Labour MP and former education minister Trevor Mallard has suggested that the school system might be spending too effort on working with the bottom fifth of students at the expense of “the most talented kids”.

Giving a lecture in Wellington on Tuesday this week, Mallard noted efforts to make sure the school system responds better to – and is shaped by the needs of – Maori and Pasifika students.

But, he added: “I’m not certain that working with the bottom fifth, who are disproportionately Maori and Pasifika, is as important as working with the top fifth of Maori and Pasifika to make sure they achieve their potential.

“One of the anxieties I have is that at the end of my time [as education minister], and since, we have had a disproportionate focus on the bottom end, and we are missing out on ensuring some of the most talented kids, Maori, Pasifika and Pakeha, are achieving their potential. We are losing just about as much with them not achieving their potential [as we do at the bottom].”

The Herald has an opinion piece from Auckland Council’s chief economist, Geoff Cooper, about inequality and why education offers the best route to tackling it.

Now, it’s great to see an economist, and one working for an increasingly influential body, talking about income gaps.

But, just like the Treasury, he’s arguing for a very limited – and, I think, flawed – view of what inequality is and how it can be reduced.

He rightly identifies that higher skills are needed to get people into better jobs and help the economy hum along smoothly. In the upcoming book that I’ve edited, Inequality: a New Zealand Crisis, we have two chapters on education and improving skills training.

But Cooper and others tend to stop there. Only things like education, they argue, can reduce inequality while imposing no overall cost on the economy; other measures are too redistributive, too costly, too old-school.

But I think they’re wrong in a number of crucial ways.

First, education doesn’t explain that much about inequality. It’s very often a story of the top 1% pulling away from the rest, and the top 1% aren’t that much better educated than anyone else. In any case, New Zealand has had the western world’s largest increase in inequality, but our ‘degree premium’ – the extra income you get for being educated – is one of the lowest, so that can’t be the explanation.

Second, increasing educational levels does nothing for people in low-skilled jobs who work incredibly hard but don’t earn enough to get by. Cleaners, for instance, will be left to struggle on $14.10 an hour, regardless of investment in skills, so an emphasis on education alone is an argument for leaving those people in desperate circumstances.

Third, and most important, Cooper and others are wrong to think that other pro-equality measures will harm the economy. Ideas like wage-led growth makes the obvious point that if you pay people better, as long as other structures are set up properly, then people work harder – because they feel more valued – and so you generate more income.

There is no good evidence linking higher pay for the general workforce with lower economic growth.

So, arguments like Cooper’s are a good start – but far from enough.

A rather disturbing report on Wellington’s health services shows that central government policies have led directly to people already in poor health getting even lower priority.

‘From Great to Good’, by professor Don Matheson, explains how – under pressure from central government targets – the Capital Coast District Health Board (C&CDHB) has increased spending on hospitals relative to GP and other basic health services.

The report, based on official information act requests, says that the health system already gives less to those at the bottom (despite what the public might think), even though they need more support.

Treasury figures show that an upper middle class household receives on average almost $11,000 of health services a year, whereas the households with the lowest income receive on average $6,000 of health services – despite their greater need.

The latest New Zealand Health Survey shows that one million New Zealanders had “unmet need” for primary health care in the last year – and this is worst among Maori, Pacific and low income groups.

Our health system is less equitable – that is, it does little to help those most in need – compared with those of Australia, Canada, Germany, the Netherlands and the United Kingdom. Only the USA has a more unfair health system.

The sad thing is that before 2008, Wellington’s health board was making progress in narrowing these health inequalities and helping those on the bottom. But since then, the report finds, the board has become focussed on meeting centrally imposed hospital targets.

While getting more operations done is important, it shouldn’t have come at the expense of funding frontline GP, maternity and other services – which have been cut by hundreds of thousands of dollars, and which most affect low-income households.

As the report puts it: “C&CDHB’s direction … decreased in scope and became increasingly focused on the Minister of Health’s targets.

“This narrowing of focus crowded out the previous focus the Board had on equity for the population that it serves. While previously it had led performance in addressing equity, it is now actively disinvesting in the providers that helped secure that leadership position … while at the same time push[ing] costs onto patients who could least afford to pay.”

Another day, another study showing how an unfair tax system is helping widen the gap between the rich and the rest. It’s a US study this time, which finds that the biggest reason for widening wealth gaps 1991-2006 is the capital gains and dividends going to the top 1%.

These kind of windfalls are taxed at only 20% or so, whereas Americans who get their income from salaries can be paying 39%. It’s strikingly unfair, and has been for a long time.

Of course in New Zealand, as a rule you don’t pay tax on capital gains at all, so our system is even more extraordinarily unfair. It also means that whatever figures we have for wealth gains by the top 1% will be massively understated, since we don’t collect data on their capital gains.

The study’s also interesting as it’s another rebuttal to the idea that widening income gaps are caused by things beyond our control: impersonal, global forces like free trade, or the way that technology makes some jobs redundant and others more valuable, or the increasing premium for education.

This study builds on a lot of recent work showing that that’s not so. Take the education story – the idea that inequality widens because people with degrees earn more. It’s a seductive theory, because fixing it sounds so easy, relatively speaking. Just get more people to get degrees: job done.

But if in fact the main problem – as it clearly is in the US, at least – is the profits going to the top 1%, education is not the problem (or the answer). The top 1% are not better educated than the rest of the top third, say, of your average country. This is not about ‘returns to education’, as people like to call it.

Instead, it’s about really difficult but political – not impersonal – choices, about how the tax system treats different classes of people differently. And that’s what needs to be solved.

The Treasury has just released a paper outlining its thoughts on inequality (as part of its wider work on Living Standards). Now, it’s great to see the Treasury acknowledging that it matters how income is distributed – not just how much of it we generate. Unfortunately, it hasn’t quite faced up to the full reality of the problem, which leaves its account very weak, and in places incoherent.

The Treasury says its starting point is “the ability to participate in society”, which is a fabulous place to begin. The whole point about inequality is not just that people need to be lifted above an absolute level; inequality means they are left out of things that other people have, unable to join in with the rest of society, in way that is determined by how much other people have.

Unfortunately, the Treasury doesn’t seem to realise what that really means, because its proposals are then focussed almost entirely around improving social mobility. Now, social mobility is important: people need opportunities to earn more, or to live better than their parents did. But it isn’t enough by itself.

Even if people can move freely up and down the ladder, there is obviously still a ‘down’ – and being in that ‘down’ spot is miserable. To put it differently: even with mobility, there will always be people who are very poor and don’t earn enough to participate in society – even if they are doing useful work. Tamara Baddeley, a woman whose story will be told in the Inequality book, cares for the elderly, is paid $14.81 an hour – and can’t afford to go to the movies. To talk about ‘opportunity’ and mobility’ is meaningless here.

What is needed is direct action to tackle inequality now: action to raise her salary, so that she can participate fully. The Treasury’s view, which seems to be that it doesn’t matter if people are desperately and unfairly poor, as long as it’s not for long, is woefully inadequate – not least because, by its own measure, people need more income – right here, right now, whatever they are doing – if they are going to be able to participate in society (like being able to go to the movies).

In addition, the Treasury seems to have missed the obvious point that if you want to increase social mobility and offer equal opportunities to all, you need greater equality of incomes. To state the obvious, if some people have far more wealth than others, their children will get a much better start in life. In addition, some whole communities become cut off from opportunity because, when poverty is concentrated, there are few jobs going, their communities aren’t adequately invested in, and they become characterised by hopelessness and despair.

The international evidence is that, across countries, more equal societies have better mobility (far more people make it out of poverty in Denmark than they do in the US), and that, across time, as inequality increases, mobility decreases. The US shows this: as gaps have widened, people’s ability to escape poverty has fallen.  Again, the Treasury’s paper fails to take into account this basic point.

Another problem with the paper is that it gives an extremely biased account of why inequality has risen in New Zealand, discussing technological change and different household patterns, but not mentioning little things like lower taxes on the very wealthy and reduced benefits for the poorest. Nor does it mention the decline in union membership, which some overseas research suggests is responsible for up to one-third of rising inequality. The failure to even mention this factor is just staggering.

Still, it’s good to see the Treasury engaging with the issue. As with The Economist’s (similarly partial) special feature on inequality last year, the fact that the issue can’t be ignored now is a huge positive in itself.

I’ve just written a piece for an international project aimed at improving governance – the way countries are run – known as the Sustainable Governance Indicators.

The piece is about our rising inequality, and how it threatens some of the things we hold dear: a relatively free and transparent political system, for example.

It’s here: http://news.sgi-network.org/news/details/1301/the-fair-society-and-its-enemies/ and in an abridged version on the OECD’s site:
http://www.oecdbetterlifeindex.org/2013/01/the-fair-society-and-its-enemies/

Greg Duncan – an American academic with three decades’ experience researching poverty, welfare dependency and childhood development – will be giving several public lectures in Wellington next month about the long-term damage caused by child poverty.

Duncan, a distinguished professor from the University of California, Irvine, has spent his career examining the long-term impacts of childhood poverty on adult productivity, health and wellbeing.

He has investigated the role of school-entry skills and behaviours on later school achievement and attainment, and the effects of increasing income inequality on children’s life chances.

His public lectures are as follows:

Thursday 15 November: 7.00-9.00pm, Public forum on The Cost and Challenge of Child Poverty followed by questions and discussion, St Johns in the City, Willis St

Wednesday 21 November: Lunchtime lecture at Victoria University, School of Government (12.30pm-1.30pm): Solutions to Child Poverty, Government buildings, lecture theatre 2

Monday 26 November: 5.30-7.30, Evening lecture at the University: The Long Reach of Early Childhood Poverty, Rutherford House, lecture theatre 1

Our first talk on inequality at Te Papa, on September 13, was a huge success: a great crowd of well over 200 people, and a fantastic array of speakers setting out all the reasons – personal, social, and economic – why we should worry about the widening divide.

Now, we’re gearing up for the second talk, on October 4, this time looking at solutions. The event blurb is below. All welcome!

Forums for the Future: Between Rich and Poor – the Solutions / October 4, 2012  Soundings Theatre, Te Papa, 6.30-8pm

The widening gap between rich and poor is damaging our families, our economy and our shared social fabric, and threatens our traditional values of fairness and egalitarianism. But we can do something about it. At this event, four leading speakers will discuss the way that education, a stronger economy, fairer workplaces, and a more supportive welfare system could help close the gap between rich and poor.

Speakers:

• Cathy Wylie, chief researcher at the New Zealand Council for Educational Research – on education and its role in reducing inequalities

• Ganesh Nana, chief economist, BERL – on tackling inequality and creating a stronger economy

• Prof Nigel Haworth, Auckland University – on people, work and fair rewards

• Associate Prof Mike O’Brien, former head of the Alternative Welfare Working Group – on tax, benefits and redistribution

The Living Wage campaign launch in Wellington a few weeks ago was a powerful lesson in the way that equal opportunities and equal incomes are inextricably linked.

The highlight of the launch was a speech from Sosefina Masoe, a cleaner. Sosofina, who featured in this Dominion Post story, told how she and her husband are struggling to get by on near-minimum wages: $13.85 an hour for “hard, dirty” work cleaning the Police College.

She and her husband are looking after four grandchildren so that the children’s parents can study “to get ahead in life”. But they don’t earn enough to feed those grandchildren properly, or, sometimes, even keep the fridge running. Bills are mounting up every day.

What’s especially powerful about the Sosefina’s story is that, even if some respondents to the Dominion Post story questioned whether there should be so many children in the family, and asked how much money was sent back to Samoa, in all other respects the Masoes are following the American – or even Kiwi – Dream template.

They are working incredibly hard – including 12-hour stints on Sundays – and have very few if any luxuries. “We never go for a movie – or a holiday,” Sosefina said at the campaign launch.

Above all, they are intensely ambitious for their children. Sosefina and her husband recognise that they themselves are unlikely to change jobs, because they can’t afford to take the time out from working to study: “My husband and I talk about how we could do something different, but we are stuck in cleaning jobs on low pay.”

But they are giving up their own happiness so that their children can get better jobs. “I care for my four grandchildren because I told their parents to study [in order] to make a better life.”

If they earned a living wage, that money would, Sosefina said, go into paying for their children’s education, or to basics, like better food so that their children and grandchildren won’t get sick.

The point here is that the Masoes believe firmly in equality of opportunity, in trying to get ahead, in moving up the ladder – but those very opportunities are being severely impeded, to say the least, by an inequality of outcome, in this case, low pay.

When people are earning less than enough to live well on, they can’t take advantage of the opportunities that theoretically exist – not without an extraordinary, and probably damaging, sacrifice.

So even if the only thing that you care about is creating more opportunities, you can’t ignore the need for better, and fairer, pay.

The latest Roy Morgan poll, released on Friday, shows National’s lead continuing to fall and economic concerns dominating all others.

But deeper down in the figures is something far more interesting, and in a way surprising: the gap between rich and poor is worrying more and more New Zealanders, and now bothers twice as many people as it did a year ago.

Roy Morgan’s figures show that around 18 months ago, in November 2010, just 3% of the population said that “poverty, the gap between rich and poor, and/or imbalance of wealth” was the most important issue we face as a country.

By April this year, that figure had hit 10%; it’s now at 8%. So despite a slight fall-off, or poll wobble, twice as many people now have inequality in the front of their minds.

That’s surprising in a sense, because after a barrage of columns, debates and newspaper articles on inequality last year, media attention seemed to me to have diminished this year, as the continuing world crisis focused minds on more basic issues, such as where on earth economic growth is coming to come from now.

But of course coverage doesn’t always reflect reality. And the figures may show a growing realisation that people on low and average incomes are just still struggling, with little hope in sight, while others seem insulated from the economic malaise.

The last round of tax cuts, after all, gave someone on $150,000 an extra $135 a week, but just an extra $35 a week to someone on an average wage. So those tax cuts, which are now just starting to be felt, have increased the gap between rich and poor by $100 a week.

People may have registered, too, that CEOs are still doing extremely well (albeit their pay increases have stalled), without always an obvious justification. Telecom’s Paul Reynolds is getting a $1.75 million severance package, for example.

They may also have twigged that asset sales, whatever your view of their general merits, stand a good chance of transferring collective wealth into a relatively small number of hands, given that most people will struggle to spare the cash needed to buy them.

The key annual report on inequality, Household Incomes in New Zealand, is slated to appear in August. If that shows a widening gap between rich and poor (after last year’s slight narrowing thanks to poor stockmarket returns for the rich), we can expect the chorus of concern to grow even louder.