Working Towards a Fairer New Zealand

Many of us believe Aotearoa New Zealand is a fair country, where every member of society has easy access to education, health, employment opportunities and a safe place to live.  Unfortunately, for a growing segment of society, the opposite is true.  New Zealand is a “world leader” in growth in income inequality.  We have gone from being one of the most equal countries to one of the most unequal in the OECD within two decades.  While productivity rose 48% from 1990 to 2010, the average wage rose only 18%.  While our adult minimum wage earners get $27,000 per year, the average annual pay of the heads of New Zealand’s listed companies was $1.6 million (NZ Herald April 2011) and the average CEO salary in 2008 was $690,000. So, we’re not looking that fair after all.

The evidence is very strong that reducing income inequality is a key contributor to improving our health, our wellbeing and our economy. It is not the only contributor, but the experience of past decades is that without reducing economic inequality, it is much harder or indeed almost impossible to improve many of our health and social outcomes. But we need to be fair in our approach too.  We do not want to penalise people or businesses that are doing well – we need them to continue to do so in the interest of building a better country.  We don’t want to leave everyone else behind, either. 

These are a few ways that we can respond: 

• Restraint – choosing as business, local & central government and other organisations to restrain the growth in difference between highest and lowest paid and working on changing our attitudes to inequality.
• Regulation - passing legislation and regulations to raise the lowest wages and restrain the highest pay levels.
• Redistribution – using the tax system to share income and wealth more fairly.

Leaders in business can take the lead by showing restraint and transparency in setting remuneration for directors, executives and senior management. In Japan, it has proved possible for businesses to be highly successful while maintaining comparatively low differentials between highest and lowest paid employees.  Organisations could explore using ratios in setting pay scales, to ensure that the lowest paid are not left behind as executive pay increases.

The effectiveness of increased employment in reducing income inequality is conditional on there being sufficient employment opportunities at rates of pay that actually do increase household income. Businesses could help by really aiming to raise pay levels for the lower paid and offering them opportunities for further training and education. Supporting people on the margins of the employment market, such as people with disabilities, young people without qualifications or people leaving prison, will help overcome barriers to improving incomes and life chances. Being flexible in models of work will help those with family or carer responsibilities, and supporting employees to organise and bargain collectively helps achieve fairness and transparency in employment conditions.

A fairer country is better for all of us regardless of how wealthy we are, because it means we are all better off.  If we all do our part, we can turn our country into one that is known as a world leader in equality instead.