Sunday, 4 September 2011

Income Inequality Increasing

National’s strategy to lift us out of recession is creating high unemployment, low wages, few jobs, and no vision of a future that might lift our spirits. Labour will lift businesses, families and workers out of recession as we have done before.

Sadly since the current Government has been in office the number of families who can’t make ends meet on their income has increased and the number of families that need to go to a food bank continues to increase.

Last week I was invited to Super Grans in Masterton with Labour leader Phil Goff. We both were impressed at the dedication of the women we saw teaching young people how to prepare a nutritious meal from a food bank parcel.

The Salvation Army says it gave about 35,000 food parcels in the first six months of this year, compared to 53,000 for the whole of last year. Every week I am out listening to people in the Wairarapa and I continually hear stories of families below the poverty line desperately seeking help. The facts are out there on the streets, and at the social services agencies who are at the front-line in helping those most in need.

This reliance on the food bank to make ends meet also accompanies a growth in inequality between those who have grown in wealth and those who now have less. Inequality reduced from 2001 under Labour and continued to reduce throughout Labour’s last term, mainly as the result of Working for Families, but it’s returned sharply since the end of last year. A change of government has seen policy veer sharply away from active redistribution and the recent changes to income tax have favoured the better off.

The wealth of the 150 richest people in New Zealand increased by more than $7 billion last year, and every one of these people got at least a thousand dollars a week in tax cuts. The truth is that a small number of New Zealanders hold 50 per cent of our total wealth.

Massive income inequality was a factor in the great depression and was also a principal feature leading to the financial collapse of 2008. The high level of inequality created the opportunities that made it possible for many to get rich. They made decisions that they knew or should have known were dangerous and destructive to their institutions and the economy, and of course to themselves once the crash happened.

When the fruits of growth in productivity go disproportionately to a small part of the population, the result can only be disaster. In 1914, Henry Ford of Ford Motors doubled the wages he was paying to $5 (US) a day. He said he wanted his workers to be able to afford the cars they were making. He saw them as part of the population Ford was selling to. Today any company can make more profit by driving down the wages they pay but the result is economic disaster – and it is one which I see reflected in the Wairarapa electorate – the lowest paid electorate in the country. The trouble is that the workers of the Wairarapa are also the purchasers and consumers of the Wairarapa. They are the heart of the local economy.

High levels of inequality mean an increase in poverty and growing health and social problems - worsening mental health, a rise in addictions, obesity, teenage pregnancies, higher imprisonment, less trust, more murders and violence, worse social mobility, and the list goes on.

Professor of Public Health Philippa Howden-Chapman, from Otago University, recently showed that New Zealand's infant mortality rate before the mid-1980s was comparable to Denmark, but was now almost twice as high as Denmark. This is linked to inequality. As Professor Howden-Chapman says, "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."

Labour is working hard to correct the imbalance created by National. Borrowing millions each week to fund tax-cuts, the bulk of which go to the top 10 percent of income earners in a recession is madness. Our undertaking to remove the tax on fresh fruit and vegetables is not just about lowering food costs. It’s about healthy food. It’s about good quality school lunches. It is part of Labour’s wider programme of support for families with young children.

The promise to make the first $100 of income each week tax free is also one part of a wider programme – some of which can be seen in the announced plan for a tax on capital gains. There will be a shift away from National’s tax benefits for the top elite. Income above $150,000 a year will be taxed at 39%.

Increasing the minimum wage to $15 has huge implications for our economy. It is a simple and obvious move which has a major effect on the local economy of every town in the Wairarapa electorate. $15 an hour is still close to the poverty borderline but the effect is not just on the wage earner, but also on the local economy. Small businesses are going broke because customers don’t have the money to spend. Any wage increase can lead on to an economy that supports jobs and growth.

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