MSD social report 2009: Inequality increased in Labour's last year in office

The Ministry of Social Development has silently released its annual Social Report for 2009 – no doubt attempting to keep the findings under the radar. Likewise, the National Government has refrained from releasing a single press release on it (as yet). As always with the wealth of statistics in such reports, there is the good and the bad to be seized upon, and these things can be spun by the left and the right, and the various partisans in many different ways. I’ll leave Labour and National to give the positive spin on the current stats – and much of the negative material reflects poorly on the past Labour Government, for which the period of this report effectively covers. Instead, this blog post highlight some of the negative material that immediately sticks out from a browse of the report. There is one particular domain within the report that shows serious problems: ‘Economic Standard of Living’. Basically, since the last annual report – and thus during Labour’s last year in office – New Zealand became a less equal society, with increased inequality and greater poverty. [Read more below]

The annual Social Report aims to provide ‘a snapshot of how New Zealanders are faring and monitors social trends over time’. The Ministry of Social Development has put up the 2009 report on the Social Report website, where the whole report can be downloaded as a PDF or the individual sections can be just read online. Also available from the MSD website are a Key Findings fact sheet and a Key summary points by domain.


MSD’s reluctance to celebrate or publicize the report are probably based on Social Development Minister Paula Bennett’s lack of enthusiasm for such exercises. Obviously the very useful Social Report process was set up by the previous administration, and the new government will do things differently. Thus, while the same general framework of the Social Report appears to have remained the same, there’s been some obvious changes of tone and nuance. The new administration seems much less keen to use some key social policy terminology that has been in vogue for the last decade – and hence my word count shows that whereas the 2008 Social Report used the term ‘wellbeing’ 98 times, the new report has cut it right back to only 42 times. Such small changes indicate significant new outlooks.

The report covers ‘43 indicators which span across 10 domains or aspects of peoples’ lives ranging from health to social connectedness’. While I’m sure others will analyse each of these domains, I’m mainly interested in the domain of Economic Standard of Living, for which I have highlighted some details below.

The three most important indicators for Economic Standard of Living, in my view, are income inequality, population with low incomes, and housing affordability.

Income inequality

Income inequality is defined as the ‘extent of disparity between high income and low income households’, and its ‘measured by comparing the incomes of the top 20 per cent of households with the incomes of the bottom 20 per cent’. The latest figures, for 2008, show that ‘the equivalised disposable income of a household at the 80th income percentile was 2.6 times larger than that of a household at the 20th percentile’.

Figure EC2.1 Ratio of the 80th percentile of equivalised disposable household income to the 20th percentile of equivalised disposable household income, 1988–2008

 

Gini coefficients calculations are also used to ‘measure income inequality, with a score of 100 indicating perfect inequality and a score of 0 indicating perfect equality’. The 2009 Social Report shows that the Gini coefficient score increased from 33 in 2007 to 34 in 2008 – signaling increasing inequality during Labour’s last year of office. By contrast, the OECD median is 31. Furthermore, ‘New Zealand’s Gini score was below that of the United States (38), very close to those of the United Kingdom (34) and Ireland (33), a little above Canada and Japan (32), and a little further above that of Australia (30). Denmark and Sweden had the lowest income inequality with Gini scores of 23.66’.


Population with low incomes

According to the Social Report, ‘The proportion of the population with low incomes also provides information about how equitably resources are distributed and how many people are likely to be on incomes that do not allow them to participate fully in society’. This key statistic shows that the proportion of the population on low incomes increased from 13% in 2007 to 14% in 2008 – again during Labour’s last year in office. And as the Social Report significantly states, this ‘proportion was still above what it had been in the 1980s’.

Related to this increase in poverty, the proportion of children in low-income households rose from 16% in 2007 to 20% in 2008.

Housing affordability

Housing became much less affordable during Labour’s last year in office. Here, the indicator is defined as ‘The proportion of households and the proportion of people within households spending more than 30 per cent of their disposable income on housing’. While in 2004, only 21% of households had to spend more than 30% of their income on housing costs, by 2004 this had increased to 26%, and then by 2008 it was 29%. As the report states, ‘Housing costs have a major impact on overall material living standards’.

Figure EC4.1 Proportion of households with housing cost outgoings-to-income ratio greater than 30 per cent, 1988–2008