PensionReforms
Veritas propter investigationem [Truth through research]
 
TitleHousehold Incomes in New Zealand - Trends in indicators of inequality and hardship 1982 to 2012 (2013)
AuthorsBryan Perry
InstitutionMinistry of Social Development
TopicsLiving standards
 Statistical issues
 Poverty rates amongst the elderly
 Well-being in retirement
CountryNew Zealand
Date Published2013
Date posted on PR30 Dec 2014
  
  
 
Perry, B, (2013). Household Incomes in New Zealand - Trends in indicators of inequality and hardship 1982 to 2012 (2013) Ministry of Social Development,

PensionReforms’ summary and comments

The measurement of poverty in a community is a difficult but necessary task.  Over periods, the results are dynamic, depending on the measures used.  This 2013 report updates earlier reports by the same author.  PensionReforms looked at two earlier reports, the first from 2006 here and a 2009 version here.

 

This latest report updates material wellbeing measures by measuring household incomes from all sources over the period 1982 to 2012.

 

“The income measure used is household after-tax cash income for the twelve months prior to interview, adjusted for household size and composition.  This is referred to as equivalised disposable household income and is taken as an indicator of a household’s access to economic resources and of its (potential) living standards.”

 

The report concentrates on “…trends in income-based indicators of inequality and hardship.  These trends are set in the context of a description of the changing overall income distribution in the period.”  It uses a ‘fixed line’ measure that “…anchors the poverty line in a reference year, then adjusts it each survey with the CPI [inflation].  This gives a measure of change in relation to a benchmark held fixed in real terms…”

 

The report mainly uses “…data from Statistics New Zealand’s Household Economic Survey (HES) which is a sample survey of around 2800 to 3600 private households.   The latest income information is from the 2011-2012 HES (Income) which had an achieved sample of 3600 private households.”

 

The report analyses many different groups.  Over the 2001-2012 period, overall population poverty rates in New Zealand on four different income-related measures have generally fallen.

 

Of most interest to PensionReforms was the group in the oldest age group (households headed by someone age 65+).  Income-poverty measures for this group remain the lowest of all the age groups.  Amongst the age 65+, “[i]ncome poverty rates …are higher for those on their own than for couples.  For example the average rates for HES 2010 to HES 2012 were 6% and 10% respectively.”

 

In the main, this result for the over 65s reflects the significant contribution made by the universal Tier 1 ‘New Zealand Superannuation’ (NZS) and the “…private provision built up by most of the current cohort over their lifetime.  A key component of this private provision is mortgage-free home ownership which is relatively high among the current cohort.”

 

NZS has remained relatively static in real terms over the last 30 years because of its linkage to national average earnings but has declined in relation to median household incomes since the mid 1990s, because those have risen faster than inflation.  Using the OECD measure of poverty rates (50% of median incomes before housing costs) as a comparison, “the poverty rate was close to zero for the whole period 1984 to 2001.  This was because the value of NZS was above 50% of the median.  By 2009, with the value of NZS just below the 50% of median, the reported “poverty rate” had risen to 22%.  From the 2009 HES to the 2010 HES, NZS rose more rapidly than the median which brought the reported poverty rate down to 13%.  In 2012 the rate is 11%.  (Using a 48% of median threshold, the 2012 rate is close to zero.)”

 

However, the report suggests that not too much can be read into such large swings.  Taken at face value, the changes “…can leave the misleading impression that there are significant changes in material wellbeing occurring for this group, when in fact there is very little change occurring.”  An after-housing-cost (AHC) is more stable.

 

“…the proportion of older New Zealanders below the 60% fixed line AHC threshold has remained consistently lower than the population as a whole and reasonably low in its own right from 1982 to 2012.”

 

As the report points out, income measures do not capture everything that matters about poverty.  In 2010, the author reported on “non-income measures of material wellbeing and hardship” and PensionReforms looked at that here.  PensionReforms also looked at a longitudinal study of poverty in New Zealand here.

 

PensionReforms welcomes the regular information the author provides on measures of poverty amongst the old (and others).  Given the amount of money the government spends on the Tier 1 NZS, it’s comforting to know that NZS seems to be doing its job.  (File size 4.3 MB; 221 pp) 712

 

 

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