Population with low incomes

Incomes are after deducting tax and housing costs and adjusting for household size and composition. The thresholds are 50 percent and 60 percent of the 2007 household disposable income median, with 25 percent deducted to allow for average housing costs. The thresholds are adjusted for inflation to keep them fixed in real terms. (See Appendix 2 for information on the change in the reference year.)

Relevance

Having insufficient economic resources limits people’s ability to participate in and belong to their community and wider society, and otherwise restricts their quality of life. Furthermore, long-lasting low family income in childhood is associated with negative outcomes, such as lower educational attainment and poorer health.

Current level and trends

In the year to June 2009, 15 percent of the population was living below the 60 percent threshold, down from 18 percent in 2007. The proportion of the population with low incomes rose sharply from 1990, reached a peak in the mid-1990s and has generally declined since then. In 2009, the proportion was still a little above the average level in the 1980s.

The increase in the proportion of the population with low incomes in the early-1990s is attributable to declining household incomes arising from high rates of unemployment and reduced levels of social assistance. The improvement since the mid-1990s reflects more robust economic (and income) growth, the steady decline in unemployment, the increase in housing assistance and the increase in tax credits for families with children. Rates remain a little higher in 2009 than they were in the 1980s partly because, for many groups, housing costs for low-income households have risen significantly as a proportion of their household incomes.

Figure EC3.1 Proportion of the population with net-of-housing-cost household incomes below selected thresholds, 1982–200

Source: Derived from Statistics New Zealand’s Household Economic Survey (1982–2009) by the Ministry of Social Development
Notes: (1) Between 1998 and 2004, the Household Economic Survey was conducted on a three-yearly basis, rather than annually. (2) See Appendix 2 for information on the 2008 data and the change in the reference year.

Age and sex differences

A lower proportion of older people than younger people are living in households with incomes below the 60 percent threshold, although the difference between younger and older people was smaller in 2009 than it was a decade earlier. The relatively low rates for New Zealanders aged 65 years and over reflect their high rate of mortgage-free home ownership and the level of publicly-provided retirement income support.

In 2009, 22 percent of dependent children were in households with incomes below the 60 percent threshold, the same proportion as in 2007. The 2009 rate was considerably lower than the peak rate of 44 percent in 1994, and was similar to the levels of the mid-1980s (19–23 percent). Since 1986, rates for females aged 15 years and over have generally been a little higher than those for males of that age.

Table EC3.1 Proportion (%) of the population in low-income households (60 percent threshold), by age group and sex, selected years, 1986–2009

Source: Derived from Statistics New Zealand’s Household Economic Survey (1986–2009) by the Ministry of Social Development
Note: See Appendix 2 for information on the 2008 data and the change in the reference year.

Ethnic differences

Sample sizes in the source data are not large enough to support a reliable time series for proportions of the population living below the 60 percent threshold by ethnic group (see Appendix 2 for more details). Trends in real equivalised median household incomes are less volatile and are used to give an idea of the relativities between ethnic groups. For all ethnic groups, median incomes rose steadily from the low point in 1994 through to 2009, with some volatility evident for smaller ethnic groups.

Figure EC3.2 Real equivalised median household incomes, by ethnic group, 1988–2009

Source: Derived from Statistics New Zealand’s Household Economic Survey (1988–2009) by the Ministry of Social Development
Notes: (1) Household ethnicity is defined by the presence, within the household, of an adult of a particular ethnic group. (2) Between 1998 and 2004, the Household Economic Survey was conducted on a three-yearly basis, rather than annually. (3) See Appendix 2 for information on the 2008 data.

Household and family type differences

Since 2001, the proportion of people in families with dependent children living in households with incomes below the 60 percent threshold has declined. Between 2001 and 2009, the rate for those in two-parent families fell from 26 percent to 13 percent, while the rate for those in sole-parent families fell from 71 percent to 43 percent. Households with three or more children have a higher proportion living with incomes under the 60 percent threshold than those with fewer children (26 percent and 15 percent respectively in 2009). The proportion of those aged under 65 years in one-person households with incomes below the threshold increased from around 17 percent in the late-1980s to 37 percent in the mid-1990s but fell to 30 percent in 2009.

International comparison

For international comparisons, a different measure is used. The OECD measure is 50 percent of median (current year median rather than fixed line) equivalent disposable household income, which does not take into account housing costs. In 2004, 11 percent of New Zealanders were living in households with incomes below this threshold. The most recent OECD comparison (from 2004) places New Zealand 16th out of 30 OECD countries, and only just above the OECD median (10 percent). New Zealand’s rate is similar to those of Germany, Canada and Australia (11–12 percent) and well below that of the United States (17 percent). Sweden and Denmark have the lowest proportions of their populations with low incomes (each 5 percent). In 2009, the New Zealand rate was 11 percent.⁶⁸

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