It’s time to talk about NZ’s racial wealth gap
“No one should have to beg for their next meal. No child should be experiencing poverty. That kind of inequality is degrading to us all.”
Those three sentences were the opening to the substantive portion of the Speech from the Throne opening the 52nd Parliament at the end of last year, delivered by the Governor-General on behalf of the coalition government. Traditionally, the speech is meant to set the political agenda by outlining the government’s plans for the three years ahead.
Later in that same speech, the new government pledged it would work to ensure equality of opportunity for Māori in health and housing, education and employment.
Addressing these twin issues of inequality and injustice, for all New Zealanders and for Māori in particular, is the Ardern government’s loftiest political aspiration. It is for that reason that our collective silence on the racial wealth gap is so puzzling.
When I say ‘wealth’, I mean all the assets you own, minus all the debts and liabilities which you have. It includes the house you (may) own, your car, your investments, and the savings you’ve accrued. Generally when comparing wealth across groups in society, you compare the ‘median’ individual - the person who half of a specified group is wealthier than, and half of that group is poorer than.
In 2015, the median NZ European had $114,000 of wealth. The median Māori had just $23,000. That’s a gap of $91,000.
The reason we don’t discuss the racial wealth gap is because it is uncomfortable to do so.
Any inequality negatively affects economic growth in rich countries. This is for a variety of reasons. Most prominently, the price of higher education is driven by the wealthy, as they are the majority of students and can afford higher prices. This leads to poorer members of society being locked out of higher education and professional development. We can see that dynamic already, given that only 9.1 percent of Māori had a Bachelor’s Degree or higher in 2013, compared to 18.6 percent of NZ Europeans.
Because Māori people are on average less able to access education opportunities there is less innovation and productivity in the economy. That slows down overall economic growth, which hurts everyone in our society.
According to recent research, life expectancy is lower and rates of infant mortality, obesity and mental health issues are higher in states with greater inequality. In 2013, life expectancy was just 73 years for Māori men and 77.1 years for Māori women. For non-Māori males it was 80.3 years, and for non-Māori females it was 83.9. In other words, inequality between Maori and NZ Europeans contributes to Māori losing seven years of their lives.
Wealth inequality is also toxic for social cohesion. Māori experience low incomes and wealth, but can see that white New Zealanders on average suffer far less economic affliction. As a result, many Māori are likely to conclude that our political and economic system is structured in a way that disproportionately benefits white New Zealanders. Once that conclusion is made, engaging with that system becomes unattractive - making it even less likely that the system will be structured to support Māori in future.
These concerns - inequality of education, health and social engagement - are the Māori-specific concerns focused on in the Speech from the Throne. Each have their roots in the racial wealth gap, yet the gap itself was not mentioned once. Indeed, that gap is totally absent from the rhetoric of any politician or party. It only rarely arises in our discourse, solely through the work of writers like Max Rashbrooke or organisations like Business and Economic Research Ltd (‘BERL’).
The reason we don’t discuss the racial wealth gap is because it is uncomfortable to do so. Discussing the fact that Māori are more likely to be mired in poverty than NZ Europeans is easy, because we have familiar and trusted public policy solutions for poverty. Indeed, the most effective ways of addressing poverty are those which have universal applicability - benefiting all in society, and thus drawing support from all in society.
In order to gain wealth, it is crucial to have wealth in the first place.
Addressing the racial wealth gap is different. It requires us to acknowledge that past approaches have fundamentally failed. Even the reparations we as a society pay through Treaty of Waitangi settlements haven’t been enough to level the playing field. This challenge compels us to expand targeted measures to eliminate not just poverty, but Māori inequality and comparative weakness altogether.
Doing so requires confronting inevitable backlash from parts of New Zealand who see targeted support for Māori as ‘reverse racism’. That’s an understandably unappealing prospect for political parties stuck in a desperate fight for every last vote. Even socially-conscious non-politicians are unwilling to address the racial wealth gap because they don’t want to jeopardise the success of other policies or issues by tackling such a difficult topic.
But if we don’t have the courage to stand up to those reactionary parts of our society, then the problem will get exponentially worse. That’s because in order to gain wealth, it is crucial to have wealth in the first place.
For example, the simplest way to create wealth in New Zealand is currently to purchase a house. Steadily increasing house prices make it a solid investment with a high return. Yet purchasing a house requires having enough wealth in the first place to afford the deposit.
In other words, that absence of initial wealth locks most Māori out of the housing market - and prevents them from accessing the most powerful wealth creation tool the New Zealand economy offers. Only 28.2 percent of Māori New Zealanders own their own house, half of the percentage for NZ Europeans.
Similarly, a large amount of initial wealth is required to support those starting their own business. Whether to purchase property, hire staff, or support yourself while you move from guaranteed paid work, having significant wealth from the outset is crucial. Without that initial wealth, entrepreneurship is nearly impossible - barring Māori from accessing another wealth-creation tool.
Even the wealth-creation power of interest on savings or return on investments is hugely exacerbated the more wealth you have.
The less wealth Māori have initially, the less chance Māori have of gaining wealth going forward. By contrast, the greater wealth possessed by NZ Europeans now means that they will continue to have access to all of these tools of wealth creation - ensuring that our racial wealth gap will continue to grow.
That’s borne out by the statistics. In 2003/2004, the wealth of the median NZ European was $86,900. For the median Māori, it was $18,000. That means that in the 11 years between 2004 and 2015, the wealth of the median New Zealand grew by $27,100, while the increase for the median Maori was only $4,900.
Our racial wealth gap tells us little about the day-to-day reality of facing regular discrimination, racial profiling or stigma. It tells us little about the pain of seeing national figures erasing the history of colonisation in New Zealand, or of settling Treaty of Waitangi claims for far less than the value of what was stolen.
However, our racial wealth gap tells us a lot about why Māori earn, own and educate less than NZ Europeans. And if we continue to omit to take substantial action to address the gap, or even to consider it in our national discourse, we can be sure of two things. One, we’ll never be able to fix the inequality of opportunity that afflicts Māori. Two, our racial wealth gap will continue to get wider and wider.