Gini. A measure of inequality.

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I did a post on how a UBI would address inequality here

http://thestandard.org.nz/ubi-addressing-inequality/

It turns out I derived something that is already known as a measure of inequality call the Gini coefficient and the Lorenz curve. My results were based on individual incomes rather than households but essentially it gave the same result.  A lower Gini coefficient is better and represents a more equal society. It is a recognised way of measuring and comparing inequality between countries, changes in equality overtime and for the effects of taxation proposals.

http://en.wikipedia.org/wiki/Gini_coefficient#US_income_Gini_indices_over_time

http://en.wikipedia.org/wiki/Gini_coefficient

Below is the graph for NZ over time.

Gini Coefficient2

Source Child Poverty Monitor: Technical Report.

The graph speaks for itself but to state the obvious, successive governments in the last 35 years have not done much to shift inequality since rogernomics and the 1987 crash which raised it dramatically. Boy was that ever a hand out to the wealthy. It helps explain why there is such a feeling amongst older people that society was better in the past.

There is no reason to think it is OK to have a coefficient of above 30? Surely we’d want to reduce this? Why does NZ not target a Gini coefficient of say around 20 and tax and adjust social and economic policy to achieve that level. This is just as valid measure of a country’s performance as any other measure and infinitely more preferable for society than many of the obscure measures currently used. We currently control for inflation so there is no reason not to control for inequality. The effects of controlling for this would be numerous but maybe incomes would adjust to being fairer as it would be known that ridiculously high incomes would simply be redistributed via tax more fairly. Fiddling with the OCR clearly only goes so far in managing the economy.

I’d suggest that governments performance in addressing inequality can be measured thus. I’d expect the next government to make a significant shift in this before I believe they are interested in address inequality. Clearly the last labour government failed to address inequality and nor has this one. If a left government wants to have power in NZ and genuinely wants to fix the 1980’s shafting of NZ society they better do something about it.

The debate is carried on here

http://www.stuff.co.nz/national/politics/9672616/Inequality-Is-it-growing-or-not

Other links

http://www.parliament.nz/en-nz/parl-support/research-papers/00PlibCIP181/household-incomes-inequality-and-poverty

A report that is worth a read as it frames the debate in NZ is reference below.

http://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/

Gini Coefficient

In it they seem to imply that the OECD average is an acceptable level. Comparatively to US, UK and Australia we have a more equal society. Why anyone thinks we are like those countries in the 21st century or want to be like them is beyond me. Targeting the OECD average is hardly aspirational for NZ society. The rising inequality levels are unacceptable in a civilised country for a whole lot of reasons. The greater the measure (like the Gini coefficient) of the equality of a society  the greater the level of civilisation. NZ can lead the world in civilisation as opposed to descending into the barbaric and competitive nature of the US economic system and its followers. The politicians who articulate a vision of a more equal society to me are worthy of voting for.

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About BlueSky

I am by nature conservative and that nature means I care about the future and the environment. My Christian heritage has left a social conscious which has further developed by my humanity after de-conversion. I am interested in economic justice and freedom. I was a Christian until middle age but have since de-converted. Richard Dawkins 'The God Delusion' was the final nail in the coffin. By nature I'm an intellectual so ideas and beliefs are important to me and the development of those is what this site is about. According to the political compass site I am left and libertarian .

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