# Budget 2016: It's not so tough at the top while the bottom 'gets ignored'

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## How is this calculated?

The calculator adjusts your total income to enable comparisons between different households. (By looking solely at income, it leaves out other components of wealth, such as property.)

The calculator applies an OECD scale that recognises larger households need higher incomes than smaller households to have the same standard of living.

It also acknowledges economies of scale. For instance, a couple renting a two-bedroom flat will usually spend less than they would have as two individuals, each renting a one-bedroom flat. Children also require less than adults.

To do this, household income is divided by 1 for the first adult, plus 0.5 for each additional person aged 15 or older, plus 0.3 for each child under 15.

For example, a family of two adults and two children needs 2.1 times more income than a lone- person household to have the same standard of living. (1 + 0.5 + 0.3 + 0.3 = 2.1) .

The chart shows percentiles of the income distribution. A percentile of, say, 55 means 55 per cent of people have an adjusted household income below yours.

Income data used to calculate the percentile comes from Statistics NZ

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Do you consider yourself rich or poor? Are you getting by?

Since 2007, the income of a household in the top 10 per cent (90th percentile) has increased by at least \$44,400, while a household in the bottom 10 per cent (10th percentile) has had gains of \$5500.

It's not surprising then that households at the top increasingly consider they have more than enough income to meet their everyday needs.

123RF

Household income data shows little change among Kiwis on low wages between 2007 and 2015.

They are also more likely to own their home, while households in the bottom 90 per cent have seen ownership rates decline.

* Interactive: How does your income compare?
* Richest 10 per cent own \$436b: research
* NZ should consider Oz mortgage controls

UNEVEN INCOME GAINS

In 2015, a household with an income in the middle (median), earned \$74,700 annually compared to \$55,800 in 2007.

For a household nearer the bottom the increase has not been so pronounced. A 20th percentile household (richer than 20 per cent of households and poorer than 80 per cent) has seen its annual income increase by \$8300, from about \$25,800 to \$34,100.

At the other end of the spectrum, an 80th percentile household has seen its income increase by \$36,300, rising from about \$98,800 to \$135,100. A 90th percentile household had income of \$175,700 in 2015, up by \$44,400 since 2007.

Michele Mossop

Since the 1980s, inequality in New Zealand has drawn closer to levels seen in more unequal countries such as the United States.

STANDARD OF LIVING

So what has this change in income meant for standards of living?

Statistics New Zealand's annual Household Economic Survey gives us an insight into this by asking people if their household income is 'not enough', 'only just enough', 'enough' or 'more than enough' to meet everyday needs.

For households in the middle 20 per cent, 58.5 per cent said they have 'enough' or 'more than enough' income compared to 45.4 per cent in 2007.

For households in the top 20 per cent, 42.3 per cent said they have 'more than enough' income in 2015, up from 32.7 per cent in 2007.

In the bottom 20 per cent, 60.8 per cent said they had 'not enough' or 'only just enough' income, that is down on 2007 when 69.3 per cent of households claimed to have 'not enough' or 'only just enough'.

HOME OWNERSHIP

Most income decile (10 per cent) bands have not fared well in home ownership rates since 2007, with all but the middle and the top 10 per cent seeing a decrease in home ownership.

Households with incomes between the 10th and 20th percentiles have seen home ownership rates fall from 53.7 per cent in 2007 to 46.5 per cent in 2015, while trust ownership in that band stayed steady at about 11 per cent. In the poorest 10 per cent of households the decline has been more dramatic, down from 50.8 per cent to 35.7 per cent. About 11 per cent of the poorest 10 per cent of households live in homes owned by a trust, however that figure has also fallen from about 15 per cent in 2007 to 11.4 per cent in 2015.

Only the top 10 per cent have seen an increase in home ownership rates, up from 50 per cent to 61.15 per cent. Of the remaining households in the top 10 per cent, 25 per cent live in a house owned by a family trust, that's down slightly from 31 per cent in 2007.

'AT SOME POINT ... IT'S GOING TO UNWIND'

SUPPLIED

Max Rashbrooke studies the economics of inequality.

According to researcher Max Rashbrooke, the public debate has tended to focus on housing.

"That's the way people are understanding inequality at the moment.

"Since 2009, incomes have risen a little bit at the poorest end but there are much bigger increases at the richer end."

Last year's Budget had been carefully calculated to do enough to calm those who were thinking of switching their vote, he said.

"People are covering up the scale of inequality in New Zealand by borrowing massively. At some point it's presumably going to unwind.

"A very large number of people are saying they do not have enough to get by."

In 2014, a couple with a child was considered out of poverty if they earned more than \$37,000.

Many people with children earned less than this threshold.

In a recent analysis, Rashbrooke also said the proportion of tax paid by the top earners had not changed in years.

"The data shows that the richest tenth of taxpayers got one-third of all taxable income in both 2008 and 2014. Within that, the richest one per cent, about 34,000 people, got over 8 per cent of taxable income.

"In contrast, the poorest tenth got just 0.4 per cent."

INCOME DEBATE FORGOTTEN

Child Poverty Action Group social security spokesman Professor Mike O'Brien​ said public debate had sidelined income in recent months.

Improving the incomes of the bottom 20 per cent of the working population was crucial, he said.

"There hasn't been much discussion about incomes other than discussions about tax rates, which won't make much difference for people at the lower end of the scale. How do we improve the incomes of those on the lowest incomes?

"The Government is least willing to tackle it at all. It seems to treat poverty as an individual thing."

Middle income earners were also better off and many of the wage increases were among middle management and executives.

"The experiences at the bottom end just tend to get ignored. The Government has been saying that work is the solution to poverty. It's kind of reflected in big jumps like CEOs, that kind of filters through.

"Those who have stable jobs and in middle management, that's where the increases are rather than at the bottom end."

* An earlier version of this story incorrectly stated changes in income for different household deciles were for the period from 2007-2015, when in fact the figures reflected the change since 2010. This has been corrected so that the value changes reflect changes between 2007 and 2015.

* Comments on this story are now closed.