The haves and the have moresSave
By Jess McAllen
Blessed are the rich millennials for they shall inherit the earth - that's if researcher Max Rashbrooke's new book is anything to go by.
The Ya Ya Club, Les Gens, Fulltimer Society: 2015 was the year of the rich kid club. They wear Louboutins and Louis Vuitton and drive lamborghinis.
Twenty years ago, the idea that power, success and wealth could be distributed according to ability and diligence, rather than accident of birth, defined New Zealand.
We've always had rich and powerful families but also held fervently that the humble Kiwi could rise to become part of that elite.
All that is changing fast. Amid sky-rocketing house prices and Gatsby-like soirees, Rashbrooke's Wealth and New Zealand provides new data that suggests in 10-20 years New Zealand will face unprecedented levels of inequality.
Last year, Thomas Piketty's economic book Capital in the Twenty-First Century became a media sensation for its vivid picture of a world reverting to Victorian-style levels of inequality.
The French economist claimed an unprecedented accumulation of wealth is the single greatest reason for widespread inequalities in the past few centuries.
Rashbrooke says Piketty's work heavily influenced his latest book, which follows Inequality: A New Zealand Crisis, and The Inequality Debate: an Introduction.
The latter focused on our growing income gaps and the problems they create in New Zealand, but this new book - funded by a Bruce Jesson Foundation scholarship and private donors - is about understanding affluence.
In a project with Statistics New Zealand, the data, which looked at people's wealth between 2004 and 2010, has yielded grim results, says Rashbrooke.
The wealthiest 1 per cent of the country - about 34,000 adults - have nearly a fifth of all the wealth (18.1 per cent). The wealthiest 10 per cent - about 340,000 adults - have more than half (53.4 per cent).
The poorest half of the country - about 1.7 million adults - have only 3.8 per cent.
Rashbrooke's book also reveals that between 2004 and 2010:
• Wealth of the top 1 per cent increased from $94 billion to $147b;
• Middle class wealth rose from $194b to $348b;
• New Zealand's wealthiest 10 per cent increased their asset holdings from $259b to $437b, a rise of nearly $180b;
• The poorest 10 per cent saw their net debt increase from $5.7b to $7.4b.
Much of the boom for the wealthiest and the middle class is driven by soaring property prices.
The data, the latest available, is based on a survey of 20,000 people of whom 200 were among the wealthiest 1 per cent. Rashbrooke also used figures from this year's National Business Review's Rich List.
He says the amount those on the list earned has increased significantly in the past few years. It is 40 per cent up on its 2010 mark and increased 12 per cent - $6b - in the last year.
The research project will continue next year and the findings from New Zealand's first wealth survey will be published by Statistics New Zealand as part of the Household Economic Survey.
Decadent lifestyles shown by social media's young elite have echoes of portraiture from the 18th century, says Rashbrooke.
As oil painters once sought to show off a subject's prestige, now selfies - where youth snap their Bollinger receipts - have the same effect of implying status and are in stark contrast to the austerity being forced on most of the West's economies.
Eyebrows have been raised about the antics of the wealthy young after their rapid rise into the public eye.
At least four elite social clubs have popped up in the past year and their social media accounts are littered with pictures of helicopters, diamond rings, BMWs and spirulina smoothies.
The best known of them, The Ya Ya Club, came to media attention at the end of last year when the Prime Minister's son Max Key and his DJ group, Troskey, debuted at one of their events at an Auckland bar.
But they have found themselves targeted for seeming to boast about their privileged position.
Lorde labelled the Ya Ya Club an "embarrassing hot mess" after they announced what some felt was a culturally insensitive theme for their first ball.
"There's that manifestation of wealth inequality," says Rashbrooke, "through the Ya Ya Club effect: inherited or established wealth leads some people to lead lives very different from those of others and becoming more set as a class apart."
Millennials grew up as house building rates in New Zealand declined, unionisation decreased - from 70 per cent of the workforce in the 1980s to 20 per cent today - and benefits were slashed.
Rashbrooke blames the 1991 "Mother of All Budgets" passed by the National Government when benefits were cut by 20-30 per cent of their value and were only increased in line with inflation, not the average wage, which rose much faster.
In Wealth and New Zealand he writes: "It could be argued that low benefits are the result of successive governments not generating enough tax revenue to fund higher payments.
And one of the main reasons our tax take is so low [again, it is one of the lowest in the developed world] is that we gather so little revenue from our most affluent citizens."
About half of the wealth in New Zealand is locked in housing. This means being able to buy a house and build wealth savings is crucial - but it is becoming harder for anyone under-35, Rashbrooke says.
He floats the idea that MPs may be biased towards the interests of the wealthy because "in many cases they are members of that class".
Parliament's Register of Pecuniary Interests shows 40 of National's 59 MPs have investment properties, 15 Labour MPs own one or more second properties, as do seven New Zealand First MPs and five Green MPs.
Growing inequality translates to shrinking opportunity and this is evident by the battle to get into grammar zones in Auckland.
"Those schools are well-resourced and that access is increasingly limited to people who can afford property prices in those areas - the wealthy," says Rashbrooke.
He recalls visiting one of the few high schools that offers the International Baccalaureate in Wellington.
"The principal said it was important because the question for their girls was not which university would they go to but which university anywhere in the world would they go to.
"That is a great ambition but it's different from the opportunities on offer at Porirua College."
The effects become more pronounced in higher education. Almost a quarter of Otago University medical students in 2010 were from the wealthiest 10 per cent of homes, according to a 2012 study by the university's pro vice-chancellor, Peter Crampton.
Only 1 per cent of students were from homes in the most deprived decile, decile one.
Parental wealth also influences study options. Internships are an expected requirement on courses such as law, communications and social work.
Some students are expected to work fulltime for no money on top of their part-time or sometimes full-time jobs to pay rent, others have their parents to fall back on.
Piketty's predicted steady state of wealth being six times the national income is a viable outcome for New Zealand, says Rashbrooke.
Whether wealth is a bad thing comes down to ethics, he writes, but in this scenario, society becomes more fractured.
"Wealthy children, growing up in neighbourhoods and going to school largely with other wealthy children may lack any deep understanding of the lives of people different from them, and vice versa.
"Not seeing inequality as a major problem, they may then use their greater influence on politics to support policies that further widen wealth and income gaps."
Rashbrooke says his book is a starting point for talking about wealth and encouraging more collection of data around it, but he does propose some solutions.
He suggests reducing income imbalances, narrowing the initial distribution of wealth, using taxes and endowments to further close the gap, taking the heat out of housing and building a more democratic society.
Specifically, he suggests increasing benefits, introducing a living wage, a capital gains tax (exempting the family home), estate taxes and better rights for renters.
We still have a lot of fluidity and the ability to transcend our background - but that is becoming more limited, warns Rashbrooke.
If Piketty is to be believed and the world is headed for levels of inequality that would feel at home in a Victorian novel, New Zealand's social landscape and identity could dramatically change and Rashbrooke wants that to prompt government action.
"We are becoming more like those overseas countries with very thick divides between the haves and have-nots," says Rashbrooke. "That concerns me."
The Instagram generation
Social media images echo historic portraiture.
Max Key and Amelia Finlayson on a beach...
...the modern equivalent of an 18th-century portrait.
Annabel Fay holds a cat in Thailand...
...a portrait from the 1500s.
Wealth and New Zealand published as part of Bridget Williams Books Texts series is available from tomorrow.