Generational pay gap evident in figures

16:00, Oct 08 2013

Young workers have been missing out on the big pay rises awarded to their older counterparts - but there is a warning that pressure is building for a catchup.

The Government revealed this week a hit in the student loan accounts was due to graduates earning less than expected.

Statistics New Zealand figures also show young Kiwis are seeing slower wage rises than their older counterparts in what Labour is calling another example of generational inequality.

BNZ chief economist Tony Alexander said employers had got away with offering low wages because of higher unemployment, but that would change over the next 12 to 18 months. "My warning to employers is to be ready to pay some more wages fairly soon."

Workers were looking for some catchup, he said. And as the market tightened, and with the current unemployment rate of about 6.4 per cent expected to drop, employers would be forced to pay up.

He pointed to the latest NZIER Quarterly Survey of Business Opinion showing businesses were having more difficulty getting staff.


"So the labour market is tightening up and that says to me wages growth in a general fashion will accelerate, but there's roughly an 18-month lag between the labour market appreciably tightening up and a wages response."

Finance Minister Bill English revealed this week that student loan repayments were lower than expected, with graduates earning less than forecast.

"The increase has been a bit lower than they thought and that stands to reason if you look at the pay increases for teachers, nurses, doctors, all in the graduate group, a lot of management, they've been pretty low in the last couple of years," he said. He expected that to turn around.

Statistics New Zealand figures released this week also showed wages increasing much faster for older people than for younger ones. Compared with the June quarter in 2009, average wages and salaries dropped for those aged 15-19, rose 5.3 per cent for those aged 20-24 and by 5.2 per cent and 5.6 per cent for those aged 25-29 and 30-34 respectively.

Older New Zealanders saw much more significant increases.

Income rose by 9.2 per cent for 35-39-year-olds, by 19.4 per cent for the 40-44 bracket and 18.7 per cent for those aged between 45 and 49.

They increased by 22, 29.8 and 18.6 per cent for the next three five-year age brackets.

Alexander said the fact employers were not having to pay well to attract staff could suppress entry-level salaries while people further up the chain might have established pay-rise expectations.

Labour finance spokesman David Parker said "it shows that even smarter, educated New Zealanders aren't seeing the incomes that were previously expected".

The gap in wage increases was one of "a number of examples of unfairness between the generations at the moment", along with housing and uncertain work conditions. "I think there is an understandable disquiet among young New Zealanders that the current economic settings aren't fair to them."

NZIER principal economist Shamubeel Eaqub said labour was becoming harder to find but wage inflation had slowed, with more people looking. The difficulties were concentrated in Canterbury.

Wage increases would improve gradually but would not be a major problem for businesses or a "massive boost" for households, necessarily.

The generational pay gap was partly because industries that employed many young people, such as hospitality, had been struggling.

Fairfax Media