbraith’s observation that in times of affluence, we become less compassionate.

John Key: Poster Boy for Rogernomics

In these times, John Key is a powerful symbol of the new values elevating wealth and individual achievement. His rags-to-riches life story has provided a base for phenomenal political popularity, blindsiding the Opposition. Labour thought his $9 million Parnell home and the Hawaiian condo would be political liabilities. Instead, they have only added to his appeal. “He’s the right man for the times. Helen [Clark] was lucky she lasted so long,” says Caldwell.

Stephen Mills, a long-time pollster for the Labour Party and managing director New Zealand of UMR Research, says inequality used to surface as a concern in polling much more frequently during the Rogernomics era. “It was a more intense issue.” These days, he thinks people would say they are concerned about the rich getting richer and the poor getting poorer, “but it doesn’t emerge as a theme that people are angry about, or are concerned about … It’s not something that’s driving politics at all.”

So how does New Zealand compare internationally in the inequality stakes? The New Zealand Institute think-tank recently gave the country a D for inequality in its report card on the nation’s well-being, saying: “Despite any perception New Zealanders may have of their country as fundamentally egalitarian, all but six of the OECD countries are more equal in terms of income distribution … Poverty is always undesirable in a society, whereas some inequality can be bene­ficial. Inequality can provide incentives to aim higher and work harder. Too much inequality, however, leads to unhappiness, frustration and stress.”

The Institute says New Zealand had a much more equal distribution of income in the 1980s, but this deteriorated rapidly in the 90s. “Most other OECD countries are at a level that New Zealand also once had, and children enjoyed better outcomes at that level.”

A rollercoaster of economic restructuring in the 1980s and 1990s brought the loss of thousands of relatively well-paid jobs for less skilled workers as a result of corporatisation of the railways and the Post Office and the loss of protection for manufacturing. Income distribution also changed as a result of tax and benefit cuts in 1991. Trade unions have been decimated by reforms of labour laws, reducing their ability to protect the wages of ordinary workers.

Philip Gendall, born in 1949, remembers as a young man in the late 1960s entering a world in which “you could get a good job even if you were low-skilled. Everyone seemed much more equal. And if you did have money, you didn’t flaunt it – it would be bad taste.”

Today, not only have jobs for the low-skilled become scarcer and more poorly paid, but the rewards at the top have exploded. In the state sector, 16 chiefs earn more than the Prime Minister’s $393,000, including Ministry of Foreign Affairs and Trade chief ­executive John Allen on $610,000, Ministry of Social Development chief executive Peter Hughes on $560,000, and Treasury secretary John Whitehead, also on $560,000.

Telecom chief executive Paul Reynolds is thought to have earned $7 million last year. And businesses owned by the Crown have also proved lucrative for some. The chief executives of state-owned enterprises Genesis, Meridian, New Zealand Post and Solid Energy each earned more than $1 million in 2008 and, of them, only Meridian’s boss failed to get a pay rise last year.

Over the past 20 years, incomes have risen at all levels of society, but they have risen more at the top. Between 1994 and 2008, those in the bottom 10% of income earners earned an extra $3600 in real terms, while those at the top gained an extra $15,800. Beneficiaries have gone backwards, with benefits lower in real terms than they were in 1991.

Social Impacts

Gaping health inequalities have also become part of the picture. A 2005 Ministry of Health report found life expectancy varied by as much as 28 years between neighbourhoods. In some neighbourhoods, people could expect to die before reaching 65; in others, they could expect to live for more than 90 years. Professor Tony Blakely, head of the Wellington School of Medicine’s health inequalities research programme, says those differences can be explained by a combination of socio­economic and ethnic inequalities, as well as migration from area to area.

In New Zealand, the widening gap between rich and poor has often been accepted as the price we have to pay for rewarding talent and hard work.

But new international thinking suggests that not just those at the bottom are paying the cost. Research by epidemiologists Richard Wilkinson and Kate Pickett say the widening inequalities since the 1980s could be the reason for New Zealand’s growing social and health problems, affecting everything from rates of incarceration to obesity, mental health problems and teenage pregnancy (see story on The Spirit Level on previous page).

Although those at the bottom suffer most from these problems, Wilkinson and Pickett argue that those further up the social scale have higher rates of all these problems than their peers in more equal societies.

Diane Robertson of the Auckland City Mission
says even after the prosperous decade at the start of this century, and a massive redistribution of income under Labour to poorer New Zealanders, poverty and hopelessness is as entrenched as ever for some New Zealanders. She has worked for 30 years in this area, and has reluctantly given up on her hope that one day Auckland City Mission won’t have to give out food parcels. Instead, she has come to accept that a key part of her mission role is to minimise the worst effects of poverty.

She says disadvantage seemed to become entrenched with a large number of people “put on the scrap heap” in the 1980s and 1990s.

“They’re marginalised, excluded from society. I think that we’re still dealing with a group of people who just haven’t come back into the workforce, and haven’t got the skills to come back into the workforce, and they’re living in poverty. That group has maintained its size, probably since 1991, as a proportion of the population.

“They’re people who have had low educational outcomes, they’ve been born to families on benefits, they’ve got poor health outcomes, they socially haven’t been involved, and quite often the prognosis for them, even as young people, is not good.

“If you’ve lived in poverty for 10 years, things just get worse and worse, they don’t get better. Then you get that repetitive, intergenerational cycle. That’s been that group that’s almost been stuck there. They’ve got high levels of debt and low levels of assets, and it’s very hard to break the poverty cycle. It’s not as simple as saying, ‘I’ll just go and get a job.’”

Now, she says, a new group of disadvantaged have joined them – those who have been shucked off in the latest recession.

Attitudes to Poverty

But contrary to other views, she thinks New Zealanders are becoming more concerned about poverty. During the prosperous 2000s, she says, attitudes to the disadvantaged hardened, with the belief that those who couldn’t get a job were bludgers. But now that many more people have lost their jobs, people are feeling more compassionate. Christmas donations were up 10% on the year before.

Unlike some poverty campaigners, Robertson isn’t sure throwing more money at the problem is the solution, saying New Zealand probably cannot afford to spend any more than it’s spending on helping the most marginalised. In fact, she seems slightly flummoxed about what the answer is. “And if there’s no more money, then we need to look at ways of making improvements on the same amount of money that we’ve got, or less.”

But Susan St John of the Child Poverty Action Group says it’s a cop-out to say inequality or poverty can be excused by New Zealand not being a rich nation.

“We have high child poverty, but low poverty for those over 65, so poverty is clearly not inevitable. The principle of egalitarianism needs to be brought to the fore, so that we get fewer ill-advised policies that widen the gap. We used to be proud of the fact that we were egalitarian. But you don’t hear that articulated by any politician as a useful social goal any more.”

Reporting by Ruth Laugesen and Joanne Black.

All content ©2003-2010 APN Holdings NZ Ltd. All rights reserved.

NOTE: Retrieved from here


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