Friday, January 06, 2012

Aotearoa/New Zealand and income disparity

Christchurch is atwirl at council CEO Tony Marryattt’s recent pay rise of 14.4% adding $68,129 to his salary of $470,400 to $538,529 a year, backdated from July 1 last year. Marryatt's annual salary package has increased 45 per cent during his four years at the council, beginning at $370,825. Nice work if you can get it...

Some would argue this outpouring of rage is nothing more than envy, but surely we can accept some people deserve more pay than others but retain our right to be outraged at how much moolah some managers manage to make, particularly in times of economic downturn?! Another rebuttal is that running such a beast as a modern council or corporation is much harder now than it was, say, in the 1970s. But cast your mind back to old school offices, pre-xerox, pre-PC, bottles of twink for endless typos, a secretarial pool...


Imagine trying to run a post-disaster city with that sort of technology.

I believe the growing income disparity in Aotearoa is corrosive. It rots whatever collective membership we may pretend to still have in the economy. Insisting that there is an international market force compelling CEO's to accept ever-increasing amounts to manage or mismanage their fiefdom (which is actually, in the case of Marryatt, our city) is a nonsense. The data shows a lot of variation, not least because of the range of methodologies employed. Wikipedia does pronounce that in 2005 the U.S. had the highest ratio of 39:1 CEO's compensation to pay of manufacturing production workers. Britain was second with 31.8:1; Italy third with 25.9:1, oh and look, Aotearoa/NZ fourth with 24.9:1.

That Marryatt was holidaying in Australia during the latest series of significant earthquakes epitomises a vacumn of leadership in this instance. But in many ways it hides a multitude of inequities. Consider John Key, a millionaire prior to politics (he was a money trader, not exactly the 'businessman' some have made out)...




Source: The Economist


Daron Acemoglu notes that economists rarely focus on  CEOs because i), there aren't that many CEOs or multimillionaires meaning that when you take, say, a 1% sample of NZ households you’re not going to get many, and ii), data are 'top coded' meaning you don’t actually see people’s exact earnings.Therefore a lot of the economics literature has looked at things like, do people with university degrees earn more than high school graduates, or do postgraduates earn more?
Brian Easton has compared NZ ineqaulity (using the 'Gini co-efficient')...

Income equality in the OECD countries (Source: Brian Easton. 'Income and wealth distribution - Factor income', Te Ara - the Encyclopedia of New Zealand, updated 26-Nov-1)




So as a country, we less equal than most other coutnries we like to compare ourselves to (especially Scandinavia and Australia).


Data on Maori income distribution is, again, quite limited. Te Ara offers the following graph, skewed, I assume, by NZ men earning considerably more than NZ women (again, corporate positions are predominantly held be men) as tane do earn more than wahine:








Dixon and Mare (2004) have published a detailed (and highly technical) paper on 'Understanding Changes in Māori Incomes and Income Inequality 1997-2003'.



Interesting paper by Sin and Mare (2004) on 'Māori Incomes:Investigating Differences Between Iwi' who find that policies aimed at improving Māori incomes may be more cost-effective if they target specific iwi. Biggest causal factor, and no surprises here, is qualifications.

Median real incomes summary (2001 $s)




Median real incomes of large iwi (2001 $s)



Despite ongoing promotion of a Maori economy discourse, and significant discussions regarding the post-settlement environment, improving Maori incomes must surely lie with the wider NZ economy, placing great emphasis on education and training strategies in a domestic climate of volatile economic contexts and a global context of economic contraction. We've not managed it well this far...
Readings
'Tax and equity' by Brian Easton, one of several (linked) analyses of the New Zealand context.

'The growth of executive pay' by (and I love these monikers!) Lucian Bebchuk and Yanev Grinstein (2005).
'Anatomy of the 1%' by David Moberg

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