Simon Collins

Simon Collins is the Herald’s social issues reporter.

Divided auckland: Mind the widening gap ... a tale of two cities

Craig Bradley and Carla Bradley with their three sons, Jayden (15 months), Alex (11 months) and Cane (3), at their rented home in Papakura. Photo / Greg bowker
Craig Bradley and Carla Bradley with their three sons, Jayden (15 months), Alex (11 months) and Cane (3), at their rented home in Papakura. Photo / Greg bowker

At this time of year - weather permitting - beaches along Auckland's eastern waterfront from Mission Bay to St Heliers are full of families enjoying the sun.

Images of pohutukawa in bloom and sun sparkling off the water are the basis of countless childhood memories, and considered a right by many Aucklanders.

But there are now children in parts of this city who have never been to a beach.

In less than a generation, the equal city we once knew has become divided. In 1986, average incomes were roughly the same across Auckland's suburbs. Now, they are disparate.

The comfortable

St Heliers couple Anita and Nigel Smith and sons Ben, 13, and Louis, 10, are near the comfortable end of the scale. Their combined income of $150,000 puts them just below the richest 10 per cent of New Zealand households, who earned over $155,000 last year.

Nigel, 46, and Anita, 45, came here from Britain in 1999 six months after Ben was born because this was "a better place to bring up kids".

Nigel, a graphic designer, got a job in a local design studio, but it went broke two months later. He took the clients into a new business, Transformer Design, which he started from home.

"For the first five years or so the business didn't make enough for us to live on and we got into debt," Anita says.

Gradually the business expanded, employing eight people at its peak. But its biggest clients were property developers who were wiped out when the recession hit. The firm had to write off huge bad debts and halved its staff.

"In a good year we'd make $160,000 to $170,000, but it's been so variable over the last few years that it's really hard to predict," Anita says.

They work hard for it. "I never work less than 50 hours, sometimes a lot more," Nigel says. "Most weekends I go to the office."

Anita also works 10 to 20 hours a week as the firm's business manager. But she fits that in between her main job, which is home-educating Ben and Louis.

The parents successfully shielded their boys from the effects of a fluctuating income. Anita buys them educational books and DVDs, and games which Louis plays on an iPad. They were at Waihi Beach for Christmas, they're in Sydney this weekend, and in mid-year they're going to a family reunion in Spain.

They employ a couple to clean both the house and the office once a week. They also pay someone to do the lawns and the gardening.

"It was just simple maths," Nigel explains. "We could pay so much per hour to get someone to cut the lawns, and I could earn double that. I may as well spend that time going to the office and doing paperwork."

But the income gap worries them.

"During the election was when it really hit me," says Anita. "I had been to have a facial. Then I went to a supermarket and did the weekly shop.

"I drove past one of the Labour billboards about raising the minimum wage to $15 an hour. That's $600 a week. I thought, 'I've just spent that this morning having a facial, buying products from the beauty therapist and doing the shopping. How can a family live on that?"'

The figures

The gap between rich and poor has not always been this wide. Over the last century, the share of national income taken by the richest 1 per cent of taxpayers actually trended downwards for 60 years, from around 11 per cent in the 1920s to a low of 5 per cent by 1986, but then jumped back up to 8 per cent by 1990.

Since then the rich share of the cake has stayed between 8 and 10 per cent apart from a brief spike to 14 per cent in 1999, which the Inland Revenue Department says was due to "a big surge in dividend payments ahead of the change in the top tax rate to 39c on April 1, 2000".

This history suggests that high taxes deter the rich from drawing, or declaring, high incomes. The top income tax rate rose from 22 per cent in 1925 to a peak of 90 per cent during World War II, and briefly peaked again at 66 per cent under Robert Muldoon in the 1980s, before Roger Douglas and David Caygill halved it to 33 per cent in 1986-88.

Helen Clark hiked it again to 39 per cent in 2000, but John Key restored the 33 per cent rate in 2010.

Council of Trade Unions economist Bill Rosenberg says the declining rich share of the cake until 1986 also coincided with a long-term increase in union membership after the first Labour Government introduced compulsory membership at unionised workplaces in the 1930s. The rich share recovered after union powers were dismantled in 1991.

A December report by the Organisation for Economic Co-operation and Development traces the same decline in the rich share of the cake until the 1980s, and a similar rise since then, in most developed countries.

But the global financial crisis since then has sparked renewed concern about inequality. International Monetary Fund economists Michael Kumhof and Romain Ranciere blame the crisis on the rich effectively lending their surplus funds, through financial institutions, to poorer families who ultimately could not afford the repayments.

They recommend reducing inequality by "more progressive labour income taxes" and "strengthening the bargaining power of workers".

The strugglers

Craig and Carla Bradley are not a "poor" family, but they are struggling. Their income of $42,000 last year put them in the fourth-to-bottom tenth of households. They will earn more this year - but only because Craig, aged 51, now works seven days a week.

He earns $20 an hour delivering office furniture 40 hours a week, - $668 after tax. The family have also had about $150 a week in family tax credits for their first two boys now aged 3 years and 15 months. That will go up by $61 after a third baby son was born last November.

But that doesn't pay all the bills. So a year ago Craig started a casual job milking cows for a Clevedon farmer twice a day on Saturdays and Sundays when needed, earning an extra $70 a milking.

He also does fencing and haymaking for another farmer, but also only on a casual basis.

"I worked it out, it's about $80 to $100 we have to find each week just to keep ahead," he says.

The family's commitments are scary. Their rent is $340 a week. They are paying off two cars totalling about $160 a week, Craig pays $132 a fortnight in child support for a child from a previous relationship, and they are paying off a credit card and a bed and drawers.

After power, phone and a weekly petrol bill of about $120, that leaves typically just $150 a week for food and groceries.

"Sometimes Carla and I go without," says Craig.

"We have gone two days without food just so the kids can eat," adds Carla, 29. "That's when I was pregnant, too."

They buy meat and fresh vegetables sparingly.

They buy mainly second-hand clothing and use the same shoes "until they wear a hole in them". Their home is clean and comfortable but their dilapidated couch came from Craig's work when "someone was going to throw it out". Their laptop computer hasn't worked for four months because they can't afford to repair it.

The boys love going with Craig to his farm jobs. "To me, it's cheap entertainment," Craig says.

But they haven't had a family holiday since their first son was born. Expensive places like the zoo or Kelly Tarlton's are impossible, and even free outings are ruled out by the cost of petrol.

"The boys haven't been out to a beach yet," Craig says. "We are only 20 minutes from the beach at Maraetai but we never go.

"As long as the boys are happy and fed, that's all we're worried about."

THE SERIES

Today: The widening gap.
Tomorrow: Tax and benefits.
Wednesday: Housing.
Thursday: Health.
Friday: Education.
Saturday: What can we do?

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n6 at 30 Jul 2014 19:16:57 Processing Time: 478ms