Wednesday, December 17, 2014

Reducing welfare dependence would reduce inequality

Letter to the Hutt News:

Dear Editor

According to Gordon Campbell  a recent  OECD report showed New Zealand's "...economic policies have caused a significant rise in income inequality" (Hutt News, December 16).

Income inequality grew during the late 1980s and early 1990s then levelled off during the 2000s.

Over that period the structure of families, and gender participation in the work force changed significantly. Single parent families headed by females with no or low educational qualifications and/or  work experience increased significantly through to the turn of the century before levelling off over the past few years. Many depend on welfare and consequently form a large share of poor families.

At the same time,  partnered woman increasingly either remained working or returned to work earlier after childbirth.

In a nutshell, there are now more households with one work-less parent, and more households with two working parents. The difference between the the incomes of the  two households is pronounced.

What the OECD report  Campbell refers to said was that, "...active labour market policies, childcare supports and in-work benefits" are needed if increased economic growth is desired. This recognises that children coming out of disadvantaged homes eg unemployed households, need a working parent and better engagement with education from an early age.

The welfare reforms instituted by the National government (and Labour prior with the creation of the In Work Tax Credit) have gone some way to fulfilling this goal but need to go much further. Reducing welfare dependence would contribute enormously to reducing inequality.

Lindsay Mitchell

Figure J.5   Inequality in New Zealand and the OECD trend: the Gini coefficient



Source: http://www.msd.govt.nz/documents/about-msd-and-our-work/publications-resources/monitoring/household-income-report/2014/main-report.doc

6 comments:

Anonymous said...

Reducing welfare dependency is good - and also very very easy: just reduce welfare.

Reducing inequality - on the other hand - is communism.

Lindsay Mitchell said...

Oh BS anon.

Reducing inequality might also be a by-product of (unfettered) free trade and functioning labour markets.

Anonymous said...

Reducing inequality might also be a by-product of (unfettered) free trade and functioning labour markets.

simply not true. Successful economics lead to increasing "inequality". Inequality is not a problem to be solved, and equality is not a goal to be reached. As any mathematical economist - e.g. http://www.math.uvic.ca/faculty/reed/income.2.pdf

That's the #1 lesson of Rogernomics and Ruthanasia - increasing economic success will concomitantly increase inequality: and that this is a good thing.

John B said...

If you want to control people, you need a reason. Inequality comes about naturally through many factors that include talent, effort, luck, good decision-making. If you paint inequality as a bad thing that has to be "cured," then you have a wonderful rationale for controlling the population.

Mike said...

How do you define 'welfare dependence'?

Lindsay Mitchell said...

Welfare dependence is reliance on a benefit.

Long-term welfare dependence is defined as 1+ years by the National government.

When I write about welfare dependence I am thinking about chronic dependence that is due to choice rather than chance.