The 1997 Rankin File: #5

© 1997 Keith Rankin

The Generation Income Gap

New Zealanders' gross incomes have increased in the 1990s, but not by as much as GDP statistics would imply. This is because an increasing proportion of gross domestic product is the property of foreign stakeholders in the New Zealand economy, and therefore do not show up in a census of New Zealand residents' income.

To look at the broader picture, we need to take a longer time span. The 1986 census was taken during a highly unstable phase of the "reform" program commenced in 1984 (it was particularly unstable in the sense of the inflation bubble and the big lead that prices had over wages), and the 1991 census was taken as New Zealand was moving into its deepest slump since 1933. It is comparisons between 1996 and 1981 that give the best perspective on income trends.

The main findings are that:

• Aggregate incomes have risen by 22% which equates to 1.3% per annum, or approximately 0.3% per annum per person (Table 3).
• Median male incomes have fallen significantly, whereas median female incomes have risen markedly (Table 1).
• The incomes of young people have fallen sharply, whereas those of older people have risen (Table 1).
• Inequality - as measured by the ratio of median to mean income - has risen markedly for all age groups, for males in all age groups except the 25-35 group, and for young females. While the gap between males and females is equalising, the income gap within most age/gender population cohorts is rising, leading to more inequality overall (Table 2).
• Decreased female inequality is arising from larger numbers of females participating in the workforce.
• For some age groups, the growth of inequality is more marked when both sexes are combined than when each sex is considered separately. This is a 'composition effect', whereby the proportion of women in the labour force is much greater in 1996 than in 1981 (Table 2).
• Despite female and male incomes converging, average female incomes remain significantly below average male incomes. This is mainly a result of lower female labour force participation rates and lower average hours worked.
• While the median income of both male and female wage/salary earners aged 20-24 was $20,000 in 1990/91 (expressed in 1990/91 dollars), early returns from the 1996 census suggest that the real wages of young adult females fell more rapidly than the real wages of young adult males, reversing a 20-year trend. It seems likely that female-intensive occupations have been more severely affected by the 1991 Employment Contracts Act.

Overall, the most striking findings of the income census are the rapidly widening differences between the incomes of older and younger New Zealanders.

The three tables follow:

1997 Rankin File Titles

Rankin File