Government Needs to Consider Income Mobility

May 11, 2012 New Zealand Finance

Income levels in New ZealandFuture discussions regarding income inequality in New Zealand need to consider income mobility over time in order to better target economic policies.

On May 9th the University of Otago published new research which was commissioned by the Treasury of New Zealand in order to attain greater information on income movements across different demographics in the country. The authors of the research examined data collected in Statistics New Zealand’s annual Survey of Family, Income and Employment, to determine how the incomes of New Zealanders changed over the period between 2002 and 2009.

The research indicates that over the time period New Zealanders saw significant mobility in their incomes, both in terms of upward and downward movements. The most notable movements were seen amongst the highest and lowest earners, with only 24 percent of people who were in the lowest earnings deciles in 2002 were still there in 2009, and only 46 percent of individuals who were originally the top deciles remaining there over the entire 7 years.

The study found that the most likely people to be earning the lowest incomes in the country were youths, or individuals with low qualifications, solo parents and Maori.

The researchers suggested that the finding highlight the need for future economic policies to consider income mobility and also emphasize the importance of encouraging individuals to improve their economic situations. They added that it was ineffective to look exclusively at income inequality statistics in New Zealand, as taxpayers change demographics over time and their income levels shift accordingly.

The Treasury’s own report on the research can be read on the Treasury website.

Photo by Pink Sherbet Photography