Indicators of Inequality for Māori and Pacific People - PDF

Indicators of Inequality for Māori and Pacific People Lisa Marriott and Dalice Sim WORKING PAPER 09/2014 August 2014 Working Papers in Public Finance Chair in Public Finance Victoria Business School The

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Indicators of Inequality for Māori and Pacific People Lisa Marriott and Dalice Sim WORKING PAPER 09/2014 August 2014 Working Papers in Public Finance Chair in Public Finance Victoria Business School The Working Papers in Public Finance series is published by the Victoria Business School to disseminate initial research on public finance topics, from economists, accountants, finance, law and tax specialists, to a wider audience. Any opinions and views expressed in these papers are those of the author(s). They should not be attributed to Victoria University of Wellington or the sponsors of the Chair in Public Finance. Further enquiries to: The Administrator Chair in Public Finance Victoria University of Wellington PO Box 600 Wellington 6041 New Zealand Phone: Papers in the series can be downloaded from the following website: Indicators of Inequality for Māori and Pacific People Lisa Marriott 1 and Dalice Sim 2 ABSTRACT: This study investigates a number of inequality indicators in New Zealand. The research examines the current gaps in the indicators between the European population, and Māori and Pacific people. The study also undertakes a comparison of the changes in the gaps over a period approximating 10 years for each of the indicators. A total of 21 indicators are investigated in this study, incorporating measures of health; knowledge and skills; employment; standards of living; cultural identity; and social connectedness. The aim of this research is to assess the extent to which indicators suggest that the inequality gap is increasing or decreasing between European and Māori, and European and Pacific people in New Zealand. In general, all ethnic group measurements are moving in the same direction, that is, most ethnic groups are improving or not improving for a specific measure. However, increases are visible in gaps for the majority of the indicators examined in this article, that is, the indicators suggest greater inequality has resulted over the 10-year period for both Māori and Pacific people. Of the 21 indicators assessed in this study, eight (38 per cent) show improvements in the form of a decreasing gap between European and Māori, although not all of these improvements are significant. Less positive results are visible in 12 indicators (57 per cent), which produce increasing gaps between European and Māori. One indicator is largely unchanged. Not all indicators are available for Pacific people, but of the indicators measured, five (29 per cent) showed an improvement in the form of closing gaps between the European population and Pacific people. Again not all of the decreases in gaps are significant. Worsening differences were found in 11 (65 per cent) of the indicators measuring inequality between the European population and Pacific people. Similarly to the Māori population, one indicator remained unchanged. 1.0 Introduction Most OECD countries have seen an increase in the gaps between the wealthy and the lesswealthy in recent times (OECD, 2008). Addressing inequality is important for multiple reasons: it assists with creating a fair society where individuals have equality of opportunity by identifying specific areas where improvement is required; it is important for economic 1 Associate Professor, School of Accounting and Commercial Law, Victoria Business School, Victoria University of Wellington. Contact: telephone Dalice Sim is the Statistical Consultant for Victoria University of Wellington, New Zealand. Contact details: 1 growth; it is important for social cohesion; and inequality generates fiscal costs on the wider community, such as through increased crime and health expenditure (Cabinet Social Development Committee, 2004a). Perhaps the problem is best captured by the OECD: greater inequality raises economic, political and ethical challenges as it risks leaving a growing number of people behind in an ever-changing economy (2011:3). The patterns of inequality in New Zealand are well-established. Regardless of whether income or wealth are used as measures of inequality, New Zealand scores around the average of OECD countries, with similar levels of inequality to Australia, Japan and Canada (Perry, 2013a:1). In terms of how this is reflected in society, the top 10 per cent in New Zealand earn 8.6 times the income of the bottom 10 per cent, once tax and transfers are taken into account (Perry, 2013a:1). Recent polls in New Zealand suggest that poverty, the gap between rich and poor, and the imbalance in wealth in New Zealand are becoming of increasing concern to New Zealanders. 3 Inequality captures the distribution of resources across society. While this is an important measure, it is also important to investigate differences in distributions among different ethnic groups. If inequality is equally represented among different ethnic groups, we would expect to find a similar proportion of each ethnic group under each measure. To the extent that a different ethnic groups has a different representation in a social indicator, this suggests greater or lesser inequality among that ethnic group. This study focuses on the differences in 21 social indicators that capture a range of inequality measures across three ethnic groups in New Zealand: Europeans, Māori and Pacific people. The aim of the study is to report on differences found among these three ethnic groups for a range of inequality measures. In December 2003, the Strategic Social Policy Group of the Ministry of Social Development released a report titled Social Indicators for the Pacific and Māori Populations (Ministry of Social Development, 2003). A follow up report was produced in the following year: Reducing Inequalities Indicators for Māori and Pacific Peoples (Ministry of Social Development, 2004). These reports outlined a number of indicators of inequality in a range of categories: health; knowledge and skills; paid work; economic standard of living; cultural identity; safety; and social connectedness. The reports provided the direction of movement of each indicator, i.e. improving, worsening or no clear trend. Of the 27 indicators in the 2003 report, six showed improvements for Pacific people and 13 showed improvements for Māori populations. However, a number of indicators produced no result, as information was not available, or no clear trend was evident. For Māori populations, none of the indicators produced worsening trends, while one produced a worsening trend for Pacific people. It is 10 years since these reports were released by the Ministry of Social Development. This study provides a follow up to the report, to review progress on a range of inequality measures in New Zealand over the past decade. Numerous policies were introduced subsequent to the 2003 report with the aim of measuring and improving identified inequalities (Cabinet Social 3 Roy Morgan Research, Finding No. 5111, Available at Retrieved 8 April Development Committee, 2004a, 2004b, 2004c). The initial reports provided absolute and relative measures of improvement against previous measures for the same population and a comparison population, usually Europeans. This research adopts the same approach. This study commences with a review of some of the recent literature on inequality. This is followed in section three with a discussion of the methodology and data sources used in this study. Section four outlines the data and the data analysis, while section five provides a discussion of the findings. The article concludes in section six. 2.0 Background The issues relating to inequality have become well known over the past decade. This may, at least in part, be attributed to works such as The Spirit Level: Why Equality is Better for Everyone (Wilkinson and Pickett, 2010) and The Price of Inequality (Stiglitz, 2013). Studies such as these have raised the profile of inequality and communicated the potential wideranging effects from inequality; not just among those who are among the lower deciles in society. A further issue with inequality is the suggestion that it has a long-term effect, with income inequality experienced early in life, resulting in reduced social mobility later in life (Corak, 2013; Rashbrooke, 2014). There are multiple other reasons why equality is desirable. Inequality limits the opportunities for people to maximise their potential contribution to the economy and to society (Nana, 2013). The economic loss is explained by Nana (2013:60) as a very real economic loss incurred by the existence of unemployed, under-employed, untrained, disenchanted, disconnected, disenfranchised and, indeed, disruptive resources. Nana (2013:61) expands on the inefficiency generated by inequality by highlighting the additional resources that are diverted from wealth-enhancing activities and allocated to picking up the pieces. The impacts of the inefficiency generated from inequality are felt across all of society, including businesses who have a less skilled workforce; higher tax rates to fund the costs of inequality; and the lost potential economic growth from under-utilisation of human resources. Multiple studies link poor health measures to income inequality. For example, research suggests that national mortality rates are lowest in countries that have smaller income differences (Wilkinson, 1997); income inequality leads to increased mortality (Kawachi, Kennedy, Lochner and Prothrow-Stith, 1997); and income inequality is accompanied by many differences in conditions of life at the individual and population levels, which may adversely influence health (Lynch, Davey Smith, Kaplan and House, 2000). While inequality has been shown to produce negative outcomes at the individual level, lower levels of inequality have been shown to produce positive outcomes at a national level. For example, Ostry, Berg and Tsangarides (2014:4) show that lower net inequality is robustly correlated with faster and more durable economic growth. This was recognised by the New Zealand Cabinet Social Development Committee (2004a), with the observation that prosperity depends on improving the productivity of all citizens and that providing greater opportunities for everyone will allow greater participation in, and contribution to, society. 3 While inequality is not solely related to income inequality, the income inequality measure is one of the most common measures used as a determinant of standard of living. As noted by the OECD (2013:66) high income inequalities typically imply a waste of human resources, in the form of a large share of the population out of work or trapped in low-paid and lowskilled jobs. However, one of the key difficulties with assessing income inequality is the difficulty in obtaining measures that effectively capture differences in incomes (Cribb, Hood, Joyce and Phillips, 2013). The most common measure of income inequality is the Gini coefficient. The Gini coefficient ranges from zero to one, with higher numbers indicating higher levels of inequality. The Gini coefficient is based on a comparison of cumulative proportions of the population against cumulative proportions of income received (OECD, 2013). Thus, perfect equality is achieved when the Gini coefficient value is zero (that is, where the bottom 10 per cent of the population receive 10 per cent of the income, the bottom 20 per cent of the population receive 20 per cent of the income, etc. (Stiglitz, 2013)). Perfect inequality exists when the Gini coefficient value is one, as this represents a situation where all income goes to one person. While there has been considerable variation in income inequality among OECD countries as measured by the Gini coefficient in recent decades, New Zealand has shown one of the strongest increases in income inequality over the period from the mid-1980s to the mid-2000s (OECD, 2011:228). The most recent Gini coefficient for New Zealand is 2011, where it was 0.32 (OECD, 2014). This is the same as Australia and the OECD average. However, it is higher than Denmark (0.25), Finland (0.27), Norway (0.25) and Sweden (0.27) (OECD, 2014). The OECD (2008) raises a number of factors that have influenced changes in both income inequality and poverty over time. The primary factors that are visible among OECD countries include: s in the structure of the population, including the increase in the number of single-person households. Earnings becoming more unequal. This is driven by globalisation, skill-biased technical change and labour market institutions. Falling employment rates among people who are less educated. Unequal distribution of capital income and self-employment income (OECD, 2008). Historically, on average, general outcomes for Māori and Pacific people have been less positive than those for the European population. Perry (2013b:124) reports that Māori and Pacific ethnic groups typically have poverty rates that are around double those of the European/Pakeha ethnic group, regardless of the measure used. Using the measure of less than 60 per cent of the median income, 23 per cent of Māori, 22 per cent of Pacific people, and 11 per cent of European/Pakeha people had household incomes below this threshold (Perry, 2013b:124). While poverty is a different issue to inequality, to the extent that greater inequalities exist among certain ethnic groups, the result is higher levels of poverty among these ethnic groups. 4 Other examples of reported gaps in performance include: A secondary school retention rate (to age 17) for Māori students of 50.6% (75.4% for non-māori); Unemployment rate for Māori youth of 25.7% (14.2% for non-māori); School leavers achieving University Entrance standard (NCEA Level 2) for Māori Youth of 25% (47.9% for non-māori); A higher rate of Māori youth not in education or employment or training at 22.4 per cent (9.1 per cent for the non-māori population) (Te Puni Kōkiri, 2012). At the time of the Ministry of Social Development (2003, 2004) reports that this study replicates a number of policy initiatives were proposed to assist with addressing inequality. 4 These policies included: Ensuring a robust programme of early intervention for at-risk children and families; Addressing the income needs of children in low-income families through implementation of the Working for Families programme; Continuing the focus on the health needs of families/whänau through improving access to health services; Increasing participation in early childhood education where participation is low; Improving participation and achievement among young people who are at risk of leaving school with few qualifications; Improving access to education, training and employment for economically inactive young people; Addressing the barriers to employment; Tackling risk factors of poor health and improving access to services for those currently at risk of poor health outcomes (Cabinet Social Development Committee, 2004a:2). A number of these policies were implemented at or around the time of the Ministry of Social Development (2003, 2004) reports, or are ongoing at the present time, such as addressing the barriers to employment and tackling risk factors relating to health. However, the focus that was visible a decade ago on specifically addressing the drivers of inequality appears to have diminished, with the last six-monthly report on reducing inequalities produced for the period July to December 2003 (Cabinet Social Development Committee, 2004c). 5 At the time of the last six-monthly report, 109 initiatives were reported on by 12 government agencies. Of the 109 initiatives, 49 were from the Ministry of Education, 14 were from the Ministry of Health and 10 were from the Ministry of Housing. 4 Refer to Cabinet Social Development Committee (2004a), p.11, Table 3: Reducing Inequalities Policies and Programmes, for a more comprehensive overview of policies and programmes targeted towards reducing inequalities. 5 The six-monthly report was a report of departmental activity on initiatives to reduce inequality. 5 3.0 Methodology This study is a comparative study of the European, Māori, and Pacific people in New Zealand using a number of inequality indicators. The study replicates work undertaken by the Ministry of Social Development in New Zealand in 2003 and 2004, where two reports were produced outlining a number of indicators intended to measure inequality among Māori and Pacific people. This research reviews the same indicators after a period as close as possible to 10 years. Not all of the measures reported in the initial studies have been replicated here. For some indicators, data is not available, or due to measurement changes over the 10-year period, it is not comparable over time. The following section outlines the data and statistical methods used to assess the indicators outlined in section four. 3.1 Data The four primary ethnic groups in New Zealand are European, Māori, Pacific people and Asian. This study investigates European, Māori and Pacific people. Ethnicity is the ethnic group or groups that people identify with or feel they belong to. 6 The measure is based on self-perception and it is possible to belong to more than one ethnic group. In census data, and other official statistics, a person identifying with more than one ethnic group will be counted once in each group. As our primary research focus is on inequality differences between Māori and Pacific people, we have not included Asian people in this analysis. Asian people are the third most common ethnic grouping in New Zealand, with 12 per cent of the population identifying with at least one Asian ethnic group in the 2013 census. Of the four primary ethnic groups, the Asian group is increasing at the fastest pace, with a 33 per cent increase since the previous census in Of relevance to this study is that Asian people are often proportionately more highly represented in positive indicators. Thus, this is changing outcomes for the other ethnic groups, which is an important consideration in interpreting some of the indicators discussed in this study. There are demographic differences between the three populations investigated in this study. In the most recent New Zealand census, 74 per cent of people identified with at least one European ethnicity; 15 per cent identified as Māori; and 7 per cent identified as Pacific people. 8 The median age is 41 years for those identifying as European; 23.9 years for those 6 Statistics New Zealand Statistical Standard for Ethnicity. Available at Retrieved 9 July Statistics New Zealand Census Major Ethnic Groups in New Zealand. Available at Retrieved 9 July These figures show the proportion of people who identified with this ethnic group. As individuals may identify with more than one ethnic group, the totals of the ethnic groups do not add to 100 per cent. Prioritisation (where the ethnic group of a person with multiple ethnic group identifications is assigned to just one ethnic group) is no longer used in official statistics in New Zealand, as it may mask diversity between ethnic groups. Statistics New Zealand The Impact of Prioritisation on the Interpretation of Ethnicity Data. Wellington: Statistics New Zealand. 6 identifying as Māori; and 22.1 years for those identifying as Pacific people. 9 Thus, the population groups for Māori and Pacific people are younger than the European group. Each of the indicators is presented in a table showing data in two time periods, with as close as possible to a 10-year gap. Each of the tables also shows the absolute and relative change over the two time periods shown, as well as the gaps between the European population, and Māori and Pacific people over the specified periods. 10 In some cases a negative difference indicates that the gaps have closed, i.e., there is some degree of catching-up in the indicator; while in other cases a negative difference indicates that the gaps have widened. For the purposes of clarity, we have also explicitly stated whether th
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