NZ incomes, according to the Green Party

28/05/2012 § 1 Comment

The Green Party responded to the Budget with this graphic:

I carry around in my head a vague sense of the income distribution of New Zealand. The Green’s figures did not match that distribution. So, I went looking for the numbers. Helpfully, the Party’s website had more information (pdf) about how these incomes were calculated.

  • Solo parent: ‘$333 a week DPB, student allowance and housing allowance of $125 per week, $80 working income, and $88 Family tax credit. This actual puts her in the middle of the 3nd decile – ie 20% of household [sic] have lower incomes.’ I can’t verify the income because I’m not familiar with these government programmes. The additional comment, that 20% of households have lower incomes, is misleading. According to the NZ Income Survey, 15% of households have one member so may not be poorer per person. Also, some of these payments are specifically aimed at lifting children out of the poorest deciles, which they appear to be doing.
  • The typical family: $71,500 seems high for the ‘typical family’. The Greens link to the NZ Income Survey, which reveals that the figure is indeed the median for a family of at least five (‘Couple with three or more dependent children’). They aren’t really ‘typical’ — they are only 5.7% of all households, and only 14.0% of households with dependent children (there are more solo parent households — 16.4% of households with dependent children).
  • The top 10% family: The additional information states that the $250,000 was ‘Estimated from Household Income Survey (Income) data’. I don’t know how they ‘estimated’ this figure, but it is a fairly high estimate of the top 10%. IRD income statistics make this clear. Only 1.4% of earners (in 2010) have an income of $150,000 or higher. Assuming that the part-time earner can only make $50,000, then the main earner needs to bring in $200,000; there are 0.7% such earners. So, this isn’t a top 10% family but a top 1%.
  • The top 1%: This is the average taxable income per earner for the top 1% of earners, using IRD figures. However, it isn’t a household figure (like the others are) and it isn’t a median (which would be a better representation of this distribution).

The IRD figures don’t tell us about families and households because they are only taxable incomes and include earners like students who are working part-time. But, they are a guide. More than half of earners make less than $25,000. The top 10% of earners make about $70,500 or more — the top 10% of ‘families’ will be higher.

What all this means is that the Green Party figures are skewed upwards. What they are presenting as ‘typical’ isn’t. Even when they talk about the ‘top 10%’, they overestimate the income. So, why?

I can make a few guesses:

  • It probably maximises the increases and decreases they calculate for the various families. So, the choices are political rather than economic.
  • They may be trying to emphasise the distance between the majority and the top 10%. However, they are simply wrong. People making over $100,000 are under 5% of earners, so there are still lots of the top 10% making under that.
  • They don’t know how lucky they are. Many of the people who brought you this analysis are themselves in the top 10%. But life is expensive — housing, kids, cars, insurance, etc. They don’t feel rich. They can’t quite believe that 90% of the country toughs it out on less — a lot less. So, they recalibrate their mental model of the income distribution with themselves in the upper middle instead of the top.

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