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Economists conflicted over income inequality

Nov 3rd, 2011 | By | Category: Front Page Layout, Latest News, News

HOURLY wages are not matching inflation but economists are divided on whether the gap between rich and poor is widening.

The median hourly wage increased just 1.9% to $20.38, the smallest percentage increase since June 2000, according to the latest Statistics New Zealand income survey.

New Zealand Institute of Economic Research principal economist Shambeel Eaqub says the figures, which are released annually, are a sign of the recession affecting wages.

“What tends to happen is the labour market tends to take a long time to adjust to the economy.”

Mr Eaqub says the wage rise is below the increase in living costs, which means it could be difficult for now, but as the economy seems to be picking up again we should see wages increase again soon.

Rising living costs are reflected in the latest Consumer Price Index figures, which show a 4.6% increase in the cost of goods from September 2010 to September 2011.

The Statistics New Zealand figures show that even without the GST increase in December last year, the CPI would have risen by 2.5%, notably higher than the 1.9% median hourly wage increase.

Council of Trade Unions economist Bill Rosenburg says wages would be expected to rise as the economy rises, but that it is not always the case.

In the meantime it will be even more difficult for low income earners, he says.

“The difference between the rises in median and average wages is an indication that income gaps in the community are growing.”

Mr Rosenburg says total incomes have risen faster because people have been working longer hours and there has been a disproportionate loss of lower income jobs.

The statistics also show a 4% increase in median wages to $800.

This was matched by a 3.9% median wages increase to $550 for income from all sources, which Mr Eaqub says is a good indicator the wage gap is not widening.

“It’s unfair if you just look at wages because of income from tax breaks.

“People who are working also get access to benefits like Working for Families, so if you are comparing income for a high income person to a low income person you’re not really getting the full picture.”

Statistics from the income survey also show a drop in the difference between the median hourly earnings for males and females, the biggest change since the survey began in 1997.

Median hourly earnings for females were at $19.50 while earnings for males were $21.58, increasing 50c and 33c respectively.

The survey also showed earnings from government transfers such as benefits increasing by 3.1 % this year.

According to Statistics New Zealand this was largely thanks to a 3.4% increase in the number of people aged 65 and over getting income from this source, as well as some adjustments to superannuation and other benefits.


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