Lift wages to solve inequality says Rosenberg

Posted By TEU on Aug 7, 2014 |

Wages and salaries are a vital part of the picture of income inequality in New Zealand because so many people depend on them says CTU economist Bill Rosenberg. For households with at least one member aged 18-64, wages make up over three-quarters of average household income, and this is rising.

BIll Rosenberg cites fellow economist Brian Easton, who says “the majority of New Zealand’s poor are couples with jobs, with some – but not a lot of – children, living in their own home, albeit with a mortgage”.

Between 1993 and 2003, real wages at and below the median (middle) grew only 3 to 6 percent, while those above the median grew significantly faster – for example 15 percent growth for the wealthiest 10 percent. Nearly a third of households with dependents earn wages below the Living Wage ($18.80) and over half of sole parents who are working earn below the Living Wage. Most earn under $15 per hour.

On the other hand, the highest salaries rose rapidly in the late 1990s, stretching the inequality between top executives and most workers. There is conflicting evidence as to whether top income inequality rose or fell during the 2000s, but it has risen again more recently.

“The average income for the top one thousandth of New Zealanders rose from 16.5 times the average for the bottom 90 percent of New Zealanders in 1994 to 21 times in 2012. This excludes shares or share options that senior executives often get paid,” says Bill Rosenberg.

Rising inequality puts greater pressure on governments to compensate people for their loss, he says.

“Working for Families is an example, but is being cut. Even at $2.5 billion it is small compared to the $19 billion annual loss in labour share since the 1980s – $10,000 per wage earner per year.”


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