CTU: More evidence of growing income gaps: Inequality rising

1 Sep

The report on household incomes, inequality and hardship prepared each year by the Ministry of Social Development was released this month. It showed that income inequality rose again in the year to June 2011, and is now at its highest level ever in New Zealand. It also showed that the median (middle) household income fell by 3.0 percent over the year. This is the first time the median household income has fallen since the early 1990s. The changes in income were not evenly spread: the top third of households by income saw increasing incomes. The bottom two-thirds had falling incomes – some falling steeply.

Another report on inequality was released by Treasury in June. It shows extremely high inequality in market income (that is before taxes and tax credits like Working for Families). Their estimates of inequality in disposable income (after tax) are even higher than those shown by the MSD study. However the report confirms that the tax system plays a very significant role in reducing income inequality. It also looks at “final income” – income including the benefits of public services – and shows that this lowers inequality further. However it is the tax system (including Working for Families) that plays the biggest role.

The reports also show that market income for the lowest income 50 percent of households was no greater in 2010 after taking account of inflation than it was in 1988. There were modest increases for the next 40 percent but large increases for the highest income tenth of households, which received 30 percent of all market income in 2010.

CTU Economic Bulletin August 2012

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