Keith Rankin, 12 July 1999
Commentators often talk of an average annual wage in New Zealand of about $35,000. The source for this figure is the Quarterly Employment Survey (QES), a survey of firms that is used to measure wages, hours worked, and the number of filled fulltime and part-time jobs in New Zealand.
The QES covers all firms in New Zealand with at least 2 fulltime equivalent employees; ie at least 2 fulltime or 4 part-time employees in addition to the firms' principals. In addition, the QES data excludes the following sectors, most of which have high rates of self-employment:
Agriculture and agricultural contracting;
Hunting and trapping;
Fishing;
Seagoing work;
Domestic services in households;
Armed forces (civilian staff are included);
Owning and leasing of real estate.
The chart below shows that the QES "average wage" has increased from $22,000 to $35,000 in the 12 years to December 1998. Most of the increases that have taken place simply reflect increases in prices, and not increases in living standards.
Some other factors affect the QES figures. When employment growth is weak, few young workers are being hired, and the average increasingly reflects older more established better paid workers. Likewise, when employment growth accelerated, as in the mid-1990s, the wages of the newly employed served to bring the average down slightly. Further, when high wage sectors grow faster than low wage sectors, then overall wages appear to rise even if nobody is getting a pay rise.
Employees include managers and chief executives. With the managerial model having become ubiquitous in both public and corporate private sectors, the QES average wage has become increasingly biased by the effect of a small number of relatively high paid employees. The median or middle wage is much lower than the average wage. Put another way, perhaps 70% of employees receive less than the average wage.
For perspective, we only need to look at the 1996 census income data. Only 13% of New Zealanders aged over 15 received more than $40,000 in the year to March 1996. That would translate to about 15% today, with another 5% of adult New Zealanders receiving between $35,000 and $40,000.
In 1999, 30% of adult New Zealanders receive less than $10,000, and over 55% receive less than $20,000. Middle income New Zealanders receive less than $20,000 per annum; far short of the $35,000 "average wage".
The $10 per week tax cut that Treasurer Bill English proposes to introduce in April will be payable in full to 15% of adult New Zealanders. Fewer than 600,000 New Zealanders will get $5 or more per week. 850,000 adults (plus a similar number of children) will get nothing. Another 850,000 will get between $0 and $2 per week. A person working fulltime on the minimum adult wage will get a tax cut of $1 per week.
Because we talk of $35,000 as being the "average wage", it seems that middle-income earners are benefiting most from tax cuts. That's Bill English's claim. In reality, the millennium tax cut will be a dividend payable to the top 20% of New Zealanders, as were the previous five rounds of tax cuts (1982, 1986, 1988, 1996, 1998). Middle-class, maybe, but not middle-income. Three-quarters of adult New Zealanders' incomes fall short of middle class income levels.
© 1999 Keith Rankin