Dawn Picken: How the pandemic is worsening the wealth divide

Many of us still hold jobs and our major complaint is not being able to travel abroad while a growing number of our neighbours are facing job losses. Photo/ Getty Images.

New Zealand this week entered its first recession in 11 years. No surprise after the sucker punch lockdown delivered the economy.

Gross domestic product (GDP) shrank 12.2 per over the June quarter.

Around the world, Covid-19 has not only battered businesses, it's also shone a light on inequalities within the workforce and the community at large.

Many of the "haves" worked from home during lockdown and beyond, while those on the knife-edge of insolvency got laid off or continued in minimum wage jobs as essential workers.

Some of us feared our homes would lose value because of the pandemic, yet the opposite is happening in the Bay.

NZME last week reported first-home buyers, returning Kiwis and pent-up demand after the Covid-19 lockdown have driven median house prices in Tauranga and Rotorua to record levels. Tauranga's median house price has reached a record $745,000 and Rotorua's climbed above half-a-million dollars at $510,000.

As a homeowner, these numbers - paper gains, really - don't make me feel any richer. I hope to be years away from selling. And I worry about the rental market, not only for my friends and the rest of the community, but also for me. Another zig or zag of the economy could send me back into that crowded, pricey space.

Rents have been climbing and can continue rising after the Government's six-month freeze on rent increases ends next Friday. Home price inflation and resulting rent rises have squeezed some working families so hard, they're spending half their wages or more on housing, leaving little left over for utilities or to stock the fridge.

Things could get worse as people stop receiving Jobseeker support this month.

Government numbers show 60 per cent more people are getting work-ready benefits than this time last year. The pandemic has hit younger workers especially hard, as the number of people under aged 24 on the benefit has jumped 80 per cent. Some experts predict unemployment could hit 7 per cent this year.

Covid has widened economic inequality at a time when the divide was already at record levels: A 2019 Credit Suisse report said the richest 1 per cent of people worldwide owned more than 44 per cent of household wealth.

Covid-19 has widened economic inequality at a time when the divide was already at record levels, writes Dawn Picken.

In Aotearoa, 10 per cent of the population own 59 per cent of assets; the middle own 39 per cent; and the bottom half own just 2 per cent, according to statistics compiled by writer Max Rashbrooke who studies wealth and inequality.

Rashbrooke says the playing field isn't level because the rich pass down intergenerational wealth, while people on the low end of the pay scale face the daunting (if not impossible) task of saving for a home with little (if any) disposable income and no family help for the deposit.

Homeownership has fallen to 64.5 per cent according to 2018 census numbers, but economists say the figure is probably lower, as more than a half-million people failed to answer the question about whether they owned the home they were living in.

It is an odd time to be alive, when many of us still hold jobs and our major complaint is not being able to travel abroad. Meanwhile, a growing number of our neighbours have hacked the family budget to the bone after a job loss.

We measure ourselves against others in times of feast and famine. It's often unhealthy. No one feels rich, when millionaires compare themselves to billionaires and middle class earners size up people earning a quarter-million dollars per year - or more. They say comparison is the thief of joy. Studies have shown comparison also leads to anger.

In his book, The Broken Ladder: How Inequality Affects The Way We Live, Think And Die psychologist Keith Payne writes air rage is more likely to happen in planes that have a first-class cabin.

Walking past those passengers reinforces the idea of a status hierarchy, "...which suggests that to witness that inequality seems to have some kind of psychological effect on people that really ramps up the disruptive behaviour". Payne says if you board a plane in the middle or at the rear and don't have to walk past the first-class cabin, there's a much lower incidence of air rage in the coach cabin.

Differences between people can be likened to a status ladder, a place where we see ourselves on a certain rung. Payne says when the scale of inequality grows beyond what we can psychologically handle, the ladder is broken. "It becomes harder and harder to occupy the rung that we think we ought to be on".

For many in Aotearoa, the ladder broke a long time ago. Statistics show one in seven households nationwide live in poverty. Tauranga has seven suburbs identified in the NZ Social Deprivation Index as being a 9 or 10 on the deprivation scale (with 10 being the most deprived).

We know we must address child poverty and housing insecurity. These are enormous, complex issues people we elect are working to solve. Meanwhile, cupboards are bare.

History shows we won't fix these issues quickly, but there is something we can do this instant that'll help our neighbours - give to your community food bank. In my case, that's the Tauranga Community Food Bank. In less than the time it took to read this piece, you can contribute to struggling families in a meaningful way. It won't solve inequality, but it will help provide locals strength as they keep trying to get a foot on the ladder.