Editorial: The deepening argument about the widening pay gap

Gareth Morgan announced his new party's policy outside John Key's mansion in Parnell, Auckland.
JOSH FAGAN/FAIRFAX NZ

Gareth Morgan announced his new party's policy outside John Key's mansion in Parnell, Auckland.

Say something is "unfair" and a stiff argument will always follow.  And the most damaging form of unfairness is the double standard.

So the claim that district health boards are being hypocritical over junior doctors' pay is especially wounding. How can DHB bosses be preaching austerity to the young doctors, asks the Salaried Medical Specialists' union, when they averaged a 2.6 per cent pay rise? And how come they got this kind of rise when the average public sector chief executive got only 1.3 per cent?

These are hard questions and it's not obvious that the DHBs can answer them. The point is not that reducing the DHB bosses' salaries would free up the money needed to pay the junior doctors. If Health Minister Jonathan Coleman is right in saying that the doctors' demands would cost $60 million and require 160 extra doctors, the pay cut would go nowhere near it.

What stings is the unfairness and the unjustness of the double standard. And in the intensely political battle over junior doctors' pay, the DHBs are already on the back foot. The evidence does strongly suggest that the doctors are overworked and that there is a risk to patient health and safety as a result.

The double standard just rubs salt in the wound.

The reason the wound is raw is that inequality and unfairness over pay have become one of the weeping sores of modern politics. This has taken various forms in every advanced English-speaking country, for it is the market revolution among Anglo-Saxon nations that has widened the pay gap most spectacularly. It is there that the argument is most heated.

Economist Gareth Morgan makes the wider economic point on the same day that the union is crying "unfair" over doctors' salaries. New Zealanders recognise the need for fundamental change to end the "crazy inequality ladder" the country has been climbing "since the neoliberal experiment failed to deliver 'trickle down' ", Morgan says.

Some proponents of Rogernomics and its daughter-disciplines claimed that the revolution would make incomes more equal, not less. History has proven them wrong. So what should be done about it?

Morgan rightly points to the unfair impact of a tilted tax system which clobbers salaries but leaves capital gains largely untouched. Whether there will be a real change here, however, seems unlikely. National pretends that its tax regime on housing is a kind of capital gains tax for speculators; Labour has formally abandoned its previous policy of a capital gain tax on houses apart from the family home.

British and American politicians have sought to put a cap on sky-high incomes. Labour leader Jeremy Corbyn said this week that under Labour no business would gain a British government contract if its boss earned more than 20 times as much as its lowest-paid worker. US Democratic Party contender Bernie Sanders proposed a 100 per cent tax on incomes over US$450,000.

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Caps on the highest salary could collide with the market necessity of paying higher salaries for special skills. But the evidence is overwhelming that inequality has risen too much. The question is: how is the problem to be tackled?

 - Stuff

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