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The Wealth-Gap Tower

The Inequality Tower is one of Toby Morris’s illustrative musings on life and politics published by the The Wireless. The tiers in the Inequality Tower, an apartment block, are a great visual metaphor, one that Max Rashbrooke, author of Inequality: A New Zealand Crisis, talked about with Toby.

To carry the analogy a little further (although alas, I don’t have the graphic design skills to do it justice!)….

  • Inequality needs to also be put into a global context. Globally, trade has reduced inequality between countries. Living conditions between apartment blocks are becoming more equal. See Eric and Jenesa’s report on the Case for Economic Growth for more.
  • Check out Hans Rosling, the super geeky (meant in the nicest way – like geek is the new chic kind of thing) passionate Swedish statistician and his incredible gapminder site. Rosling’s Magic Washing Machine shows how economic growth pulls people out of poverty and improves living conditions. 50 years ago, maybe only the rich guy in the penthouse could afford a washing machine. Now, even those in the bottom level have washing machines. The bottom 50% might be poorer, relative to the guy in the penthouse today, compared with 50 years ago, but they are not absolutely poorer. Toby’s graphs indeed show that the rich have gotten richer but the poor haven’t gotten poorer since the 1980s.
  • Toby says that the poorest 50% have a “pretty bleak future” but that’s not quite substantiated. Bryan Perry’s work shows that of those who were in socio-economic deciles 1-3 in the year 2002, a quarter had moved into deciles 4-5, and another quarter into 6-10, by 2008.  So, of those who lived in the bottom third of the apartment building in 2002, six years later, half of them had moved up.
  • Not everyone gets out of poverty. There is one argument that inter-generational welfare dependency has entrenched people into poverty.  Welfare should be a safety net for sure, for those falling from floors above, but it can become a sticky web.
  • Systemic issues in education are also a big issue that prevent kids growing up on the ground floor from having good life opportunities. School zoning might exacerbate inequality, because the costs of schooling are capitalised into property. People who have the money can pay for the penthouse because there are weird zones in place that mean people who own penthouses are allowed into the best schools and those in the bottom aren’t. That is terribly, terribly unfair. Double the rate of Maori and Pacific families don’t get their first school of choice.
  • And, lastly housing unaffordability is “a substantial part of New Zealand’s child poverty problem” as Eric argues here. As housing costs increase, those on the ground floor pay increasingly more of their income, proportionately, on housing.  Luke, Jason, and Khyaati’s work shows that Auckland’s housing crisis is caused by artificial constraints in the supply of housing. In other words, the cost of renting the bottom floor of the apartment block is artificially high, because there aren’t enough apartment buildings for people to live in (when the supply of something goes down, the price goes up). Jason and Bryce are starting new research looking at how to fix council incentives for development.

Jenesa and Bryce are starting work on poverty, inequality and welfare soon. Toby says we need to start fixing these problems. Couldn’t agree more.

One more little note. Toby makes a cheeky reference to yachting and rich people. Couldn’t help but think about Luke’s article asking why the government supports a rich man’s sport? Is it right that people at all levels in the apartment block, through their taxes, pay for entertainment for the guy in the penthouse?

1 Comment on The Wealth-Gap Tower

  1. School zoning:

    I grew up in a ‘high end’ school in Napier, Bluff Hill. I didn’t like it at all. Nasty, asshole kids – and cold, deeply stupid and self-righteous teachers (often – not always!). But I always appreciated not having to go to the poor-peoples school on the flat, Port school, because it was filled with disturbed kids some of whom were truly scary and off their nut. Port school was on another level again.

    There is a lot to be said for “zoning” kids who are serious child abuse victims away from the other kids. Other kids just don’t need that. But zoning is a crude mechanism…and indeed, often very unfair. What we need is freedom of association, so that kids have the power to simply isolate themselves from other kids that are just horrible.

    And what breathtaking arrogance, really, for the government to think it has the right to choose your company for you – and dictate how and when and where your kids will learn.


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