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Has household income inequality really changed?

Has household income inequality really changed in the last 20 years?

16 September 2014

Peter Sherwin, Partner, Privately Held Business at Grant Thornton New Zealand, looks at New Zealand household incomes, the numbers of ‘poor households’ and how things have changed in this country over the last 20 years in light of a myriad of statements made by the different parties in the lead up to the election.

The OECD and our own Ministry of Social Development have extensively researched these topics and their findings differ with some of the comments being made in the run up to the election.

An OECD survey of income inequality indicates that there is no evidence of any sustained rise or fall in income inequality in New Zealand since their research began in the mid-1990s. The trend line is flat.

The most recent OECD survey ranks New Zealand 19th out of 34 countries on the income inequality table. New Zealand ranks equal with Canada, Estonia and Italy. Australia is 24th and Chile is the most unequal. The most equal country is Iceland.

Sixteen European countries have more income equality than New Zealand including Netherlands, Germany, France and Czech Republic, which is possibly due to better education standards and higher pay rates.

The latest New Zealand Ministry of Social Development survey of household incomes (after income tax paid and benefits received) shows that the gains over all income categories in 2013 were similar, which demonstrates that income inequality in 2013 was comparable to what it was in the mid-1990s.

However, the gap between benefit levels and New Zealand superannuation, wages and household income between 1983 and 2013 has grown.

There is no evidence of growing income equality in the population overall between high income households and middle and low income households in the last 20 years; and there is growing evidence of an increasing proportion of dual-earner families - 66% of two parent families were dual earners in 2013, up from 50% in the early 1980s.

There is an issue with child poverty with 24% of children (200,000) living in households dependent on an adult receiving a benefit and 200,000 children living in a household with no full-time worker. However, this is down from 233,000 (22%) in 2010 and 280,000 (30%) in 1998.

Children in one-parent families have a higher rate of income poverty than those in two parent families (51% vs 13%) in 2013.

On average from 2011 to 2013, 16% of European/Pakeha children lived in poor households compared with 28% of Pacific Island and 34% of Maori children. 70% of poor children lived in rental accommodation.

Household income poverty is generally considered to be incomes below 60% of the median household income.

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