Income Inequality in New Zealand free essay sample

Inequality in New Zealand The purpose of this report is to examine inequality and inequity in New Zealand income between ethnicity, gender and education. It will look at the positive and negative effects in income inequality. Inequality is the unequal distribution of household or individual income across various participants in an economy and inequity is unfairness involving favourtism and bias. To conduct my investigation I looked at articles and websites which contained information which was recent and relevent to domestic New Zealand inequality. The Gini Coefficient, a standard measure of income inequality that ranges from zero (everyone has identical incomes) to 1 (all incomes goes to only one person) rose by 4% in New Zealland along with 16 of the 22 OECD countries from mid 1990 to the late 2000s from the average of 0. 29, from 0. 27 to 0. 34 for New Zealand. 1 This means that inequality has increased in the country moving the Lorenz curve for New Zealand outward into a greater curve. The curve shows that a greater percentage of wealth is owned by the top decile of the population, indicating that the rich are getting richer while the poor are getting poorer. Impacts of the recession in terms of job losses impacted disproportionately those with low income, which means Maori and Pacific people as they are disproportionately represented in those lower incomes. There was an increase in European income from $569 a week during the recession to $580 this year while Maori experienced a sharp drop in income, down $40 to $459 and Pacific people, down $65 to $390. Maori unemployment rose from 10. 2% in March 2008 to 14. 8% in March 2012, Pacific unemployment rose from 8. 7% to 14. 7% while European unemployment only rose by 3% to 4. %. A maturing Asian population caused a large increase in the median income for Asians from $344 a week to $405. 2 In 2006 the mean income for Maori was 73% of Non-Maori median income and 85. 7% of the mean income of all residents, the Pacific median was only 84% of the total median income. 3 This shows that there is inequity in income based on ethnicity in New Zealand as the rises and drops of income is inconsistent th rough racial groups, with European and Asian income increasing while Maori and Pacific people income rates decreasing after the recession. In 2008 a quality of life survery said 11% European, 17% Maori and 23% of Pacific people said they did not have enough to cover everyday needs. 4 There is also evident income inequity due to gender. There is a definite income gap between males in females when comparing by profession. The New Zealand census of womens participation census found a gender pay gap in the public sector of 38. 81% in Defence, 29% in Treasury, 27. 2% in the office of the Prime Minister and Cabinet and 14. 9% in the Department of Labour. The gap also widens through time spent in employment. One year after entering employment the average 1 2 3 4 5 http://ips. ac. nz Income gap between races gets wider – NZHerald. co. nz http://www. teara. govt. nz http://www. teara. govt. nz http://union. org. nz By Alla Rull income gap between men and women with a bachelor qualification or above was around 6%, after 5 years the average gap had increased to 17%. 6 The curve for income growth also evens out much quicker for women compared to men. The income evens out for women at the average age of 39 while males surpass females by 9 years with an average wage higher by $35000. 7 Income inequality is also present North Shore between parts of the country. In population race distribution New Zealander Auckland, South Auckland had the European lowest median personal income in 2006 Maori of $24200 while the North Shore had Pacific the highest at $29100. West Auckland Asian had the second lowest at $26100 and Other Auckland City the second highest at $28000. South Auckland also has the highest percentage of Maori and Pacific South Auckland people compared to the other parts of population race distribution New Zealander Auckland with 15% maori and 28% European Pacifica. The North Shore had the Maori lowest percentage of Maori at 6% and Pacific 8 Pacific people at 3%. This reflects the Asian average income and the income data of Other Maori and Pacific islanders compared to Europeans and Asians. The inequality of income in the different parts of the region may also reflect the opportunities available in the part of auckland as opportunities are one of the leading causes of inequality. West Auckland and South Auckland were designed as residential areas and have less industrial opportunities compared with the city and North Shore. Early life opportunities also affect the inequality, schools in the lower income areas of Auckland have lower deciles and therefore have less money available to the school to offer students opportunities compared to higher decile schools. The most common income inequality is incomes earned by people with different qualifications. A typical bachelor degree recipient can expect to earn 73% more over a 40 year working life than the typical high school graduate and the average lifetime earnings for doctoral degree recipients are between 2 and a half and 3 times as high as the average lifetime earnings 6 http://union. org. nz 7 Payscale. com 8 http://www. enz. org By Alla Rull for highschool graduates. 9 The graph shows that at higher levels of qualifications the average yearly pay is increased with Lvl 10 Doctorate and Lvl 9 Masters learning about twice as much as a Lvl 1-3 Certificate and a Lvl 4 Cetrificate. This is due to the specialisation of the high level degrees and the amount of training and time put into the learning meaning fewer people complete them causing a smaller supply for careers needing those degrees compared to jobs which do not need any qualifications and therefore the wage rate would be at a high equilibrium point making it higher than the non qualification jobs. Income inequality may be seen as a negative in a economy as it creates a major gap between the upper and lower class which may be hard to cross. The New Zealand Living Standards 2004 report showed a million New Zealanders living in some degree of hardship, with a quarter of these in severe hardship. Despite the buoyant economy and falls in unemployment levels, not only was there a slight increase in the overall percentage of those living in poverty between 2000 and 2004, but those with the most restricted living standards had slipped deeper into poverty (poverty defined as exclusion from the minimum acceptable way of life in ones own society because of inadequate resources). 0 Income inequality is taking opportunities away from those less fortunate to be born into a wealthy family. It is seen as negative because it is caused by unfair bias based on race or sex which do not affect the persons ability to perform. However the increase in income inequality may also have positive effects. It acts as a motivator for the population to gain higher educations so they can earn high salaries, this may also make New Zealand workers more demanded over seas due to the high qualifications of the country, it promotes education as higher qualifications are needed to obtain the higher ncome careers. Greater inequality may also indicate that the economy is booming and higher skilled jobs are becoming more and more demanding within the country pushing up the wage rate for highly qualified jobs. Another big reason inequality can be seen as a positive is the inequality between job wages, not having the same pay for a highly skilled career such as a doctor and a low skill job such as a janitor means the individual is payed a fair amount for their time spent training and added qualifications which are needed for the job. http://www. sd. govt. nz/about-msd-and-our-work/publications-resources/journals-and-magazines/socialpolicy-journal/spj37/37-perceptions-of-poverty-and-income-inequalities. html http://ips. ac. nz/publications/files/d3ffbb25bdb. pdf http://www. teara. govt. nz/en/ethnic-inequalities/5 http://www. msd. govt. nz http://www. nzinstitute. org/index. php/nzahead/measures/income_inequality/ http://www. collegeboard. com/prod_downloads/press/cost04/EducationPays2004. pdf http://www. enz. org/nz-cities-compared. html http://union. org. nz/payequity http://www2. areers. govt. nz/jobs-database/whats-happening-in-the-job-market/who-earns-what/ http://union. org. nz/vote-fairness/growing-gap-between-rich-and-poor http://tvnz. co. nz/national-news/income-gap-widens-faster-in-new-zealand-4599042 http://www. american. com/archive/2007/may-june-magazine-contents/the-upside-of-income-inequality http://www. dol. govt. nz/pdfs/op2000-1main. pdf nzhearld. com – Income gap between the races gets wider http://www. enz. org Payscale. com 9 Collegeboard. com 10 http://www. msd. govt. nz By Alla Rull