Economic standard of living

Desired outcomes

New Zealand is a prosperous and equitable society, where everybody has access to an adequate income and decent, affordable housing that meets their needs. People have an adequate standard of living, and are well placed to participate fully in society and make choices about how to live their lives.

IntroductionTop

Economic standard of living concerns the material 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”.20

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

IndicatorsTop

Six headline indicators are used in this chapter to provide information on different aspects of economic standard of living. They are: market income per person; income inequality; the population with low incomes; material hardship; 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 their ability to participate in society and to make choices about how to live their lives.

The first indicator, 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.

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.

Income is not the only measure of material wellbeing. The fourth indicator provides a non-income measure of wellbeing based on the Material Wellbeing Index (MWI) developed by the Ministry of Social Development. It is based on actual household consumption, rather than on household 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.

Domain summaryTop

With the exception of market income and material hardship, the majority of indicators in the Economic Standard of Living domain are showing little or no change for recent-change and medium-term-change.

Market income per person is again improving following a decline after the 2008 Global Financial Crisis. However, while showing no change for recent-change and medium-term-change, income inequality remains much higher than in the 1980s.

The proportion of the population with low incomes has remained relatively stable for recent-change and medium-term-change and is lower than the highs of the mid-90s. The proportion of the population in material hardship rose during the Global Financial Crisis, but has declined since and shows improvement for recent-change and medium-term-change.

Housing affordability remains flat overall though it has declined for low income groups, while household crowding levels remain unchanged.