New Zealand

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Overview of Trends of Economic Inequality in New Zealand

 

Has the dispersion of earnings been increasing in recent decades?Yes, the top decile has risen from 143 per cent of median in 1986 to 186 per cent in 2012.
Has overall inequality increased in recent years?No, the Gini coefficient has been relatively stable around 32 percent since 1996. However, it rose by 7 percentage points between 1988 and 1996.
Have there been periods when overall inequality fell for a sustained period?Yes, from mid-1950s to mid-1970s.
Has poverty been falling or rising in recent decades?Poverty has substantially increased from 1996 to 2004 before decreasing mildly till 2009.
Has there been a U-pattern for top income shares over time?Yes, top gross income shares fell from mid-1950s to mid-1980s, then rose from mid-1980s to mid-1990s.
Has the distribution of wealth followed the same pattern as income?Insufficient evidence.
Additional noteworthy featuresU-shape over post-war period. Top income shares estimates for the years 1998, 1999 and 2000 are affected by changes in the income tax laws. Top shares series have a break in 1951 (change in tax units).

Sources and References

Sources for the historical data series:

Overall inequality: Gini coefficient for individual taxable income from Easton (1983, Table 10.7 for series 1 (before the introduction of PAYE) and series 2 (after the introduction of PAYE) and from figures supplied by Professor S Chatterjee, Massey University, for series 3); Gini coefficient for equivalised (applying 1988 revised Jensen scale, described as close to the modified OECD scale) disposable household annual income before deduction of housing costs from Perry (2010, Table D.9).

Top income shares: The top income shares are from WTID, based on work of Atkinson and Leigh (2008); top 0.5 percent is used in place of top 0.1 percent series as the latter lacks observations for recent years. Note that top income series have a break in 1951. Data refer to tax units before 1951 and to individuals from 1951 onwards.

Poverty: Percentage of individuals in households with equivalised (applying 1988 revised Jensen scale, described as close to the modified OECD scale) disposable income before housing costs below 60 per cent of the contemporary median from Perry (2010, Table F.2).

Individual earnings: Series 1 from Atkinson (2008, Appendix M, Table M.3), based on the work of Easton (1983); Series 2 from OECD iLibrary, Employment and Labour Market Statistics, Gross earnings decile ratios.

Wealth: share of top 1 per cent in total wealth (among adults) from Easton (1983, Table 7.3).

References:

  • Atkinson, A B, 2008, The changing distribution of earnings in OECD countries,Oxford University Press, Oxford.
  • Atkinson, A B and Leigh, A, 2008, “Top Incomes in New Zealand 1921-2005: Understanding the Effects of Marginal Tax Rates, Migration Threat, and the Macroeconomy”, Review of Income and Wealth, series 54(2): 149-165.
  • Easton, B, 1983, Income distribution in New Zealand, New Zealand Institute of Economic Research, Wellington.
  • Perry, B, 2010, “Household incomes in New Zealand: trends in indicators of inequality and hardship 1982 to 2009”, Ministry of Social Development, Wellington, ISBN 978-478-33500-2.