Monday, 24 March 2014

A terrific compendium of social analysis

I only came across the OECD's Society at a Glance 2014 publication by accident - I was so irritated by a piece of isn't-it-awful handwringing from Radio New Zealand that I went to consult the report they cited at its source - but now that I've gone through it, I can't recommend it highly enough. If you've got any interest at all in how the GFC affected societies, what the effects of policy responses were or should have been, or more generally in longer-term issues of social and economic policy, this is a corker of a compendium. Across a wide variety of topics it offers its own analysis, data links, and recommendations on further reading. It's not perfect, but it will certainly get you thinking.

You don't need to take my word for any of this: you can download the oracle itself here. And, if you want to play with a very neat online tool that enables you to compare any country with the OECD average across a variety of dimensions, go here (it's at the bottom of the web page). I've blogged before about how the OECD website has gone from an addled mishmash to a slick resource: here's another example of how good it's got.

I've picked out some of the things that I found especially interesting - the design of transfer systems and some of the associated political issues, the impact of the GFC on inequality, our relative performance on employment and unemployment - which means that this is a longer blog post than usual. And I need to explain why I thought the Radio NZ piece was inadequate, which has made it longer still. So while I normally try to keep posts a manageable size, this time round I've had to use that 'over the fold' feature. Here goes.
The chart which follows shows how progressive the transfer system is across each of the OECD countries. There's a little "reading note" beneath the graph which explains how to interpret it, which may be a bit hard to read, so here it is writ larger: "Reading note: In Portugal [as an example], the average total transfer payment received by low-income families (in the bottom 30% of the income distribution) is 71% of the average payment across all families, and less than half of the average benefit payment received by high-income families, who receive 52% more than the average family".

The OECD was making the point that if your transfer system is already well targetted to reach the poorer groups, any austerity-style cutbacks will hit the poorest most. Fair enough. But what struck me was how effective, by international standards, New Zealand and Australia (and a few of the Europeans), way over on the right of the graph, have been in making sure that the transfer system sends the money to those that need it most. I'm not saying the funds are adequate, or that we shouldn't do more, but I am saying that what we do is aimed overwhelmingly at those in most need, and not frittered on middle-class welfare.

Unlike the situation in Italy, Greece, Portugal and Spain, and to some extent France, where the better off fare better from transfers than the poorer do - a highly expensive and regressive system, at least in part due to politicians creating a favoured clientele of insiders. Interestingly, the local populations know full well what's going on. Look at this.

The 'x' marks show how satisfied local populations are with the way their welfare systems address inequality and poverty. And sure enough, Greece, Italy, Portugal, Spain and France are all rated badly on that dimension. The local citizens are perfectly capable of spotting that the health system (the orange squares) may be quite good (in France, say) but that the social welfare transfer payments are a rort for the better off.

Next - inequality. How, do you reckon, the GFC has affected income inequality? And how does New Zealand compare with what happened elsewhere? Maybe you'd guess that because the lower skilled tend to fare worse in bad times, inequality would have risen here, and maybe everywhere?

Here's the picture, from Figure 5.1 of the report. The first graph below shows the Gini coefficient for the income distribution of each country, as well as the ratio of the income of the top decline to the bottom decile, and the second graph shows changes in the income distribution over the GFC period, on both a market income basis (what people earn, gross) and a disposable income basis (after taxes and transfers). Personally I think the disposable basis is usually the more relevant for assessing outcomes.

In the top one, you'll see that New Zealand's income inequality is marginally more unequal than in the OECD as a whole (but marginally more equal than Australia's). And in the bottom one, you get to the really interesting bit. On a market incomes basis, through the GFC nothing much happened to market income inequality in New Zealand (or Australia), whereas market income inequality got a bit more unequal in the OECD as a whole. But because we have well targetted tax and transfer systems, inequality on the disposable income basis (post tax, post transfers) actually fell in New Zealand (and a little in Australia), whereas it was unchanged in the OECD.

And again you see the perverse - even scandalous - behaviour of the rotten welfare systems in some of the European countries. Some of these countries probably had too big a rise in market income inequality for even good welfare systems to handle (Spain, for example), but even the smaller rises in market income inequality that occurred in Greece and France translated, after the welfare system had inadequately responded, into rises in disposable income inequality as well. Honourable mention to Portugal, though, where market inequality didn't widen and disposable inequality lessened.

The next thing that caught my eye (in Figure 4.4) was our relatively good performance on unemployment during the GFC, as shown below. I won't go on at length, you can see it easily enough: our unemployment rate is well below the OECD average, and rose by less than the OECD average during the GFC.

Less positively on the labour market front, we've got a bit of an issue with the youth NEET rate, those Not in Employment, Education or Training, as this chart from Figure 4.7 shows. We're slightly above the OECD average - not where you want to be. It's a reminder that we've got a  relatively long tail of undereducated young people, which is arguably the greatest challenge to our educational system.

Finally a quick word about Radio New Zealand's coverage of these results ("More NZers struggle for food - OECD"). In three quick soundbites, they selected arguably the worst of New Zealand's social indicators, and only that one, out of dozens available; they made it sound as if this was a new result about current conditions when it was a rather historical measurement (2006-7 compared with 2011-2) taken in the depths of the GFC; and they insinuated that New Zealand's experience was unusual, given that we are a relatively high income country (it wasn't, food budgets were tighter across the OECD as a whole, including in some places richer than us, such as the US, Canada, Austria and Ireland). You can see all of this for yourself in Figure 1.7 of the report.

There's also another issue at play about the affordability of food. The Radio NZ newsroom missed it, but oddly enough the OECD missed it, too. There's that little matter of soaring world food prices. Here's the IMF's index of world food prices (which I happened to get at Index Mundi, though you can also get it from the IMF itself).

I've drawn in some lines showing (approximately) food prices in 2006-7 and 2011-2. You can see the difference. As I said at the beginning, the OECD report isn't perfect, and it should really have picked this up. Never mind: overall, it's still an engrossing read.

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