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Economic Standard of Living:

Population with low incomes

Definition

The proportion of the population in economic family units with equivalent disposable income net-of-housing-cost below three thresholds (low, medium and high).
The measures take account of incomes, housing costs and family size and are adjusted for inflation and taxes. The thresholds are 40 percent, 50 percent and 60 percent of the 1998 median equivalent net-of-housing-cost family incomes.

Relevance

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

Current level and trends

In the year to June 2004, 19 percent of the population was living below the 60 percent threshold, down from the proportion in the previous survey year to June 2001 (22 percent). On all three measures (low, medium and high), the proportion of the population with low incomes increased sharply in the early-1990s, reached a peak in the mid-1990s and dropped over the latter half of the decade. However, in 2004, the proportion of the population living below these thresholds was still substantially higher than it had been in 1988.

The increase in the proportion of the population with low incomes through the early-1990s is attributable to high rates of unemployment and declines in the level of social assistance. The recent improvement in this measure may reflect more robust economic (and income) growth, and the steady decline in unemployment, as well as the increase in housing assistance for those at the low end of the income distribution.

Figure EC3.1 Proportion of population with net-of-housing-cost incomes below thresholds, 1988–1998, 2001 and 2004

Graph showing Proportion of population with net-of-housing-cost incomes below thresholds, 1988–1998, 2001 and 2004

Source: Derived from Statistics New Zealand's Household Economic Survey (1988–2004), by the Ministry of Social Development

Population group differences

In 2004, 21 percent of dependent children were in economic family units below the 60 percent line (benchmarked to the 1998 median). This represents a decline from 27 percent in 2001 and is substantially below the peak of 34 percent in 1994. However, the proportion of children in low-income families remains higher than it was in 1988 (14 percent). The most striking change between 2001 and 2004 is the fall in the proportion of children in sole-parent families below the 60 percent line, from 61 percent to 43 percent.

In the population aged 15 years and over, just under a fifth (19 percent) lived in low-income economic family units in 2004. There was no difference between males and females.

Economic family units most likely to have low incomes are families who rely on income-tested benefits, sole-parent families, families with at least one adult belonging to an ethnic group other than European, families in rented dwellings and families with three or more dependent children. The situation improved for most of these family types between 2001 and 2004. However, there was no change for Pacific families, and there was an increase in the proportion of families with at least one adult belonging to Other ethnic groups (including Asian) who fell below the 60 percent benchmark line.

Table EC3.1 Proportion of population with net-of-housing-cost incomes below the 60 percent line (benchmarked to 1998 median), selected years, 1988–2004

  1987–1988 1992–1993 1997–1998 2000–2001 2003–2004
Total population 12.3 26.5 20.9 21.8 19.3
Population aged 15 and over 11.6 23.8 19.3 20.0 18.6
Males aged 15 and over 11.5 23.0 18.7 19.0 18.6
Females aged 15 and over 11.8 24.5 19.9 21.0 18.7
Total dependent children 13.5 33.9 24.4 26.7 20.6
Children in sole-parent families 15.4 63.3 51.0 60.7 43.3
Children in two-parent families 13.1 27.0 16.8 18.4 14.6
           
Total economic family units 13.8 27.9 22.8 23.1 21.7
By number of children and family type          
With one dependent child 10.3 29.2 24.0 25.2 18.8
With two dependent children 11.1 30.4 22.8 25.0 16.4
With three or more dependent children 16.8 40.6 26.1 30.6 27.4
Sole-parent families 13.9 59.6 47.1 55.1 39.8
Two-parent families 11.9 24.2 16.1 17.1 12.9
Total families with dependent children 12.3 32.7 24.2 26.4 20.1
By ethnic group          
With any Māori adult 13.5 41.8 30.3 31.5 23.6
With any Pacific adult 23.4 50.0 43.6 41.1 40.2
With any Other ethnic group adult 24.0 42.1 53.7 35.2 46.8
With any European adult 12.5 23.2 18.1 18.6 15.7
By main source of income          
New Zealand Superannuation 7.5 9.5 10.6 7.1 7.6
Income-tested benefit 25.1 75.1 60.5 61.2 51.2
By housing tenure (households with one family unit)
Rented na 44.3 35.9 33.7 28.7
Owned with mortgage na 22.5 14.5 15.9 10.7
Owned without mortgage na 5.1 3.8 5.7 5.3

Source: Derived from Statistics New Zealand's Household Economic Survey (1988–2004), by the Ministry of Social Development
Note: Revised data (see technical details in Appendix 2)

International comparison

Based on a different measure used by the OECD – 50 percent of median equivalent disposable household income and not taking housing costs into account – 9.8 percent of New Zealanders in 2000 were living in households with incomes below the low-income threshold.57 This figure places New Zealand in the middle of the OECD ranking, with a rate similar to Canada (10.3 percent), slightly below Australia (11.2 percent) and the United Kingdom (11.4 percent), and well below the United States (17 percent). Denmark has the lowest proportion of the population with low incomes (4.3 percent). By 2004, the New Zealand rate was 10.8 percent.

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