Via this (unfortunately rather dated) paper from Atkinson and Leigh, average incomes in New Zealand by percentile. The paper explains that the huge spike in 1999 is due to Labour’s policy of increasing the top tax threshold, so the very wealthy actualised all their company profits in 1999 instead of 2000.
Not only has the great neo-liberal revolution of the 80s and 90s brought great pain for absolutely no gain for 90% of the population, it hasn’t really increased the fortunes of the upper-middle class in any significant way. I suspect that if you could exclude the top 0.1% from the top 1% data-series then their line would flatline, and that the beneficiaries of the free-market reforms amount to a few thousand (at most) very high net-worth individuals.
If there hadnt been the reforms of the 80s and the 90s new zealand would have gone broke.public servents not got paid .NZ inc would have defulted on its overseas loans and the IMF called in .so yes its better than that
Comment by graham lowe — June 7, 2011 @ 7:53 am
1. Counterfactual?
2. Massive consumption benefits even if incomes constant – how many permits would you have needed from Muldoon to get the foreign currency to buy a parallel import Android phone, if imports were even allowed?
Comment by Eric Crampton — June 7, 2011 @ 8:31 am
I note, not for the first time, that Bob Hawke’s reforms, while imperfect, managed to open the Australian economy without destroying their manufacturing base and while still allowing real wage growth.
Comment by bradluen — June 7, 2011 @ 8:34 am
Also worth noting: Housing inflation has been much higher than other kinds of inflation over the last 30 years (housing 8.3%, CPI 4.8%). So if you bought a house in 1980 you’re probably a lot better off than the graph suggests. If you’ve been renting for the last 30 years, you’re probably a lot worse.
Comment by bradluen — June 7, 2011 @ 8:56 am
“…and that the beneficiaries of the free-market reforms amount to a few thousand (at most) very high net-worth individuals…”
Ah, but what individuals! Knights and Dames all!
OTOH, if it only a few thousand then when the inevitable peasants revolt comes it’ll keep the dreadful toll of Madame Guillotine at a modest level.
Comment by Sanctuary — June 7, 2011 @ 8:59 am
I love how the libertarian economist can only reply with a snide remark about how if it wasn’t for those brave and selfless titans of reform, we’d be stuck in Muldoon’s communist hellhole trading our ration tickets for the latest Amstrad computer.
I wonder perhaps, if there could’ve some sort of middle ground between letting a moron like Muldoon run the country, and having a moron like Douglas do it?
Maybe if National hadn’t won the 1978 & 1981 elections by appealing to racism, even though they won less votes than Labour, we’d know the answer to that question? (i.e we’d end up in bradulens Australian scenario where economic reform was undertaken by people who weren’t complete ideological zealots)
Comment by Hobbes — June 7, 2011 @ 9:41 am
I like how you’ve omitted 2002 onwards.
Comment by Nick K — June 7, 2011 @ 9:44 am
I like how you’ve omitted 2002 onwards.
I love how you didn’t read the first sentence of the post….
Comment by andy (the other one) — June 7, 2011 @ 9:48 am
I like how you’ve omitted 2002 onwards.
That’s mostly because I love the New Zealand Labour Party SO much I would NEVER criticise them or show them in a bad light, but also, partly, because the paper cited was published in 2005.
Comment by danylmc — June 7, 2011 @ 9:52 am
Housing inflation has been much higher than other kinds of inflation over the last 30 years (housing 8.3%, CPI 4.8%).
Not necessarily so. The House Price Index from QV (I’m assuming that’s what you’re quoting, because it’s about the only HPI in NZ…) accounts for some of the quality improvement in housing, but not all of it. The CPI, on the other hand, strips out all quality improvement in the basket of items. You’re not comparing apples with apples.
You’d get a better comparison using the Stats NZ Capital Goods Price Index (which does strip out quality improvement to give you the real increase in the cost of house building) for construction of a new residential dwelling, which has an annual average price increase since 1990 of 3.7%.
Comment by Phil — June 7, 2011 @ 10:12 am
Does it take into account people moving from the bottom 90% up into the higher brackets?
Comment by Owen — June 7, 2011 @ 10:26 am
“Does it take into account people moving from the bottom 90% up into the higher brackets?”
At the risk of stating the obvious, the bottom 90% will always be 90% of the population, for every John Key who kicks and elbows his way to the top someone else gets pushed down.
Comment by nommopilot — June 7, 2011 @ 10:30 am
Does it take into account people moving from the bottom 90% up into the higher brackets?
I get what you’re trying to say – the answer is that New Zealand’s gini-coefficient, measuring inequality grew faster during this time than any other OECD country. So upward income mobility decreased faster than in any other developed country.
Comment by danylmc — June 7, 2011 @ 10:33 am
Where in the linked paper do the authors give statistics for the bottom 90%?
Comment by lonelyavenger — June 7, 2011 @ 10:39 am
managed to open the Australian economy without destroying their manufacturing base and while still allowing real wage growth.
NZ’s manufacturing sector as a share of GDP is higher than Australia’s, for what it’s worth. They still subsidise the auto-manufacturing business to the tune of many millions too.
Comment by StephenR — June 7, 2011 @ 10:49 am
“managed to open the Australian economy without destroying their manufacturing base”
I think there were some figures quoted in the last couple of weeks that showed manufacturing is a higher share of the NZ economy than it is in Australia
Comment by Tinakori — June 7, 2011 @ 10:49 am
The House Price Index from QV (I’m assuming that’s what you’re quoting, because it’s about the only HPI in NZ…) accounts for some of the quality improvement in housing, but not all of it.
Ah, this actually explains a lot. Looking at the home ownership component of the CPI (which goes back to 1984 Q2), I get 5.2% inflation, vs 4.1% for the CPI over the same era. Can’t find quality-neutral rental price numbers going that far back.
Comment by bradluen — June 7, 2011 @ 11:11 am
As far as manufacturing goes, what growth we’ve seen has been food, drink, and forestry. Meanwhile, the likes of clothing, machinery, and furniture manufacturing have all shrunk, and no technologically-advanced industries have sprung up to take their place.
That Australia’s economy is not as heavily dependent on animal fat as ours seems to me to be a strong point in their favour.
Comment by bradluen — June 7, 2011 @ 11:38 am
Psh, NZ’s economy is too small to really go up.
We’re already committed to going sideways (as the graph clearly shows).
Comment by marsoe — June 7, 2011 @ 11:56 am
Too lazy to find directly comparable numbers (and I don’t guarantee my arithmetic is right), so take this with a grain of salt, but:
Australian annual real manufacturing growth, 1984/85-2000/01: 1.9%
NZ annual real manufacturing growth, 1988-2001: 0.9%
NZ annual real manufacturing growth, 1988-2010: 0.4%
The only sector of manufacturing in which we’ve clearly beaten Australia in real growth is wood and paper. In contrast, Australia has clearly beaten us in printing & publishing; machinery & equipment; and yes, even food, beverage & tobacco.
The “share of GDP” measure is misleading because it penalises Australia for having strong growth in sectors other than manufacturing, whereas our growth in other sectors has sucked almost as much as our manufacturing growth.
Comment by bradluen — June 7, 2011 @ 12:21 pm
New Zealand’s gini-coefficient, measuring inequality grew faster during this time than any other OECD country. So upward income mobility decreased faster than in any other developed country.
Almost. The Gini coefficient measures absolute inequality, but it doesn’t measure mobility. However, given that high inequality also correlates with high immobility, you can consider them similar enough for practical purposes.
Via The Standard, a graph demonstrating the myth of upward income mobility during the 2000s. Of course, poor people might be suddenly able to climb the ladder now that National has taken 6 cents off the top tax rate of tax-paying-income-earners, but I’ll wait for the evidence.
Comment by George D — June 7, 2011 @ 12:28 pm
Call me crazy, but I’m inclined to discount the idea of the entire population churning in and out of the top 0.1% of incomes anyway.
Comment by lyndon — June 7, 2011 @ 12:38 pm
@Graham, Eric: Danyl has said before that he’s not necessarily opposed to the reforms themselves undertaken under Lange/Douglas (e.g. floating the currency, ending ag subsidies, lowering tariffs), but rather the manner in which they were introduced (i.e. as fast as possible with no concern for the effects on the worst-off). He offered Australia’s own liberalisation process during mostly the same time period as a contrast.
Comment by derp de derp — June 7, 2011 @ 12:45 pm
Where’d you get the post-1989 top 0.1% data from?
Figure 2 (which shows income shares of the “next 4%” and “second vintile” (the 5% after that) shows us that the merely well-off didn’t to that well out of the “reform” process either. The second vintile stayed static; the next 4% saw their sahre increase by 2% between 1986 and 1993, compared with twice that for the top 1% over the same period.
Comment by Idiot/Savant — June 7, 2011 @ 1:11 pm
the 80s reforms were necessary. getting NZL out of the socialist hell we were in was imperative.
what we didn’t need was the austerity misery leveled against the country by right-wing ideologues. the 90s were, in a word, *awful*
Comment by Che Tibby — June 7, 2011 @ 1:15 pm
hold on, scratch “socialist” – replace “corporatist”.
Comment by Che Tibby — June 7, 2011 @ 1:16 pm
Danyl;
Can you please provide an updated chart with the top 0.1% removed?
The scale on the graph makes me want to scream and throw things at my PC screen. You can’t really tell anything about the ‘bottom 90%’ as it stands.
Comment by Phil — June 7, 2011 @ 1:21 pm
So what. High income earners pay most of the taxes; high income incentives keep bright go-getters in NZ. High income earners invest back into the economy and create jobs. This wealth envy obsession is the left fiddling while Rome burns.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10730596
China is at present funding NZ’s egalitarian dream.
Comment by Peter S — June 7, 2011 @ 1:35 pm
Here’s the top 10% and bottom 90%
http://dimpost.files.wordpress.com/2011/06/averageincomes1.png
This site makes it easier to source the data.
http://g-mond.parisschoolofeconomics.eu/topincomes/
Comment by danylmc — June 7, 2011 @ 1:50 pm
The scale on the graph makes me want to scream and throw things at my PC screen. You can’t really tell anything about the ‘bottom 90%’ as it stands.
That’s the point of the graph. Really. They (you, we) don’t figure.
Comment by George D — June 7, 2011 @ 1:56 pm
@Peter S – for some reason, reading your “contribution” brought a strong mental image of a Dalek voice angrily reciting your post over an ancient tannoy to shuffling masses in a camp somewhere on Skyros.
“Daleks pay most of the taxes!”
“High income incentives keep Daleks happy”
“Obey! Obey! Obey!”
Comment by Sanctuary — June 7, 2011 @ 1:57 pm
Interesting that the average income of people in the top 5-1% is almost exactly that of the top 10% (source: website Danyl linked to). Then if you add in the top 1%, so that you’re measuring the entire top 5%, it jumps up $20,000 or so.
Comment by derp de derp — June 7, 2011 @ 2:35 pm
That top incomes data set is fun. Makes it clear that it’s the top 0.5% that have done especially well, and as I/S said, the 90th to 95th percentile group has barely risen at all. On the other hand, the top 0.5% in AUS/UK/US have done better than our top 0.5%. So if it was all a rort to make the top 0.5% richer, it kind of backfired.
Could be worse watch: Since Thatcher came to power, real incomes for the top 0.5% have tripled (to 2005), while they’ve declined for the bottom 90%.
Comment by bradluen — June 7, 2011 @ 2:39 pm
Threadjack. I think you’re wanted over at Public Address for more Slutwalk fun.
http://publicaddress.net/system/topic/3068/
Comment by DaveG — June 7, 2011 @ 2:42 pm
> “I suspect that if you could exclude the top 0.1% …(the other lines)… would flatline”.
That is absolutely the case.
We can’t tell anything about the top 1, top 10 or bottom 90 % from this graph.
This graph is a good example of why medians can be more useful than averages.
Also wasn’t this the approximate period when we started encouraging the immigration of high net worths?
Comment by Graeme — June 7, 2011 @ 3:09 pm
Here’s the top 10% and bottom 90%
http://dimpost.files.wordpress.com/2011/06/averageincomes1.png
Cheers, much appreciated.
So, from this updated chart, 90% of the population have, in real terms, not gone anywhere since 1972.
Over the past 40 years we’ve had a pretty wild political ride compared to most developed western nations, and yet it seems the majority of the gains (and losses too, to be fair) have accrued to the higest earners – note that this isn’t necessarily the same as ‘wealthiest’ individuals.
This suggest to me that the political party in power has sweet fuck-all impact, and there’s a range of far far deeper social issues at play.
Comment by Phil — June 7, 2011 @ 3:46 pm
I think you’re wanted over at Public Address for more Slutwalk fun.
Eh. These people ARE hilarious – I love the way Hart throws down like a gangsta rapper and then falls to pieces whenever anyone disagrees with her – but I like Russell Brown, and he doesn’t like it when I make fun of his friends, which is fair enough.
This suggest to me that the political party in power has sweet fuck-all impact, and there’s a range of far far deeper social issues at play.
I suspect that when we get updated stats we’ll see lower incomes rise under the Labour government and then under National we’ll see the top 0.1% soar post- the 2010 tax cuts.
Comment by danylmc — June 7, 2011 @ 3:56 pm
from this updated chart, 90% of the population have, in real terms, not gone anywhere since 1972.
Not quite. The graph stops at 2002. In the period 1999-2007 real average incomes went up by 9.3%. Not huge, but those minimum wage increases (and their flow-through into the rest of the wage economy) did have some impact.
Comment by George D — June 7, 2011 @ 4:08 pm
The thing about aussie is that have big holes in the ground where they dig stuff out and sell it to china for megabucks
In nz we dont allow that as we would rather moan about being poor then we have to pray that china loves our dairy products but all the while hateing those f**King dairy farmers who get rich from hard work
Comment by graham lowe — June 7, 2011 @ 7:10 pm
That’s right Graham, if it makes you feel better, everyone hates you, and it’s because you work hard.
Comment by Guy Smiley — June 7, 2011 @ 7:35 pm
graham lowe = Allan Crafer
Comment by aj — June 7, 2011 @ 7:47 pm
Don’t be ridiculous. Graham Lowe said he only had $9 million in mortgages.
Comment by Simon Poole — June 7, 2011 @ 7:56 pm
Point: This blog is getting a *wee bit* self indulgent in its’ tone and seems to be running a platform akin to NatRads’ ‘The Govt are conspiring against the goodness of the mighty Kiwi Eco-Socialist middle classes’.
Just sayin’ some balance would be wunderbar.
Comment by abel the amish — June 7, 2011 @ 7:57 pm
“Just sayin’ some balance would be wunderbar.”
Yeah, abel wants some right-wing comfort facts! Farrar’s been on holiday! You’re mean Danyl.
Comment by Guy Smiley — June 7, 2011 @ 8:21 pm
How come the bottom 90% are sitting around $20K in the second graph you posted, but they sit at less than $2K in the first? Likewise the top 10% range between $60K and $110 K in the second grapg, but around $5K in the first graph. Am I missing something?
Comment by Will Truth — June 7, 2011 @ 9:06 pm
And on cue Guy pipes in. Next his alter ego Sanctuary will pop up with a rambling essay about class warfare in the 21st Century.
Comment by abel the amish — June 7, 2011 @ 9:13 pm
It’s called analytical thought, abel the amish. Not something you kiwiblog crew are much good at. Prolly thats why you feel alienated in here
Comment by Alistair — June 7, 2011 @ 9:37 pm
Yeah, that’s it mate. As analytical as NatRads recent decent into political bias i.e. not really.
Comment by abel the amish — June 7, 2011 @ 9:50 pm
“Am I missing something?”
Count the zeroes on the x axis. The first graph has to have a much higher scale because the top .1 per cent earn so many more times as much as the rest of us. The bottom 90% is ~ the same in both graphs
Comment by nommopilot — June 7, 2011 @ 9:51 pm
“Just sayin’ some balance would be wunderbar.”
You could write a blog of your own! i’m sure people are interested in your opinion, Abel.
Comment by nommopilot — June 7, 2011 @ 9:52 pm
I guess a bias towards analytical thought and fact-based observations is still a bias
Comment by Kahikatea — June 7, 2011 @ 9:52 pm
abel: “As analytical as NatRads recent decent into political bias i.e. not really”
Here is a useful link to people who actually care about such claims: http://www.bsa.govt.nz/
Unless and until you avail yourself of their services, we’ll feel free to view you as blathering nonsense to no great effect.
Comment by Andrew Geddis — June 7, 2011 @ 9:53 pm
“blathering nonsense to no great effect.”
that’d make a great title for his new blog which is about to bring balance to the force!
Comment by nommopilot — June 7, 2011 @ 9:55 pm
I’ll avail myself to pointing out the blathering bias evident here thanks Andrew and will view your comments as beautifully crafted yet empty prose that they are.
Comment by abel the amish — June 7, 2011 @ 10:04 pm
fuck i am no crafer
i feed my cows
Comment by graham lowe — June 7, 2011 @ 10:14 pm
Oh, I see, abel. You don’t actually believe what you allege. Glad to clear that up … ta.
Comment by Andrew Geddis — June 7, 2011 @ 10:18 pm
meanwhile, graham is writing something passably like haiku.
Comment by Che Tibby — June 7, 2011 @ 10:24 pm
Political bias is not prohibited under Broadcasting Guidelines.
Comment by Graeme Edgeler — June 7, 2011 @ 10:27 pm
“i feed my cows”
And get your talking points from them.
Comment by Guy Smiley — June 7, 2011 @ 10:31 pm
Whoops. Thanks Nommopilot:)
Comment by Will Truth — June 7, 2011 @ 10:33 pm
Yes I do. Thanks.
Comment by abel the amish — June 7, 2011 @ 10:38 pm
Graeme: “Political bias is not prohibited under Broadcasting Guidelines.”
abel’s initial complaint was about an absence of balance in Dimpost’s coverage, likening this to National Radio’s practices. Seems to me Standard 4 of the Radio Broadcaster’s Code of Practice would apply to such a claim … if it were truly believed, of course.
Comment by Andrew Geddis — June 7, 2011 @ 10:45 pm
I appear to have more alter egos than a Sally Field movie.
Comment by Sanctuary — June 7, 2011 @ 10:50 pm
Goodo Andrew, ole’ Standard Four the equivalent of “a Sausage down Oxford Street” in terms of tightly worded watchdog guidelines.
Comment by abel the amish — June 7, 2011 @ 10:53 pm
So you HAVE complained then, abel? How did it go?
Comment by Andrew Geddis — June 7, 2011 @ 10:56 pm
Come’on Geddis, through me a laff line here. If you didn’t chuckle at the sausage line matey potatey …
Comment by abel the amish — June 7, 2011 @ 11:00 pm
or even throw me one
Comment by abel the amish — June 7, 2011 @ 11:02 pm
We live in such an evil socialist country that bleeds the creative innovators dry, punishing them for daring to stand tall… when will the injustice end?
Comment by Philoff — June 7, 2011 @ 11:31 pm
I understand your point. But on the exact words you used:
1. The bottom 90% absolutely no gain. What I see is an increase in real terms from about 18K to 21K (rough eyeball on your second graph). That is a gain
2. What I see is an increase from about 70K to 90K – 22% – for the top 10%. And an increase from about 18K to 21K – 16% – for the bottom 90%. And when I put it like that, not really quite as exciting as your initial hyperbole.
So, I’d agree the top 1%/0.1% on your graph have pulled in more money. But we’re talking about people earning over 200K. How many of them again? What is the point of this post other than envy?
Put it another way – the top 0.1% are making 700K, the bottom 99.9% are averaging say 22K. If we took all the money off the top 0.1% and distributed it evenly, that would mean the bottom 99.9% now are getting $22.6K. If your argument is that the bottom 99.9% aren’t making enough on average, I assume you’re not complaining about the difference between 22K and 22.6K.
To be more direct…..the money that the people at the top are earning isn’t somehow stolen from those at the bottom. If we want to do something for the 99.9%, we need to focus on getting them some skills that make them worth more. Dragging down the people at the top is not going to make a material difference, even if we ignore the fact that a lot of those people at the top are the ones creating the jobs.
Comment by PaulL — June 8, 2011 @ 12:58 am
PaulL: The key point is that there is growing inequality which is a bad thing.
But even your analysis of the absolute numbers is missing a major point – while it might not seem like much to you, the difference between 22.6K and 22K is 2.7%. Given you have described an increase of 16% over 39 years, which is 0.38% compounding, 2.7% is therefore the equivalent of 7 years of income increase that everyone else is missing out on because of the disproportionate increase of the highest income earners.
Comment by wtl — June 8, 2011 @ 2:58 am
So the comment that i get my talking points from my cows means what?
That my writing skills aren’t as flash as some of the people here with degrees?
The funny thing is this i have mates in a standard provincial town that i have grown up with some are freezing workers,trades people, farmers and the like .They all detest the arrogant attitude displayed by the so called educated elite that is why labour is no longer in power
Farmers tend to have brothers/sisters who went to uni that make you laugh. By the time we are in our late 30s we are doing quite well starting to enjoy the finer things in life and our so called smarter siblings are poorer that tends to make them slighltly resentfull
Comment by graham lowe — June 8, 2011 @ 8:00 am
Yep, if it makes you feel better, everyone’s really envious of you Graham, because you’re so rich. The gloating is a nice redeeming feature though.
Comment by Guy Smiley — June 8, 2011 @ 8:50 am
Personally I care much more about absolute standard of living than relative: the top 0.5% could all be trillionaires, for all I care, if the rest of us were on six figures (inflation adjusted, of course). But while I don’t worry much about income inequality per se, I worry about the fact that this leads to political inequality: the super-rich have a disproportionate influence on the way the country is run. And while many of the super-rich are nice people who donate to the City Mission and take out their recycling, some are not. When those who are not deign to take an interest in politics, it can lead to negative outcomes, to put it mildly.
Exhibit A for this is the Douglas-Richardson era. It started with some necessary reform, became stranger as Douglas put piecemeal ideas into an incoherent framework, and by the end was entirely co-opted by the Business Roundtable. According to the Top Incomes database, average real incomes for the top 0.5% increased by 67% between 1984 and 1993. Again, I would be fine with this if incomes for the bottom 90% increased by a respectable amount. But that’s not what happened: in fact, they decreased by 8%. (It looks even worse if you make the time period 1988 to 1992, during which the top 0.5% improved 53% and the bottom 90% declined 17%.)
I pretty much hold all NZ political parties in contempt at the moment, but I’m motivated by an abiding fear that there might be an Exhibit B if Brash gets a seat at the cabinet table.
Comment by bradluen — June 8, 2011 @ 10:34 am
Interesting chart when read just after Sir James Wallace’s take on the new super-rich who “I certainly think are not into philanthropy. They are immersed in their own lives and their own wealth.” I don’t doubt there’s significant levels of hypocrisy in his statement but still…
The kids of Thatcher and Rogernomics are not really the people you want as the super-wealthy.
Comment by garethw — June 8, 2011 @ 12:13 pm
But Gareth, what do you make of the Gates’ and Zuckerberg’s of this world? This new breed of well-connected super-rich seem like the model for modern philanthropy.
I would argue that where you have ‘new money’, for all it’s crass “classlessness”, it’s probably being put toward more charitable goals and ambitions than the more subdued and insulated old-money ever was or will be.
Comment by Phil — June 8, 2011 @ 12:47 pm
Yes agreed, although I think Sir James was referencing NZ specifically. Certainly you have the occasional Tindall or Morgan down here, but his point is that it seems to be a receding rather than growing phenomenom locally.
Comment by garethw — June 8, 2011 @ 12:57 pm
I once read a Time magazine poll of the 2000 US presidential election that asked people what they thought of the Bush tax cuts for the richest 1% of Americans.
20% of people thought they were already in the top 1% of income earners and a further 19% thought they would be there soon, which is absurd.
So, you put together a policy that looks after 1 in a 100 people – and you get 39% support for it. Not bad maths – and explains why the rest of the population are happy with the increases in inequality your graph portrays.
Comment by Conor Roberts — June 9, 2011 @ 2:15 am
“Almost. The Gini coefficient measures absolute inequality, but it doesn’t measure mobility. However, given that high inequality also correlates with high immobility, you can consider them similar enough for practical purposes.
Comment by George D — June 7, 2011 @ 12:28 pm @ 21”
Really? Surely included in the “poor” are folks straight out of uni underemployed or on grad wages, semi-professional young parents down to one income during child-rearing, the mortgage- and child-free retired. And journalists who have not yet “mobilised” into PR, policy analysis or marketing.
Conor @ 77, that was bril, nearly fell off my chair.
Comment by Clunking Fist — June 9, 2011 @ 3:04 pm