Report

Shrinking portions to low and middle‐income earners: inequality in wages & self‐employment 1998‐2015

29 Aug 2017
Description

This study shows rising inequality in the hourly rates of gross earnings (before tax and benefits) among both wage and salary earners and the self-employed over the period 1998- 2015. It finds the hourly earnings of low and middle income wage and salary earners went up at half the rate of the highest paid. The only exception was those earning around the minimum wage whose pay went up at the same rate as the highest paid. This was after adjusting for inflation (the rise in the CPI).

The data was provided on special request by Statistics New Zealand (SNZ) from the New Zealand Income Survey and comprises jobs sorted into deciles by income per hour, along with hours worked, numbers of people and total income earned in each decile.

Conclusion

This analysis has looked at the distribution of the income of employees and the self-employed, primarily from the point of hourly earnings. This has enabled us to also see the distribution of hours worked and weekly earnings, and changes in those over the period studied. It has shown that there is a majority in both groups which has either very low hourly incomes, poor growth in those incomes, or both. For the self-employed this is subject to the proviso that for some, there may be substantial unreported income.

For employees, we found increasing inequality in average hourly wages. The exception is the lowest income decile which is heavily influenced by the minimum wage, whose income has risen on average at about the same rate as the top decile. Other than that, wage rates for the next 50 percent (deciles 2 to 6) of employees rose at half the rate of the real average hourly wage of the top 10 percent. On the whole, the more highly paid employees were, the faster their hourly wage rates increased, creating growing inequality. There is a ‘hollowing out’ of the wage scale in the sense that the low and middle-income half of employees are getting much lower real increases in pay rates than the top 40 percent – and even that higher income group is becoming increasingly unequal.

On the other hand, weekly wages showed a weaker growth in inequality over the period. The reason is that employees on lower wages worked increasingly long hours to make up for slower increases in their hourly rate, while those on the highest 40 percent of wages reduced the hours they worked.

Publication Details
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All Rights Reserved
Published year only: 
2017
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