Thursday, August 28, 2008

Social report makes assumed value judgments

The NZ Herald reports on the Ministry of Social Development's 2008 Social report which produces statistics of "social indicators" to determine if things are getting "better or worse". The headline was that the "rich poor pay gap is shrinking". This is measured by a simple ratio of the earnings of the top 20% of income earners over the bottom 20%. It doesn't measure whether the bottom 20% are in abject poverty or quite comfortably fed, clothed and housed, what it does measure is the envy ratio.

Apparently the "rich" (a word Idiot Savant and others on the left are addicted to using as a term of implied abuse) are earning 2.6 times that of those in the "poor" category, a drop from 2.7 the year before. That is apparently "good". Why? I'm not sure. After all it could mean the bottom 20% have bettered themselves, but it could also mean the top 20% have suffered a decline in living standards. Both are quite different. However you need to believe that this matters. If the top 20% earned 10 times the bottom 20% it could indicate their success, and indeed in London I am sure the ratio is bigger because of the relative success of the financial sector in attracting people who earn very high incomes. It only matters if you believe that wealth is distributed not earned. If you believe that wealth is something dished out by someone powerful, not something received for producing or trading value. However, I wouldn't expect someone in the Ministry of Social Development to understand this as none of them do this.

Let's see some other "improvements". Qualifications at bachelors degree level or above have increased. This of course could be meaningless. Germany is overflowing with graduates, but many have few business skills, and it hasn't helped Germany increase its net wealth - how useful are these degrees, how good are they? How literate and intelligent are the graduates? Who knows??

How about things that have gotten worse? "Housing affordability" has a flipside, which is capital assets of those owning their homes. However, the property market is now correcting itself somewhat, improving affordability but damaging the capital people have tied up in their homes. Winners and losers whichever way the market goes, which raises the issue as to why affordability is better than asset valuation.

Then something that hasn't changed - "potentially hazardous driving", which of course can be anytime you actually drive above 20 km/h, since driving is by its very nature "potentially hazardous". Perhaps it means speeding, but then again how does anyone really know this? There isn't real time monitoring of every driver all of the time.

Then "obesity" hasn't changed. Which of course isn't true, as it has changed for thousands, as many have seen it increase others decrease - but if you're a collectivist thinking bureaucrat you find that impossible to manage so you average it out (presuming you know the facts around people's weights).

So I ask the question, what does the report usefully do? It's useful if you're a statist and want to know how to intervene in a wide range of areas, but beyond that it is just a snapshot. Ruth Dyson will use it to show "Labour is good" by saying "it showed New Zealanders overall wellbeing was improving".

Funnily enough most people focus on improving their own wellbeing as a matter of course - and it's the government that likes to take away a third of your income while you do that. Imagine how much wellbeing would improve if the government took less.

1 comment:

Mr Dennis said...

Good post. We shouldn't be focussing on the gap, but rather the condition of the poor. The richer the rich get the better - they then employ more poor people.

If someone gets rich enough to afford a private yacht for example, they employ or enable the employment of:
- Crew for the yacht
- Mechanics to maintain and repair it
- Staff at the docks they visit
- People to manufacture a yacht and associated items
These are jobs for poor people that would not exist (or less of them would exist) if rich people didn't buy yachts.

If the rich get rich, this is great for the poor overall. The state's role can be to ensure the poor are not in abject poverty, but shouldn't be to attempt to equalise everyone and take away the motivation for personal achievement.