Lessons from the upwardly mobile
New Zealand’s rich list was unfurled this week—unsurprisingly, with the rich getting richer. And the poor? Well, while it doesn’t make for a catchy a headline, they’re actually slightly richer too, according to the recently released annual household income report from the Ministry of Social Development.
So while some commentators took this news as an opportunity to grumble not only about the existence of the rich but also the gap between the rich and the poor, perhaps their time could be better spent looking at how the rich listers climbed to the top of the ladder in the first place. Focussing on the journey from rags to riches—what those in the policy circles call upward social mobility—can help us understand how to help more people escape poverty.
Some rich listers, like New Zealand’s richest man Graeme Hart, a truck driver and panel beater at sixteen, clambered up rung upon rung to the top by building profitable enterprises. Others however, like the Todd family, were essentially born up there, inheriting generations-old corporations. This shows how mobility can be either within or between generations. In other words, it can be intra-generational: looking at how people become richer within their lifetimes like Hart, or inter-generational: looking at how children become richer than their parents, like the Todds.
A fascinating study from the “land of opportunity,” comparing inter-generational mobility outcomes between different US cities, found that there were four significant factors that led to kids earning more than their parents. Cities where poorer families were dispersed among middle-class and richer families tended towards higher mobility, as did ones with more two-parent households, better-performing schools, and more civic engagement—membership in churches and sporting groups for example. Surprisingly, these factors mattered much more than higher tax rates on the rich or tax breaks for the poor.
Research in New Zealand by Treasury suggested not only that a ladder of opportunity exists in New Zealand, but that Kiwis are climbing it too. Looking at the intra-generational aspect by following the same people for seven years and recording their incomes annually, it found that over three quarters of those on the bottom income rung had scaled higher by the end of the survey. This is good news.
Sadly, this also means that around a quarter stayed put—and these are the people we really need to look out for. We all need to do our bit to help our friends and family escape poverty, it’s not simply a job for the government. If the factors in the American study hold true here in New Zealand, we need to think carefully about where we set down roots, encourage deep and stable relationships in our communities, and put our energies in groups that share and instill a vision and passion for life.
Whining about the rich is the easy way out, and taxing them isn’t much better. Instead, let’s show some real compassion to those doing it tough by firstly learning what works, and then getting in there and offering a helping hand ourselves. It’s a lesson we all need to learn