Inequalities in health have to be seen against a background of economic inequality.
(Atkinson 1999, p 283).Introduction
Compared to other OECD countries, New Zealand moved particularly rapidly in deregulating its economy in the 1980s, undertaking far-reaching social and economic reforms, and having the fastest growth in income inequality (Statistics New Zealand 1999). Income inequality rose most notably in New Zealand in the late 1980s during a major economic recession, but it did not fall during the subsequent economic expansion in the mid-1990s (O'Dea 2000). Thus the increase in income inequality appears to have been driven by structural changes to New Zealand society, which persisted after the economic recession.
There is some agreement among researchers about the reasons for about half the increase in income inequality; the reasons for the remaining increase in inequality are less easily identified. Changes in the 1980s to the taxation system appear to have been regressive, although removing tax loopholes and increasing company tax may have partially offset this effect. The rise in unemployment from the late 1980s contributed, but the most significant factor appears to have been the increase in income inequality among the employed as shown by the widening income differentials by occupation, education and hours of work.
At a household level, there has also been a reduction in the number of households where a bread-winner supports another adult and children, resulting in an increase in work-rich households, where both adults work and work-poor households where no adults are in paid employment (Callister 1998). There has also been a change in household composition, with the growth of sole parent households and older households without children. During the late eighties’ recession, more people relied on government benefits as a source of income (Stephens and Waldegrave 1996). In 1991, the Government reduced welfare benefits, which also had some impact, though small, on income inequality (Statistics New Zealand 1999).
In consequence of these changes, income inequality has increased in New Zealand over the past two decades. Middle-income families have fallen in number relative to both lower-income and higher-income families. Over the period 1986 to 1996, household disposable incomes actually fell in real terms in most deciles, but increased substantially in the top two deciles. Low-income households lost proportionately less of their income than those in the middle-income range (Statistics New Zealand 1999), but were often more vulnerable to begin with.