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Household Incomes - Trend in Inequality and Hardship

Household Incomes in New Zealand: Trends in Indicators of Inequality and Hardship 1982 to 2011

The Household Incomes Report provides information on the material wellbeing of New Zealanders as indicated by their household incomes from all sources from 1982 to 2011.

Household Incomes 1982-2011

The report uses data from Statistics New Zealand’s 2010–2011 Household Economic Survey (HES) to update the previous report in the series which had information to 2010.

The interviews for the 2010–2011 survey were carried out in the year to 30 June 2011, and asked about incomes in the previous twelve months.

The 2010–2011 survey is the first HES to fully capture the impact on incomes of the global financial crisis and related economic slowdown.

In addition to the Full Report and the Summary, there is also a Short Summary which gives a quick overview.

The next update is planned for mid 2013 using data from the 2011–2012 HES.

2012hirshortsummary.doc
2012hirfullsummary.doc
2012hirmainreport.doc
2012hirappendices.doc

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2012 Household Incomes Report – ‘At a Glance’

The Incomes Report and the Household Economic Survey (HES)

1 The 2012 Incomes Report updates the previous one with data from the 2010-11 HES (usually called the 2011 HES).

2 The survey took place from July 2010 to June 2011, and the incomes questions asked about incomes ‘in the last 12 months’ … thus covering the recession and economic downturn at its low point.

3 HES 2011 is the first one to fully pick up on the impact of the global financial crisis (GFC) and economic downturn.


Incomes

4 Median HH incomes fell 3% in real terms after little change (+1%) from HES 2009 to HES 2010.

5 This fall followed a long and strong rise in the median from the mid 1990s to 2008-09 averaging 3% pa in real terms. GDP per capita increased at 2.5% pa over this period on avg.

6 Incomes fell for deciles 3-6 … but rose for the top decile especially.

7 At the very bottom (P15 down), incomes were flat from HES 2010 to HES 2011 (protected by benefit rates being CPI adjusted and NZS being wage related).


Inequality

8 Inequality decreased significantly from HES 2009 to HES 2010 then rose from HES 2010 to HES 2011 to its highest level ever. This volatility reflects the impact of the GFC – not sure where it will settle.

9 The latest figure for OECD comparisons is 2009. On latest OECD figure, NZ is a little above the median – similar to Australia, Japan and Canada.

10 Redistribution through the tax and transfer system reduces inequality very significantly compared with what it would otherwise be. An example is that single-earner two-child families with income less than around $55,000 from wages pay no net income tax. They receive more from WFF tax credits than they pay in income tax and ACC.


Measuring poverty and hardship

11 In the more economically developed countries (MEDCs) poverty and hardship are about relative disadvantage. While it’s not an absolute subsistence notion (‘third world starvation, etc’), there are basic essentials that we expect everyone to have and no one to have to go without. Poverty and hardship for MEDCs is about being excluded from a minimum acceptable way of life in one’s own society because of lack of resources.

12 NZ has no official measure of poverty or material hardship (deprivation).

13 MSD reports regularly using a range of measures, both income measures (poverty) and non-income measures (hardship). These include internationally comparable measures (EU, OECD).

14 Poverty and hardship exist on a continuum from less to more severe. The choice of threshold impacts on the level reported, but not usually on the trends over time nor on which groups are identified as at higher risk of poverty or hardship.

Income poverty for children

15 In HES 2011, the child poverty rate was 21% using the AHC 60% fixed line measure; 25% on the moving line AHC 60% measure; 16% on the more stringent 50% moving line measure.

16 Child poverty rates were flat from 2009 to 2011 – this is a good result in the circumstances (GFC, economic downturn) … but rates are still high relative to other age groups (see #22).

17 NZ has 230,000 children (22%) in beneficiary families; 820,000 in working families. 25% of children are in households with no FT worker.

18 Poverty rates for children in working families are on average much lower than for those in beneficiary families … but 2 out of 5 poor children come from families where at least one adult is in FT work or is self-employed. This is an OECD-wide issue – the working poor. IWTC is really important here.

19 70% of poor children live in rental accommodation (20% HNZC, 50% private).

20 50% of poor children are Maori/Pacific
50% of poor children are from sole parent families and 50% from two parent.

21 Poverty rates for younger children (0-11yrs) are generally a little higher than for older children (12-17yrs): 22% and 20% in 2011.

22 There is an age gradient for income poverty (using AHC incomes): population rate is 16% … 0-17 (21%), 18-24 (21%), 25-44 (15%), 45-64 (14%), 65+ (7%) … with 65+ singles at 12% and couples 6%.

Material hardship for children

23 Hardship rates for children rose from 15% in the 2007 HES to 21% in HES 2011 using the ELSI measure. In part, this reflects the falling incomes of those in deciles 3-6, some of whom may already have been in a precarious financial position – the loss of income has been enough to tip them into hardship even though their incomes are still above the poverty threshold we use.

Income mobility and poverty persistence

24 HES gives a repeat cross-sectional picture – different people each survey. To understand how much income mobility there is, and how long-lasting or brief poverty is, we need to follow the same people each survey – we need longitudinal data.

25 We find that there is a good deal of movement but a lot is short-range. Over 7 years there is a mix of mobility and immobility. For example, out of those who start in the first wave in one of the bottom three deciles, half are still there after seven years, a quarter have moved up to around the middle, and another quarter have moved to have incomes above the middle.

26 It is important to look at cross-sectional poverty rates with ‘longitudinal eyes’. Chronic poverty (as defined in the Incomes Report) is about having an average household income over seven years that is below the poverty threshold over those years. Looking at children in poverty in a HES survey (cross-sectional), 60% of them are in chronic poverty in any survey and 40% in temporary poverty. In addition there are others who are in chronic poverty but not in current poverty in that one year – this group is about 20% of the number in current poverty.

Older working-age adults

27 Income poverty rates for single person working-age households trebled from the 1980s to 2007 (10% to 30%) and were 35% in 2011. One in 9 poor people and 1 in 4 poor households are from this group. The rates are higher for the older group living on their own (45-64 years) than for the younger group.


ENDS

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