The government will soon deliver its much-publicized well-being budget.
It was announced the budget would look at measures outside of traditional markers such as gross domestic product (GDP) to measure progress.
Photo: reb
A team of researchers at Massey University have developed their own measure of social progress, they call it the shared prosperity index, which they hope will help policy-makers.
The project leader Professor Christophe Schumacher, from the School of Economics and Finance, says the shared prosperity index was a six-year project.
“It actually started off with me having a little chat with Bill English. And in a talk he had mentioned how prosperous New Zealand is and how well we are doing. And I had pointed out that while we're doing very well, not everybody sort of participates in that growth.
“He had mentioned that I might have got my numbers wrong. And I thought maybe I need to quantify and visualize how well we share the wealth that we create throughout the different sections of society.”
So, he and his team spent the next six years constructing the index which looks at how evenly, or otherwise, the national pie or “pizza” is divided.
“Our shared prosperity index looks on the slices of that pizza, do some people get a bigger slice to some parts of society get a very small one and where are the problem areas?”
Schumacher says the index makes no judgements about how that pizza should be divided.
“We are living in a free market economy, so we don't say we want equal shares for everybody, that is not good for our economy, nor our society. We refrain from making a judgment of what the level of sharing should be.”
The index consists of eight dimensions; ranging from income to wealth, to health, to education, to housing to safety and security, he says.
A composite index of all these is then formed between zero and one - where one indicates we share everything and zero we share nothing, Schumacher says.
“What our index shows is that back in the ‘80s, we had the value of about 0.71. Then we dropped after the time of the market crash and reforms in New Zealand, to about 0.4.
"We shared a bit more when the economy did well, then during the global financial crisis we dropped again and we're currently still sort of that on a slightly downward trend to about 0.48.”
One trend he has noticed from the data is that since the recovery from the 2008 crash, sharing has not risen commensurately.
“Drilling down we do see in 2000 an increase in our index from about 0. 46 to 0.53 so yes, starting with 2000 until the global financial crisis in 2008 we actually do see a jump, an increased level of sharing in our index.
“It drops down then during and after the global financial crisis, and hasn't quite recovered since.”
Societies that are less equal tend to perform more poorly than their more equitable counterparts, he says.
“There's enough research out there that shows that societies with large level of inequality don't grow as fast, it promotes more violence and you have more health issues in a society, so there are a few reasons where we say, even if we want businesses to do very well, there's still a reason for sharing as part of a growth path.”
Prof Schumaker hopes his index will help guide governments
“I hope we can see our index as a complement to what the government does because we need both. We first need to figure out how much wealth or well-being is there in the nation, but we can't be just happy if only small parts of society benefit from all this prosperity.”
And he sees any move away from single measure approached such as GDP is a positive.
“GDP itself is no measure at all, GDP measures how big your pizza is. It doesn't say anything about distribution.
"It doesn't tell us how many hours do people have to work to make ends meet, how many people live below the poverty line, what's our access to education and healthcare, these things are not answered by GDP.
"It is just one measure in our index, it is one out of eight dimensions. The other seven measure these things that are outside a market-based transactions, but which contribute greatly to our idea of well-being.”
