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Why are so many of us struggling financially?

Is it right that the top ten percent of our population own just over half of the wealth in New Zealand, while the bottom ten percent own nothing at all?

Well unfortunately, I learned that this is in fact the case, when I watched a documentary that aired on Channel 3 in 2013. ‘Mind the Gap’ was made by award winning documentary maker Bryan Bruce and outlines why he thinks the gap between the rich and poor in our country is increasing. As I watched, I couldn’t find myself disagreeing with what he was saying and to be honest, by the time the programme had finished I felt quite angry that we have allowed this to happen.

So what were things like?

In the 1950’s it was entirely possible for one parent to be working, while the other parent raised the family, plus the family could buy a house. How many of us can do this today? I suspect the answer is not many? Back in the 50’s our class structure looked a little like this; there were virtually no unemployed, there was a large working class, a reasonably sized middle class and a small upper class. The more money you earned, the more tax you paid – up to 66%! The money in the economy flowed down from the wealthy to the not so well off.

…and what are things like now?

Nowadays, we have a large group of unemployed poor and working poor whose incomes are topped up by billions of dollars, paid for through taxes by what was once the middle class, but is now the struggling class, while profits from rents and consumer items go into the pockets of the wealthiest ten percent. In other words, instead of the money trickling down from the wealthy to the less well off, money is flowing up from the not so well off to the rich. The struggling class are subsidising the low wages paid by employers through the Working for Families benefit ($2 billion per year) and are also off-setting inflated rents by paying landlords the Accommodation Supplement ($1 billion per year).

Neo-liberal economic thinking

In my humble opinion there are certain things that have gone on politically and economically that make me ashamed of how we treat the poor and vulnerable among us. So where did it all start to go wrong? In my opinion it was the introduction of the neoliberal economic policies in the 1980s that we are still living with today.

Do terms like free trade, privatisation, de-regulation, tax breaks for the wealthy, and trickle-down effect sound familiar to you? They are all hall marks of a neo-liberal economic way of thinking and the reason that these terms sound familiar is because it is a neo-liberal philosophy that New Zealand governments have embraced for the last 30 years. In my opinion the philosophy of neo-liberalism is flawed because it allows the rich to get richer, the poor to get poorer, our countries assets to be sold, in addition to the costs for food, rents and utilities sky rocketing. Is it right that many of our children need to be fed at school, that thousands of us seek assistance from food banks, or that according to a recent University of Otago study 34,000 people suffer “severe housing deprivation”?

Why change and how?

If New Zealand could become a ‘we’ society instead of a ‘me’ society again, where we looked after our needy and vulnerable citizens it would be a better place for us all. I believe crime would drop, people would generally be happier, and education and general health would improve. This could only be a good thing.

If you agree with any of the above and want to help change New Zealand for the better then you need to use your vote in next year’s general election. Look for candidates whose policies include the wealthy having to pay more tax and increasing social spending.

If you are interested in learning more you can watch ‘Mind the Gap’ here:  www.youtube.com/watch?v=__2EdGFdgTA . Bryan Bruce also has a Facebook page that is well worth a look:  www.facebook.com/www.redsky.tv . My thanks go to Bryan for allowing me to use his material for this article.

4 replies
  1. Mike Lowe
    Mike Lowe says:

    Admirable sentiments, Andrew, but not feasible. You probably already know that the high income earners already pay way way more than the appropriate share of the tax take. And there are so few of them, in relation to lower income earners, that even a huge increase in their tax payments would offer little relief to the much larger number of lower paid folk. Also, in case you had not noticed it, our society already makes massive payments via WINZ to the more needy members of society (as well as those who are not so needy but know how to work the system). In my experience, the majority of budgeting clients are those who failed to seek budgeting advice when they first needed it, but continued to borrow from every gullible creditor until the well ran dry. Then, in desperation, seek help! But by then it is often far too late for any practicable solution except, maybe, an N.A.P. What we really need is for WINZ to be more proactive in insisting that every beneficiary who seeks assistance is compelled to seek and accept budgeting advice BEFORE any extra money is provided.

    Reply
  2. Andrew
    Andrew says:

    Thanks for your thoughts Mike, I appreciate your feedback. Why do you say that the high income earners already pay way more than the appropriate share of the tax take? Don’t forget the top 10% own half of the wealth in New Zealand, so in my opinion it doesn’t really matter if ‘there are so few of them’. They are on the same top tax rate as someone who earns $70000. New Zealand went through a major program of tax reform in the 1980′s. The top marginal rate of income tax was reduced from 66% to 33% (changed to 39% in April 2000, 38% in April 2009 and 33% on 1 October 2010) and corporate income tax rate from 48% to 33% (changed to 30% in 2008 and to 28% on 1 October 2010). Even back in the 80′s the wealthy seemed wealthy enough to me. How much wealth does an individual need to horde anyway? To me the rich seem to keep getting richer and the poor just keep getting poorer.

    I agree that we make payments (from our taxes) to support our poor and vulnerable which is great, but I do question whether we should make payments through the Work and Income Accommodation Supplement and the Working for Families scheme. Surely these payments just drive rents up and wages down, and who benefits from that? Employers and landlords, not the needy that we initially intended the money to benefit. If all workers where paid a wage by their employer that can be lived off, then all this wouldn’t be so necessary would it? I think it is wrong that a single income family on the minimum wage cannot financially survive anymore.

    And definitely I agree with you that people need to see a budget adviser when they first become aware that there may be problems looming! There is certainly a lot more an adviser can do before a disaster, rather than after.

    Reply
  3. Anne Donaldson
    Anne Donaldson says:

    This is a very relevant discussion topic Andrew and indicative of what is happening on a global scale.

    As you mentioned, we must all do our homework on the politicians we choose to vote for, with regards their vision for closing this unacceptable gap to benefit future generations.

    Cheers Anne

    Reply

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