The New New Zealand: Rebuilding Better is a major new series from the NZ Herald and NZME which, as we emerge from the shadow of the pandemic and start to rebuild, seeks to examine past mistakes and help lay a pathway for a fairer and more prosperous Aotearoa. Video / NZ Herald
As we rebuild New Zealand’s economy out of a crisis, how do we take everyone with us? Isaac Davison spoke to experts about balancing growth with fairness.
We are still counting the economic cost of a pandemic followed by a cost of living crisis in New Zealand.
Covid-19 has notbeen a complete disaster for inequality in this country, researchers say, partly because of the wage subsidy, welfare increases and other factors. Poverty has fallen on some measures.
But there are signs that after weathering this stage of the Covid-19 pandemic, tough times are ahead, especially for the very poorest in the country.
“There’s been a reduction in poverty for some groups,” said economic equality researcher and author Max Rashbrooke. “But also amongst the very poorest the kind of concentration of misery.”
He points to soaring demand for food banks, people sleeping in laundromats, children living in cars. The impact of the cost of living increases has not yet shown up in official poverty statistics. Women, Māori and Pacific and disabled people are expected to feel the pinch the most.
At the other end of society, runaway house prices have benefitted some people, though it’s not a clear-cut picture - many have to buy and sell in the same market, and looming price falls will wipe out some of those gains.
There is a growing body of evidence that says inequality is not only a social ill but can hold back economic growth. So as New Zealand looks to build back, what do experts say we should focus on?
Wage rises and low unemployment are at record levels, but they are unevenly distributed. Social services say they are increasingly dealing with working families rather than beneficiaries.
Natalie Vincent, CEO of Nga Tangata Microfinance, said her organisation had a 37 per cent increase in applications for assistance so far this year, a majority of whom were wage earners.
The average income of applicants was now $56,000, up from $36,000.
There was also an increase in people needing help with bank debt rather than finance company or high lender debts.
“These two things alongside each other mean that we’re starting to see those maybe minimum wage, low-income earners - as opposed to those who receive a benefit - are starting to really feel the pinch and not be able to manage paying debts or a lot of utility bills we are getting.”
New Zealand lifted its minimum wage to $21.20 an hour in April. But this was not a solution in itself, Rashbrooke said. He said Fair Pay Agreements, which create minimum standards for pay across a sector, could help.
He would also like to see new initiatives like a KiwiSaver scheme for kids with a kickstart payment from government.
Researchers and campaigners highlighted the large amount of low-quality, precarious work in New Zealand and the relatively high rates of exploitation, especially of migrants. A massive crackdown was needed on this sort of work, they said.
Max Rashbrooke is an author and researcher based in Wellington. Photo / Supplied
Close the pay gap
It is illegal to pay men and women differently for the same job in New Zealand, but that has not extinguished a large pay gap. Women are paid around 9.2 per cent less than men, and that gap has barely changed for five years.
There is also an ethnicity component. For every $1 a white male earns, a Māori or Asian man earns 86c, a Pasifika man earns 81c, an Asian woman earns 83c, a Māori woman earns 81c, and a Pasikifa woman earns 75c.
A Human Rights Commission study published last month found a quarter of women earned less than the living wage, which meant their paycheck was not high enough to cover the basics and to allow them to participate in society.
“So while people may be in work, the income isn’t necessarily enough to sustain just your basic needs,” said Equal Opportunities Commissioner Saunoamaali’i Karanina Sumeo. “The inequality is still there.”
The public service is now required by law to report the gender pay gap, and consideration is being given to ethnic pay gap reporting.
Dr Sumeo wants compulsory reporting to be extended to private companies, and to also cover ethnicity and disability. A campaign called MindTheGap is also pushing this proposal for companies with more than 50 staff, and has so far encouraged 60 companies to voluntarily report their pay gap.
In the shorter-term, all job advertisements should include a pay range, she said, to improve pay transparency.
Inequality is not solely about income, but about opportunity.
“The Ministry of Education threw in a certain amount of money trying to get computers into the homes of kids who didn’t have them so that they could do distance learning during lockdowns,” Rashbrooke said.
“And that would have been a stepping stone for the government to say, ‘Okay, there’s a huge problem with the digital divide. And we’re actually going to lean into that and introduce a huge programme to do away with the digital divide completely.’ And of course, it didn’t happen.”
Rashbrooke said eliminating the digital divide in New Zealand would be a huge step to reducing inequality in this country.
Reform welfare
Core benefit rates have been lifted $55 in the past two years, on top of a $ 25-a-week increase in 2020.
But there are still signs that welfare payments do not go far enough to cover basic costs of living, let alone the costs of participating in society. Spending on hardship grants is rising, reaching $236m in the September quarter alone. That increase was driven by people needing to get their welfare payments in advance.
Vincent: “We’re already providing emergency benefits, temporary additional support, the Government’s pumping money into food banks, and all these other things, that is millions and millions, billions of dollars, that if we actually just paid people liveable benefits, they would be enabled to actually live their lives without those other services.”
She said the Government should also consider wiping welfare debt, which has reached close to $1 billion. Around $200 million of this was owed by people who had been overpaid Working for Families tax credits - usually because they have not notified Work and Income that their family circumstances have changed.
Tackle housing costs
More than 300,000 New Zealanders need help to pay their rent, at a cost of around $30m a week.
“The cost of rent is still astronomical,” said Dr Sumeo. “And without shelter, that affects everything else - which school your kids can go to, and your access to work.”
Vincent said her clients were paying an average of 40 per cent of their income on rent, and some were paying up to 60 per cent. It is generally accepted that anything above 30 per cent is unaffordable.
There was no single simple fix for high rents - but campaigners said increasing housing supply, especially through densification, was a key measure.
Advocacy group Renters United and the Green Party also wants rent rises to be reined in by indexing them to inflation or wage growth.
