If income inequality is not rising in New Zealand, but enough voters think it is, do inequality concerns still matter?

This week The New Zealand Initiative released The Inequality Paradox: Why inequality matters even though it has barely changed. As the name suggests, our report finds that income inequality has remained broadly unchanged for the past 20 years.

But that doesn’t mean inequality concerns can be dismissed just yet.

Our report finds that while incomes have been increasing for both the rich and poor, not all New Zealanders are equally reaping the benefits. The cost of housing is leaving a serious dent in the wallets of those who can least afford it. The poorest in society spend more of their budget on rents and mortgages, leaving less money to meet other needs.

If housing is at the root of inequality concerns then we need housing solutions. Giving the poor cash or taxing the rich more will not close the gap if housing costs rise at an even faster rate.

Income and wealth mobility is another aspect of concern.

The problem with year-on-year inequality statistics is that they only show a snapshot in time. Mobility measures show how inequalities can smooth out over a lifetime. Engineering students subsisting on toast and pasta could expect a more comfortable lifestyle once they are qualified and experienced.

The good news is that there is generally good income mobility for a majority of people. According to Treasury analysis, only 22 percent of people remained in the same decile they started in after eight years. Out of that 22 percent, there will be some who are poor and who stay poor, not only in their own lifetime but over generations.

Hardship is a concern regardless of inequality.

Finally, in politics, it is often said that perceptions matter more than reality. Even if income inequality is not rising, there is a political problem if people perceive that the gap is getting worse. Overseas, we’ve seen frustrations about inequality affect political events like Brexit and the rise of populist politicians.

In New Zealand’s case, it is undeniable that there are some who are doing it tough, and there are some who feel like the gap between the have and have-nots is getting worse. But at least some of that frustration is misplaced.

New Zealand might not have an inequality crisis, but the housing crisis sure makes it feel like we do.

The Inequality Paradox, written by Dr Bryce Wilkinson and Jenesa Jeram is available here. To test how much you know (or think you know) about inequality, check out our quiz.