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The application of John Rawls difference principle to New Zealand
07 Jul 2014 Leave a comment
in applied price theory, income redistribution, politics - New Zealand, Rawls and Nozick Tags: difference principle, income distribution, John Rawls, Maori economic development, Pasifika economic development
An urban legend in New Zealand is that income inequality is going from bad to worse.
Since the mid 1990s to around 2011 there was a small net fall in New Zealand’s income inequality trend line in the graph for the Gini coefficient for the income distribution for New Zealand shows. inequality in New Zealand is similar to that in Australia, Ireland, Canada and Japan.
Source: Ministry of Social Development (2014)
Taxes and transfers have reduced inequality in New Zealand when measured by Gini coefficients, but the trend is been relatively stable for many years.
Source: Ministry of Social Development (2014)
Rawls pointed out that behind the veil of ignorance, people will agree to inequality as long as it is to everyone’s advantage. Rawls was attuned to the importance of incentives in a just and prosperous society. If unequal incomes are allowed, this might turn out to be to the advantage of everyone. Robert Nozick said that:
Political philosophers must now either work within Rawls’s theory or explain why not.
The groups that have been doing best in New Zealand have been Maori and Pasifika. In real terms, overall median household income rose 47% from 1994 to 2010; for Maori, this rise was 68%; for Pacific, 77%!
Source: Ministry of Social Development (2014)
The large improvements in Māori incomes since 1992 were based on rising Māori employment rates, fewer Māori on benefits or zero incomes, more Māori moving into higher paying jobs, and greater Māori educational attainment (Dixon and Maré 2007).
Maori unemployment reached a 20-year low of 8 per cent from 2005 to 2008. Labour force participation by Maori increased from 45% in the late 1980s to about 62% in the last few years.
Most of the remaining income disparities between Māori and non-Māori flow from differences in educational attainment and demographic and socio-economic characteristics including household composition (Chapple 2000; Maani 2004; Dixon and Maré 2007).
How much of the massive increases in incomes over the last 20 years spread throughout the entire community are you willing to give up for a little more equality? How much of your income will you donate to charity to lead the way?
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Utopia, you are standing in it! 
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