Fact 7: Economic growth alone does not solve poverty

  • Economic growth alone will not necessarily address poverty and inequality
  • The gap between the rich and the poor is large and shows little sign of declining.
  • There are more people in poverty now than there were in the 1980s
  • Income disparities between Māori, Pacific peoples and Pakeha remain high

Economic growth alone will not necessarily address poverty and inequality

It is certainly true that when economic growth falters and unemployment increases, thousands more people are plunged into poverty. However, it is now widely recognised that poverty is not automatically solved by economic growth.

“Growing the (economic) cake” does not necessarily mean that everyone receives a larger slice. Recent evidence from the World Bank and from the IMF recognises the need for growth to be “pro poor” if it is to make an impact on poverty and inequality. This means that economic growth needs to be accompanied by policies that reduce inequality by redistributing wealth (e.g. cash payments to the poor that help them access health care and stay in school).

The gap between the rich and the poor is large and shows little sign of declining

New Zealand is now a far more unequal country than it was a generation ago. Over the past three decades New Zealand has gone from being one of the most equal to being among the most unequal countries of the wealthy OECD countries.  In those 30 years, incomes for the average of the top 10% income earners doubled while lower and middle incomes barely increased.

The Working for Families income support package introduced in 2004 had some impact with income inequality falling slightly for the first time for nearly twenty years, but since then inequality has tended to increase again, reaching its highest level in 2011.

There are more people living in poverty now than there were in the 1980s

Poverty levels are also much higher during the early 1980s. Child poverty is almost twice as high and other groups are affected particularly severely:

  • sole-parents with dependent children (almost half are in poverty)
  • single-adults (a quarter are in poverty)
  • households reliant on social welfare benefits.72

Income disparities between Māori, Pacific peoples and Pakeha remain:

The gap between Maori, Pacific and European incomes continues to grow. For example, the average weekly income from wages and salaries in the June 2013 quarter was $863 for European/Pākehā, $767 for Māori, and $712 for Pacific people.

Wealth disparity is huge

The most recent available information from a study published in 2007 reported that the top 10% of wealthy New Zealand individuals own over half of New Zealand‟s total net worth, and nearly one fifth of total net worth is owned by the top one percent of wealthy individuals. At the halfway mark, the bottom half of the population collectively owns a mere 5 percent of total net worth.

Pacific people are the cultural group with the least wealth with two thirds having net assets of less than $16,000 and one tenth have negative net worth (i.e. in debt).