It has become an urban legend in New Zealand that inequality is getting worse and worse.
Brian Easton adjusted the top income share database for New Zealand for the introduction of dividend imputation. This encouraged companies to distribute more dividends.
Once this measurement error was corrected by Easton, there has been no increase in top income shares in New Zealand since the 1950s. It has been a slow taper at best or a flat line.
There is a wages boom from the early 1990s after 20 years of wage stagnation, a period which some people regard as the good old days.
The return of real wages growth, and strong employment growth to boot, came straight after the Ruth Richardson horror budget and the passage of the Employment Contracts Act.
Every ethnic group experienced strong income growth as well as the graphic below shows. The rich got richer and the poor got richer too.
According to Brian Perry, the the expert at the Ministry of Social Development writing in last year’s Social Report:
The primary measure is the proportion of people in households with equivalised disposable income net-of-housing-costs below a threshold set at 50 percent of the 2007 household disposable income median – and held fixed in real terms (the 2007 anchored or constant value measure, CV-07).
This measure shows whether the incomes of low-income households are rising or falling in real terms, irrespective of what is happening to the incomes of the rest of the population.
The two other measures use fully relative thresholds set at 50 and 60 percent of the current year’s household disposable income median net-of-housing-costs (REL 50/60). These measures reflect how low-income households are faring relative to middle-income households.
Source: Severe Housing Deprivation – Healthy Housing – He Kainga Oranga.
NZ has a gender wage gap of 6% according to the OECD and 12% according to the Ministry of Women’s Affairs, with 30% of that explained by occupational segregation. That is 2 to 4 percentage points.
You have to explain occupational segregation. Men are represented more in occupations that are riskier. They are paid more for that. There are systematic differences in the occupational choices of married parents, single parents and single mothers regarding the risks of injury. Again, that feeds into wages.
Occupational segregation explains 2 to 4 percentage points of wages. Given that risk premiums – danger money – and trading lower wages for greater flexibility in a job can easily reduce wages or increase them by 2-4%, occupational segregation is simply a proxy for measurement error.
Still more of wage premiums has to be poured into this 2-4% of wages such as occupational segregation in unsocial work hours. Many more women than men work 9 to 5 during the week. Men would then have a wage premium for working nights and weekends. A hell a lot has to be explained away by just 2 to 4% wages.
What does undervalued work mean? Does it mean it is very profitable to employ women in certain occupations such as caring. That implies that high profits will lead new firms to enter these industries bidding up wages and equalising them with other competing jobs.