Sunday, February 12, 2012

Lindsay Mitchell: The rich are getting poorer and the poor are getting richer

Reinforcing Simon Collins' recent series about income inequality, a NZ Herald editorial contains this statement:
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.
The following table appears in the most recent Ministry of Social Development Household Incomes Survey:



Dear Editor

The NZ Herald has recently devoted a great deal of energy and space to the issue of child poverty and inequality. One editorial contained the statement, "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." 

The official source for poverty measurement, the Ministry of Social Development's Household Incomes Report, shows that using the 'fixed-line after housing costs 60% threshold', the proportion of children in poverty fell from 37 percent in 2001 to 22 percent in 2010. Using the other measure, 'moving-line', the percentage fell from 30 to 25 (with a dip to 22 percent in 2007).

Also ignored regarding income inequality is, "Income inequality peaked in the early 2000s, then fell from 2004 to 2007 as a result of the WFF package, and in 2010 was lower again than in 2007. The lower figures in 2010 compared with 2007 reflect two changes: (a) the recent (2009 to 2010) decline in real incomes for the top two deciles (lower investment returns especially), and (b) a small real gain for lower deciles."

Personally I would favour lower tax rates over the Working For Families programme which produces inefficiencies and disincentives. But the fact remains income inequality has been reducing nationally. It would seem your series is asking readers to believe that Auckland is following a different trend.

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