Welcome back to Sunday reading. The most important story of the week was the release of the Ministry of Social Development’s new Household Incomes Report, which provides an update on wealth, poverty, and inequality in New Zealand.
The report confirms that the housing affordability crisis is at the heart of many worsening social outcomes. Max Rashbrooke discusses the big picture on The Spinoff:
Yesterday’s Household Incomes Report, the annual record of inequality in New Zealand, is a confronting read for those who think everything is getting worse. Take the figures for poverty, as measured by the number of households living on less than half the national average (for a household their size). That means having less than $275 a week for a single person (after housing costs are deducted), or $510 for a couple with one child.
In 2009, 14% of New Zealanders – one in seven – were under that line. In 2016? Still 14%. In the last seven years, the poorest fifth of the country have seen their incomes grow by around 12%. That’s only just keeping pace with other New Zealanders – but it refutes the idea that the poor are getting poorer, as a whole.
Take another poverty measure, the number of children living in households that can’t afford basic things like buying decent shoes or heating their house. In 2009, 16% of children were in that group. In 2015, the figure was 14%.
[…] Within the poorest fifth of New Zealanders, who have seen some improvements under National, there is a group of the very poorest – and they have received quite different treatment.
They are mostly people on benefits grappling with multiple problems, and they have been subject to a punitive regime of benefit-cutting sanctions, often applied inexplicably and probably harming the thousands of children in their care, although the government can’t be sure because it hasn’t been concerned enough to check. (It has equally little idea what has happened to all the people who have moved off the benefit in recent years – whether they are actually better off or have just disappeared from the system.) These people are the first to feel the effects of the housing shortage, and the help offered them has been woefully weak.
That’s why families have started living in cars, Auckland’s rough sleeper population is at a record high, and the number of people seeking help from charities like Wellington’s DCM has doubled. Core benefits may have increased by $25 a week for some last year, but, given the scale of the problems, relying on that is like using a bit of four-by-two to prop up a collapsing tower block.
The Ministry of Social Development’s report on “Household Incomes in New Zealand: trends and indicators of inequality and hardship 1982 to 2016” found income inequality before housing costs has been broadly unchanged for the last 20 years, having worsened substantially between the mid 1980s and the early 1990s.
However, it found that inequality after housing costs was significantly worse than before housing costs, and has risen over the last five years versus the early 2000s.
Real incomes for the bottom decile of income earners were still a little lower in 2016 after housing costs than they were in the late 1980s.
The report, known around Wellington as the Perry report after its author Bryan Perry, found that over the last 10 years around 15 percent of households have been spending more than 40 percent of their incomes on housing costs. That’s up from five percent of households having to spend that high a proportion on housing in the late 1980s.
75,000 kids in damp, mouldy and cold homes
The poorest rental households with children are in the worst position. The Perry report found that the bottom 10 percent of income earners under the age of 65 now spend around half of their income on housing costs. That’s up from an average of 29 percent in the 1980s. That’s because real incomes for beneficiaries are adjusted for Consumer Price Inflation, which has risen much slower than housing costs.
Incomes for superannuitants rise much faster than for beneficiaries because New Zealand Superannuation is indexed to average wages, which have risen faster than inflation since the mid 1980s.
The combination of low income growth for poor working families and beneficiaries, and high rent growth, particularly of private rentals, has proven toxic, as has the poor quality of rentals.
The Perry report found 10 percent of households with children reported a major problem with dampness and mould, while 13 percent of households with children reported problems keeping their homes warm in winter. Around 75,000 children were in households reporting problems with damp, mouldy and cold homes. About 70 percent of those reporting major problems with housing quality were in rental properties, with 45 percent in private rentals, 25 percent in Housing New Zealand houses and the rest living in their own homes.
About half of the children living in such homes and in rental stress live in families with one working parent, while the other half live in beneficiary households.
Build more (and better) housing.
When you've got a housing shortage and you just can't figure out what to do about it pic.twitter.com/s1rTmOoBrR
— Jonathan Hawkins (@jvhawkins) July 27, 2017
On a slightly separate topic – regional divergence, rather than household divergence – four Radio New Zealand journalists have done a good piece on “the boom, the bust, and the rustbelt” as part of their Brighter Future? series. It’s a picture of a country floating on several overlapping waves of commodity prices:
Over on the West Coast – birthplace of the Labour Party – former miner turned tourism operator Mickey Ryan says the region has lost its working-class mojo.
“My parents – if you’d put a red scarf on a labrador dog they’d vote for it, you know. That’s how staunch Labour they were.”
Not any more, he says.
“When you left school you went to the mines because it was big money and your ambition was to get on the coal shoveling it.
“I suppose when you look at it now it’s laughable, but that’s where the big money was.”
The downturn in coal mining has seen hundreds of jobs vanish on the West Coast, and an exodus of people.
A lot is linked to the performance of state-owned enterprise Solid Energy – New Zealand’s largest coal mining company, which mined extensively in the region…
In June 2016, Buller district mayor Garry Howard said 600 jobs and $50m in annual wages had been slashed from the district’s economy in just two years.
But just last week, a bright spot loomed on the horizon, when the government announced a plan to pump millions of dollars into the West Coast in an effort to move its economy away from coal mining.
The $37m plan includes increasing tourism, making it easier to invest and do business in the region, and supporting economic diversification.
And something new is stirring on the Coast.
Down the road from Mickey Ryan’s home is a modern innovation hub, Epic Westport, where teams of tech wizards are busy working for global firms like Disney and Sony.
Epic Westport co-founder and chief executive Natasha Barnes Dellaca is part of what she says is an avant garde move to small towns.
“I’m passionate about environmental issues as well and so building an economy on cleaner technologies and creating job opportunities in rural centres … really appealed to me.”
Cities appear to be the winners from current economic trends – but can they count on their good fortune continuing? In Bloomberg View, Conor Sen puts forth a skeptical perspective, at least in the context of the US:
There have been three broad phases of American cities. In the first, lasting until the early-to-mid 20th century, cities were hubs of production. They were where factories were located. In resource-rich parts of the country, they had many banks and merchants. Oftentimes there were colleges and universities nearby. They were where immigrants came to build new lives for themselves. They were social arrangements of necessity rather than choice.
In the second phase, lasting until the 1980s, cities were in decline. Factories, and their associated manufacturing jobs, left, first for cheaper areas domestically, and then in some cases out of the country entirely. The era of the automobile and the explosion of suburbia led to a hollowing out of cities as most people with the freedom to leave cities for suburbs chose to do so. The jobs that remained in cities may not have been glamorous, but they were resilient.
In the third phase, in which we’re now living, cities increasingly resemble playgrounds for the wealthy and well-educated. As top talent has clustered in urban areas, housing costs have soared. Property developers have responded, in this economic cycle in particular, by building luxury apartments for young professionals. After decades of being based in the suburbs, large corporations have moved their headquarters back to downtowns and central business districts. The technology sector is concentrating not only in cities, but in a handful of cities. As city residents are increasingly wealthy and well-educated, the local business mix has changed as well, increasingly made up of high-end coffee shops, craft beer and cocktail bars, and organic grocery stores.
Cities were the best performers coming out of the last recession because the excess of the last economic cycle was concentrated in the suburbs and exurbs. It’s where too much housing construction occurred, where household credit was over-extended, where local economies were over-reliant on real estate and consumption. Cities, by comparison, had more diversified economies that were less reliant on household credit and real estate, the epicenter of the crisis.
But the specialization of high-end jobs and wealth in cities could end up being their undoing. The city model of old was like a grocery store — a balanced mix of all types of different products, from milk and bread to a pharmacy to some splurge items like cupcakes and Champagne. In tough times, cupcake and Champagne sales might fall, but people are still going to buy their milk, bread and toiletries, keeping the store afloat.
But is rewinding to the manufacturing-based city a good idea? Perhaps not, say Ana Campoy, Youyou Zhou, and Christoper Groskopf in an in-depth piece on Quartz:
We collected years of data for every state and province in North America, and the conclusion is clear: US president Donald Trump’s belief that manufacturing equals prosperity doesn’t hold up.
As Trump tells it, it was the migration of American factories overseas that snatched middle-class existence from hard-working Americans. On July 17 he launched “Made in America” week and sent Congress a list of his goals for the renegotiation of the North American Free Trade Agreement (Nafta), which begins on Aug. 16. The first of those goals: to reduce the US’s trade deficit, presumably by stamping more stuff with “Made in the USA.”
If Trump were right, manufacturing workers in Oregon should be doing great. From 2003 to 2015, the state’s manufacturing GDP grew 180%, the fastest pace not only in the US but in virtually all of North America. As a share of Oregon’s GDP, manufacturing doubled to nearly a quarter.
Yet the news for the workers themselves wasn’t so bright. While they would have expected to earn 10% more than the average statewide wage in 2003, today, that premium has shrunk to 3%. In other words, manufacturing in Oregon is now barely better than the average job as a ladder of social mobility.
It’s not only Oregon that debunks the view of manufacturing as an engine of growth. Across the US, Mexico, and Canada, the data we analyzed show that building more factories doesn’t lead to as many jobs as it used to, nor to higher wages, and that closing factories doesn’t necessarily lead to a loss of prosperity.
By the way, the article has a lot more in-depth data analysis and visualisations. It’s worth reading! But the summary is clear: we can’t go back to the way things were before – the only option is to go forward.
Speaking of progressing versus regressing, NZ Herald columnist Fran O’Sullivan wrote a powerful piece about how we need to do more to give women a fair go in media and business. I don’t always agree with O’Sullivan, but she’s spot on here:
…when company chairman Rob Campbell suggested it might be time for women to be profiled more extensively in business media – and quoted in more stories – journalists took issue with him because that did not reflect the business reality that women (in the main) do not hold the senior roles.
Campbell was arguing for positive inclusion of women to pave the way for a change in the status quo. There will be plenty of women making their way through the corporate hierarchy who would thank him for his championing of their cause.
Said Hosking: “She offered no solutions, largely because, short of ludicrous amounts of artificiality and intervention there are no obvious solutions.”
In the real world many employers think differently. They are also coming up with solutions.
As Westpac chief executive David McLean puts it: “Closing the gender pay gap is the same as any other business problem – and once it is seen that way people take it very seriously … We’ve made it one of our core business objectives. We broke the problem down, measured it, made people accountable for it, and set a three-year target.”
Here’s Nick Stanhope from Sovereign: “The gender pay gap? There shouldn’t be one. I have two daughters and want them to go into a world that is fair and equitable. If I can make things better in my position, then that is something that I certainly want to do.”
And try Vector chief executive Simon Mackenzie: “We have been changing as an organisation. About 40 per cent of our recent hires have been female, including women in areas such as technology, risk, and in our legal team. It appears to be an ongoing issue that there are still fewer women in electrical engineering but on the IT side we are seeing more coming through.”
Read the entire thing.
That’s probably enough text for the day, so if you’re still reading I’d recommend checking out Onehunga rappers SWIDT’s new record Stoneyhunga, which is awesome. Here’s an earlier track: