Population with low incomes

Relevance

Insufficient economic resources limit people’s ability to participate in and belong to their community and wider society. 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 2008, 14 per cent of the population was living below the 60 per cent threshold. This was similar to the 13 per cent in the previous survey year to June 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. However, in 2008, the proportion was still above what it had been 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 higher in 2008 than they were in the 1980s partly because 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, 1982–2008

Source: Derived from Statistics New Zealand’s Household Economic Survey (1982–2008) by the Ministry of Social Development
Note: Between 1998 and 2004, the Household Economic Survey was conducted on a three-yearly basis, rather than annually

Age and sex differences

A lower proportion of older people than younger people are below the 60 per cent threshold, although the difference between younger and older people was much smaller in 2008 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.

In 2008, 20 per cent of dependent children were in households with incomes below the 60 per cent threshold. This was an increase from 16 per cent in 2007 and reflects the rise in housing costs for households with children. The 2008 rate was considerably lower than the peak rate of 35 per cent in 1994, but it was still above the levels of the mid-1980s (11 per cent). Rates for females aged 15 years and over have generally been a little higher than those for males of that age since 1986.

Table EC3.1 Proportion (%) of the population in low-income households (60 per cent threshold), by age and sex, selected years, 1986–2008

Source: Derived from Statistics New Zealand’s Household Economic Survey (1986–2008) by the Ministry of Social Development

Ethnic differences

Sample sizes in the source data are not large enough to support a reliable time series for proportions below the 60 per cent 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 from the low point in 1994 through to 2008, with some volatility evident for smaller ethnic groups.

Figure EC3.2 Real equivalised median household incomes, by ethnic group, 1988–2008

Source: Derived from Statistics New Zealand’s Household Economic Survey (1988–2008) 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

Household and family type differences

Since 2001, the proportion of people in families with dependent children who were below the 60 per cent threshold has declined. Between 2001 and 2008, the rate for those in two-parent families fell from 19 per cent to 13 per cent, while the rate for those in sole-parent families fell from 61 per cent to 39 per cent. Households with three or more children have a higher proportion under the 60 per cent threshold than those with fewer children (22 per cent and 15 per cent respectively in 2008). The proportion of those aged under 65 years in one-person households who were below the threshold increased from around 12 per cent in the late-1980s to 30 per cent in the mid-1990s but fell to 25 per cent in 2008.

International comparison

For international comparisons, a different measure is used. The OECD measure is 50 per cent of median (current year median rather than fixed line) equivalent disposable household income, which does not take into account housing costs. In 2004, 11 per cent 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 per cent). New Zealand’s rate is similar to those of Germany, Canada and Australia (11–12 per cent) and well below that of the United States (17 per cent). Sweden and Denmark have the lowest proportions of their populations with low incomes (each 5 per cent). In 2007 and 2008, the New Zealand rate was 12 per cent.⁶⁷

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