New Zealand’s income inequality problem

10 April 2014

If you’re 35 or younger, the New Zealand you grew up is in many ways remarkably different to people older than you. One of the most profound differences is in the degree of income inequality.

Over the last three decades New Zealand there has been a step change in inequality — we’ve gone from being one of the most equal to one of the most unequal countries in the developed world.

Our income inequality increased very rapidly in the late 1980s and ’90s — faster in fact than in any other wealthy country. Since then the rest of the world has caught up with us. Over these decades a big gap between rich and poor has opened up.

Over that time we’ve seen:

  • The top incomes double

  • The bottom half of incomes barely changed

  • The current trend shows no sign that this ‘step change’ to inequality will be reversed

How did this happen?

  • Tax cuts gave big breaks to higher income earners

  • Welfare benefit cuts of up to 20% reduced incomes for New Zealand’s poorest

  • Changes to employment law weakened the bargaining power of low-paid workers so they found it harder to win pay increases

  • Rising unemployment means fewer people earning wages and more people reliant on much lower welfare benefits

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