Economic standard of living

Introduction

Economic standard of living concerns the physical circumstances in which people live, the goods and services they are able to consume and the economic resources to which they have access. It is concerned with the average level of resources in New Zealand as well as the distribution of those resources across New Zealand society.

Basic necessities such as adequate food, clothing and housing are fundamental to wellbeing. The 1972 Royal Commission on Social Security agreed that a useful standard for adequacy was a level of resources that allowed individuals not just to survive but also to participate. They defined participation as meaning “no-one is ... so poor that they cannot eat the sort of food that New Zealanders usually eat, wear the same sort of clothes, [and] take a moderate part in those activities which the ordinary New Zealander takes part in as a matter of course”.⁶²

The desired outcomes statement points to the importance not only of everyone enjoying a decent standard of living, but also of our society being as prosperous as possible to enable the overall standard of living of New Zealanders to increase.

Indicators

Five indicators are used in this chapter to provide information on different aspects of economic standards of living. They are: market income per person, income inequality, the population with low incomes, housing affordability and household crowding.

The focus of the chapter is on objective measures of economic living standards. Together, the indicators provide information about overall trends in living standards, levels of hardship and how equitably resources are distributed. All are relevant to the adequacy of people’s incomes and their ability to participate in society and to choose how to live their lives.

Market income per person gives an indication of the average level of income and therefore the overall material quality of life available to New Zealanders. We also provide an estimate of the economic value of unpaid work.

Income inequality is measured by comparing the incomes of higher income households (80th percentile) with the incomes of lower income households (20th percentile). High levels of inequality are associated with lower levels of social cohesion and overall life satisfaction, even when less well-off people have adequate incomes to meet their basic needs.

The proportion of the population with low incomes also provides information about how equitably resources are distributed and how many people may be experiencing difficulty in participating fully in society through a lack of income.

Housing affordability measures the proportion of the population spending more than 30 percent of their disposable income on housing. Housing costs have a major impact on overall material living standards, especially for low-income households.

The final indicator measures the proportion of the population living in crowded households. Crowded housing is a well-known health risk and this indicator provides a direct measure of the extent of this problem over time.