The OECD’s latest on inequality

The latest OECD report on income inequality is out, showing New Zealand as one of just six countries where inequality was stable or falling from 2007 to 2011.

This doesn’t alter what we already knew, which is that nothing much changed here between the global financial crisis and the end of the current data we have, which only runs to 2011-12. (As is true everywhere, data is only released with a certain lag.)

In that period, top incomes fell along with bottom ones, because the sharemarket took a dive and corporate profits were lower. That’s not an unusual post-crisis picture: top incomes are often the most volatile.

What we don’t know is what has happened since 2011-12 – and we’ll find out some more of that next month, when the Ministry of Social Development releases the latest issue of its gold standard inequality/poverty document, Household Incomes in New Zealand.

Given the anecdotal reports of a return to high levels of luxury spending, compared with tepid increases in employment and salaries, I would expect that next instalment to show inequality increasing again – but we’ll have to wait and see. Even then, we’ll only know part of the picture. We won’t know how capital gains are increasing for the rich, because we don’t tax or record them; and we won’t know what’s happening to the income hidden in trusts.

It’s also important not to forget the wider story here. Whatever has happened in the last few years, nothing changes the fact that New Zealand had the developed world’s biggest increase in inequality from the mid-80s to the mid-2000s. The gap between the rich and the poor pretty much doubled.

That’s the context we’re working in, and the issue we have to deal with.