Story: Income and wealth distribution

Page 3. Personal income distribution

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2006 census data

In the 2006 census – as in other censuses since 1981 – New Zealanders aged 15 and over were asked to provide information on their personal income. This was their total income before tax – their market income plus social security benefits and pensions.

In 2006 the distribution of income among individuals had a similar pattern to that in previous census years. The greatest number of the adult population were in the $10,000 to $15,000 per annum range. Many in this category would be on New Zealand superannuation or a social security benefit. The unemployment benefit in that year was $8,800.

There were a few people with losses of income (typically self-employed and investors) and some (such as students or stay-at-home mothers) had zero or very low incomes. One-tenth adults made less than $280. The bottom half of the population had only about a sixth of the total income.

There were also people with very high incomes (the top tenth had incomes of over $64,800). Over half of the country’s personal income went to the top fifth of the adult population. The average (or mean) income was $32,500, but the median (the middle income, with half the adult population above this figure and half below) was only $24,500.

Changes in income distribution

1951–1981

From 1951, census statistics for personal incomes included Māori. From 1951 to 1981, personal income distribution became increasingly equal. The share of the top tenth of the adult population fell from 38.5% in 1951 to 34.9% in 1981. One reason was that immediately after the Second World War a large proportion of women did not earn income. As they entered the workforce – initially part-time for many, but increasingly full-time – those with zero incomes in the past began to report market incomes.

However, income distribution was also getting narrower. This was probably partly because the rising labour-market share of earnings reduced the relative incomes of capitalists, and because margins for skill (the difference in income between skilled and unskilled workers) was decreasing.

Since 1981

After 1981 social security benefits and pensions were included in the statistics. The distribution of income continued to become more equal until the mid-1980s, but reversed after that. The earnings of capital rose, and margins for skill began to increase (especially at the top end of the market for managerial and professional occupations). By the 1980s and 1990s most women were already in the paid workforce, so there was no further reduction in those without incomes. The 1991 cuts in many social security benefits reinforced the increasing inequality.

After 1996 the distribution did not change radically, although in the early 2000s there was some evidence of a slight reduction in the inequality in personal income distribution – probably as people who had been out of work entered the workforce.

International comparison

It is notoriously difficult to compare income distributions across countries, but OECD data suggest that New Zealand has become comparatively less equal over time. In the mid-1980s New Zealand’s income distribution was more egalitarian than the OECD average, but by the mid-1990s it was considerably less equal than the OECD average. Since 2000 there has been a slight narrowing of the difference.

In terms of poverty rates in 2004 New Zealand was in the middle of the OECD.

How to cite this page:

Brian Easton, 'Income and wealth distribution - Personal income distribution', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/income-and-wealth-distribution/page-3 (accessed 28 March 2017)

Story by Brian Easton, published 11 Mar 2010