Income Growth and Earnings Variations in New Zealand, 1998—2004

This work provides an update of changes in the income distribution over the period from 1998-2004, using data from the Household Labour Force Survey's annual Income Supplement (HLFS-IS). We focus on changes in working-age individuals' earnings and total income distribution and, to allow for resource sharing within households, their equivalised household total income distribution over the period. Our analysis shows that there have been broad gains in income to both individuals and households, suggesting the spoils of growth have been shared widely across the income distribution. Mean and median earnings increased 15 percent and 23 percent respectively, while mean and median individual income both increased 12-13 percent and equivalised household income by 11 percent. Inequality, as measured by the Gini coefficient, was more stable: individual earnings inequality fell 4 percent; individual income inequality was unchanged, while equivalised household income inequality increased 2-3 percent. The main contributors to the observed changes appear to be employment and real wage growth. We estimate that roughly one-half of the growth in average individual incomes is due to employment growth, and one-quarter each to demographic changes and wage growth. We also find that the relative employment and wage contributions have varied across the distribution: income gains at the lower end of the income distributions have been largely driven by employment, while changes at the higher end have been driven by wage gains.