• Market income per person
• Income inequality
• Population with low incomes
• Population with low living standards
• Housing affordability
• Household crowding

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 they have access to. It is concerned with both 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".⁵²

The desired outcome statement points to the importance of not only everyone enjoying a decent standard of living, but also of our society being as prosperous as possible. Such prosperity gives people choice over how to live their lives.

Indicators

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

The focus is largely on objective measures of economic living standards, though one indicator (the population with low living standards) takes into account people’s subjective perceptions about how well off they are. 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 make choices about their lives.

The focus of the first three is on incomes, while the remaining three are more direct measures of the material living standards people can achieve. This recognises that the same level of income can produce different living standards, depending on factors such as people’s coping skills, their health status and the assets they own.

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. This is an internationally recognised measure, allowing comparisons between New Zealand and other nations. An estimate of the economic value of unpaid work is also provided.

Income inequality is measured by comparing the incomes of the top 20 percent of households with the incomes of the bottom 20 percent. High levels of inequality are associated with lower levels of social cohesion and personal wellbeing, 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 are likely to be on incomes that do not allow full participation in society.

The population with low living standards takes into account the extent people do without things and do not engage in social activities because of the cost, as well as measuring whether people feel their incomes are satisfactory.

Housing affordability measures the proportion of the population spending more than 30 percent of their income on housing. Housing costs have a major impact on overall material living standards.

The final indicator measures the number of people living in overcrowded houses. Housing is a basic need, and this indicator provides a direct measure of the adequacy of housing people can afford.