Monday, March 5, 2012
Steve Baron: NZ not confronting the Important Issues
the rich and the poor) has become the scourge of today. A famous Kiwi once said that New
Zealanders would not understand a fiscal deficit if they tripped over it in the street and perhaps they do not understand much about income inequality either, or how it effects them—but they should. It is an issue that past and present governments have been ignoring—probably because they are not sure how to fix the problem.
'Income inequality' are two words that quickly spurt with enthusiasm from the mouth of most devout socialists. Even though I consider myself a capitalist (with a social conscience), these two words have been concerning me also.
Income inequality is growing in New Zealand and with it comes economic, social and political problems. Income inequality makes it harder for those at the bottom of the socio-economic ladder to get ahead. It traps them, breeds resentment for the free market system, for political leadership, for those with wealth and creates two classes of people—the 'haves' and the 'have nots'. I am not about to start bleating on here about taking from the rich to give to the poor, petty jealousies or giving people something they do not deserve. Certainly, there are no-hoper's out there that are too lazy to achieve anything, all they want are handouts, but they are a small minority. Most people do not want handouts, most have pride and simply want, and deserve, an equal opportunity to be able to achieve all they are capable of achieving as individuals—income inequality pulverises this opportunity. It creates an uneven playing field.
An OECD report showed that income inequality has grown mostly due to technological progress which has created more demand for highly skilled workers. This demand exacerbates the gap in earnings between low and high skilled workers. Governments have tried to fix this problem with various benefit payments and tax reforms. This helps reduce income inequality to some extent, but only goes so far. Technological advances and a struggling economy leads to less employment for the unskilled, it also puts pressure on governments to cut the cost of social security. On top of this we have an ever deepening public health black hole we continue to poor money into. Compounding the problem is an ageing population and growing superannuation costs which are all becoming unsustainable—but still our governments stand defiant as if they had a magic wand. Social security, health and superannuation alone, form the bulk of government expenditure. These issues are all intricately intertwined and immensely important for any government that truly wants to reduce income inequality and help New Zealand become a wealthier society.
If governments are able to leave more money in New Zealanders pockets by reducing government expenditure which must be funded either through more debt or taxation, then the economy has the ability to grow and create further employment. Dramatic policy changes are needed in these areas but are mostly avoided by governments for fear of being thrown out at the next election over such controversial issues. These issues need to be placed over and above politics and they need to be addressed now, before the problem feeds on itself. Governments can reduce spending in these areas by putting the responsibility back on New Zealanders for their own healthcare and superannuation—we can not carry on as we are and these services can no longer be funded through taxation. When a service like public healthcare does not operate in a competitive environment they are rarely efficient and usually lack innovation. When a service is also offered free of charge it is often abused or misused. Public healthcare in New Zealand has become inefficient and ineffective. Privatising all public hospitals is now an option and encouraging citizens to insure against the need for healthcare is inevitable. Privatising hospitals will reduce the funding burden of an inefficient healthcare system on taxpayers. Placing the responsibility of superannuation back on individuals will also empower New Zealanders to stand on their own two feet. Such a policy would steer New Zealanders away from their fixation with residential real estate as an investment and enforce New Zealanders to seek a more balanced plan for their retirement. This would improve domestic savings and investment which could be freed up to expand the economy therefore reducing the likelihood of residential homes being seen as an investment, possibly increasing the chance of cheaper homes and a home owning society for the right reasons.
An important part of individual responsibility comes from having a job. More jobs need to be created but that is easier said than done—especially in tough economic times. However, with the changes highlighted above, more jobs are likely to be created. Just having jobs is not enough though, to reduce income inequality. There needs to be a focus on increasing human capital with job related training for the low skilled along with on-the-job training and improved training procedures. Unfortunately there are very few incentives for employees and employers to make this investment but these are key requirements for reducing income inequality.
at 3:13 PM