Why does inequality matter?The effects of a corrosive force

The rich and the rest

1984 1986 1988 1990 1992 1994 1996 1998 2001 2004 2007 2009 2010 20110

50000

100000

150000

200000

250000

300000

350000

400000

Bottom 10%MiddleTop 10%Top 1%

Annual income

in $

World famous … for inequalityHardly an egalitarian country• Once among the most equal rich countries• From the mid-80s to the mid-2000s, rich

world’s biggest rise in rich-poor gap• Now in the bottom third of the OECD• For wealth, the top 1% own three times as

much as the bottom half put together• Maori and Pacific peoples have twice the

Pakeha poverty rate, and greater inequality

Inequality: the corrosive forceAs people live apart, they think apart

• Lives (right from the outset) become increasingly segregated

• Democracy suffers • Trust declines• Community involvement falls

away• Bonds and ties are eroded

Corroding health and wellbeingMore equal societies are better for most

Corroding politicsMoney well spent for the 1%

“Actual policy outcomes strongly reflect the preferences of the most affluent but bear virtually no relationship to the preferences of poor or middle-class Americans. The vast discrepancy … stands in sharp contrast to the ideal of political equality that Americans hold dear…. representational biases of this magnitude call into question the very democratic character of our society” – Martin Gilens

Corroding opportunityWant the US dream? Go to Denmark

Corroding the economyNot ‘necessary’, despite the claims

• Over the long term, more equal societies have better growth rates and are more productive

• So inequality at current levels is not defensible economically

• In fact it’s damaging to the economy• Especially to opportunity, and in the

longterm

Cause 1: Inequality for workersWhere did all the money go?

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20110.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

• Bargaining power falls at the low end

• Financial power rises at the top end

• The balance shifts

Average hourly wages since 1990

Cause 2: Inequality for allTax, welfare and employment changes

• Huge rise in number of unemployed• Benefits have been cut sharply• Flat rate GST has been increased (while

top tax rates have been cut)• Overall the welfare system does much

less to support people who are unemployed than it did in the 1980s

Further information…In the book and on inequality.org.nz

So what can be done?Some ideas for unions to consider

• We need to think about ‘predistribution’ and where inequality originates

• The things that shape the rewards for those contributions

• Within existing firms: the Living Wage, pay ratios, worker voice

• Changing firms: worker co-operatives