Given the nation’s high levels of income and asset inequality, why do so many New Zealanders oppose wealth redistribution? Professor Philip Nel argues it comes down to the perceived fairness of our society, but questions when that will run out.
One of the perennial puzzles about New Zealand is why voters do not oppose inequality more, given the country’s alleged egalitarian tradition, and relatively high current levels of income and wealth (asset) inequality.
While income inequality in New Zealand is today not much higher than in the 1930s, it has worsened in the 1980s and 1990s from low post-World War II levels. More disturbingly, asset inequality has increased a lot over the past two decades, with rising house prices excluding many potential buyers from the market.
So, why are New Zealanders not more in favour of equalising redistribution?
What deepens the puzzle is that it is the middle and working classes, those who will benefit most from redistribution, who seem to eschew it.
While many have wondered about this, few have undertaken a comparative study of New Zealand to see how much, and why New Zealand inequality attitudes differ from those of other OECD countries.
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There are many explanations why citizens of both developing and developed countries tolerate inequality. At the most general level, psychologists have identified a general status-quo bias, making people accept that status quo as the way the world is supposed to be.
In highly religious countries, the status quo is also associated with the will of the divine. Political scientists and economists have pointed out that income and wealth inequality are complex phenomena and that citizens cannot be expected to understand these complexities fully. Some have argued, in addition, that the ideological hold of popularised neoliberal understanding of the economy cannot be underestimated.
I prefer to refrain from seeing voters as being the ignorant victims of popular ideologies. Instead, based on cross-national experimental research, I argue people in general are more concerned about issues of fairness than about relative inequality. It might be that people are not very well-informed about their own position on the income ladder, but what they care about is whether the processes that allocate positions on the ladder are fair, broadly speaking.
The American author John Steinbeck once commented that poor people in the USA tolerate inequality because in their own minds they are “temporarily embarrassed millionaires”.
While the American dream of equal opportunities is today far from the truth, there is still widespread belief that through hard work and initiative, one can advance in life. This, I venture, also holds for New Zealand.
For much of the post-Depression 20th century, successive birth cohorts of New Zealanders have seen how their own educational and financial achievements have outstripped those of their parents. Since World War II, inter-generational social mobility in New Zealand was among the highest in OECD countries, with the baby-boomer generation probably being the biggest beneficiaries, but people born in the 1960s, 1970s, and 1980s also experienced New Zealand as an economy that provides opportunities for a “fair go”.
New Zealand lies at the lower end of the OECD ‘Great Gatsby curve’ (which traces the persistence of privilege between generations). Not surprisingly, New Zealanders are among the OECD respondents who are most tolerant of inequality. This extends across class, gender, and ethnic lines (Māori are only marginally more pro-redistribution than Pākehā).
The sociologist Peter Davis in 1979 concluded that based on the limited data at his disposal then that people did not experience New Zealand as a rigidly stratified society. Today, we have much more extensive survey data at our disposal.
Using the rich comparative data of successive waves of the World Values Survey covering the period 2000 to 2020, I have tested a model in which the preference of the individual respondent is determined by both individual level factors such as gender, income, level of interest in politics, self-placement on the left-right political spectrum, and perceptions of the fairness of one’s own society, and by national characteristics such as average intergenerational mobility.
Of all the explanatory factors, different measures of perceived and actual intergenerational mobility emerge as significant predictors of the inequality and redistribution attitudes of New Zealand respondents.
As predicted by the POUM hypothesis (Prospects of Upward Mobility) suggested by Albert Hirschman in the 1970s and developed by Thomas Piketty in the 1990s, respondents who have had experiences of social mobility, and/or perceive their society to provide such opportunities, are more tolerant of inequality and more sceptical of the potential efficiency costs of redistribution.
It is an open question whether the perception that New Zealand is a fair society will continue among the generations that have become politically savvy after the 2008 financial crisis. It is worth noting that Hirschman pointed out that the tolerance gain from POUM cannot be expected to last forever.
When people observe that only some in society consistently gain from economic processes, while they remain stuck (and even regress), their willingness to tolerate inequality may eventually run out.
We need more fine-grained data on actual and perceived mobility in New Zealand to determine whether post-1980 generations of New Zealanders are as sanguine about their prospects for upward mobility as their parents and grandparents.
Philip Nel recently published an article on this subject in Kōtuitui: New Zealand Journal of Social Science Online.