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  Community » Waikato Progress Indicators - Tupuranga Waikato » Report cards » Income inequality

Income inequality

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INCOME INEQUALITYimage

    NO SIGNIFICANT CHANGE

 

Household income inequality in the Waikato region varies from year to year but there is no apparent long-term trend. The Waikato region has slightly less income inequality (more equality) than New Zealand overall. New Zealand's income inequality is slightly higher than the OECD average.

This indicator uses a ‘Gini coefficient’ to measure income inequality across households in the Waikato region. ‘Zero’ indicates perfect income equality. As the measure gets closer to ‘1’,  income inequality increases.

Why is this indicator important?

A higher average level of income inequality indicates that within that population, a greater proportion of households total income is accruing to a smaller proportion of households. This means the majority of people living in that area are on lower incomes compared to the minority that have a higher income, and may have a lower standard of living as a result.

On the other hand, opportunities to earn more money can encourage some people to innovate and contribute to economic growth within an area. As not everyone can do this, people on lower incomes can become concerned over economic growth not being fairly shared between rich and poor.

When people within a population earn similar levels of income, there are likely to be more social connections and less conflict within that community, which also contributes to sustainable development.

What is this indicator telling us? 

 

  • The Waikato regional level of income inequality in 2013 was similar to 2001, with no apparent long-term trend either upward or downward. Note this indicator is inherently variable from year to year due to relatively small sub-national sample size and also variation in the numbers of very-high-income households in the sample each year.
  • The household income inequality indicator for the Waikato region tracked slightly lower than the indicator for New Zealand overall for the period between 2001 and 2013, indicating more equality in Waikato compared to the national average.
  • According to the latest Ministry of Social Development report on income inequality and hardship indicator trends for New Zealand overall (Perry 2016), there have been some fluctuations in household income inequality since the mid-1990s but there is no evidence of any sustained rise or fall in the Gini coefficient or other income inequality indicators over this period. The trend-line is flat.
  • Based on the Gini long-term trend line, New Zealand’s income inequality is a little higher than the OECD average, around the same as Australia.

Check out related information on our website and other organisations’ websites listed on our Waikato Progress Indicators’ Useful Links page.

Click here to view report cards

 


DATA SOURCE AND SUPPORTING INFORMATION

This indicator is measured using a household income based Gini coefficient, which indicates the level of inequality or dispersion within a region's income distribution. A Gini coefficient of zero means perfect equality, where every household has exactly the same level of income; whereas a Gini coefficient of one means that only one household is earning all the income. Household incomes are reported after tax and government transfers (i.e. disposable household income), and adjusted or equivalised to take into account the number of people within the household. These calculations use Treasury’s definition of disposable income: Total income + working for families - tax payable – ACC + accommodation supplement), equivalised according to household size (using Revised Jensen Scale).

Market Economics Ltd (ME) calculated the Gini coefficients for the Waikato region for 2001-2013 period based on data extracted from Statistics New Zealand’s (SNZ) Household Economic Survey (HES). The HES provides median annual disposable household income values.

Update details: Annual series from Market Economics Ltd (ME) using year-ended-June HES data (released in late November).

All HES data from the year ended June 2007 to the year ended June 2012 were revised in early 2014, as household disposable income was previously miscalculated by SNZ in a way that tended to overestimate the disposable incomes of households on low to middle incomes. These revisions have been incorporated into the WPI time series.

A customised data request from SNZ was obtained for this report. Statistics New Zealand modelled equivalised disposable household income, the number of households by decile, by region as well as the country as a whole.

For national estimates refer to Section D of the annual Household Incomes in New Zealand(external link) report published by the Ministry of Social Development (MSD).

Note that the Gini coefficient takes into account all household incomes and is therefore susceptible to annual variability due to differences in the number of very-high-income households captured in the survey sample each year. Obtaining a consistently representative group of very-high-income households in a survey sample is a well-known difficulty. Therefore, while longer-term trends over several survey periods provides robust and reliable information, smaller changes between survey periods should not be used to support definitive conclusions about change. Similarly, while statistically significant differences between sub-groups (e.g. regions) within one survey year can be counted as providing robust and reliable information, any smaller differences should not be used to support definitive conclusions about differences.

Customised data request requirements: Note that ME’s calculations require a customised data extract from the HES and although the HES results are published in late November, it may not be possible for Statistics New Zealand to issue data for several months, as they rely on Treasury to produce the modelled data from the “Taxwell” micro-simulation data.

DATA AVAILABILITY – OTHER THAN WAIKATO REGION:

Territorial Authority (TA) disaggregation: No

Other regions: The survey regions are Auckland, Wellington, Rest of North Island, Canterbury and Rest of South Island.

New Zealand: Yes 

Other countries/ Organisation for Economic Co-operation and Development (OECD): Comparison data from the OECD Income Distribution Database(external link).

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