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© The Treasury Income mobility in New Zealand: What was going on between 2002 and 2009 Dr Tony Burton, The Treasury
© The Treasury Key messages 1.Treasury’s is building up evidence on Living Standards in New Zealand. 2.Both income mobility and poverty persistence are relevant for policy makers. 3.Targeting those more likely to be in deprivation may miss most people suffering deprivation. 4.Most people with persistently low income do not suffer deprivation. 5.More work is needed on New Zealand data to understand what is happening in New Zealand.
© The Treasury Treasury Living Standards Framework Income dynamics and poverty are crucial to: Understanding equality Assessing policy impacts Understanding policy gaps
© The Treasury Who has a low income now? Bryan Perry’s work has definitively answered which group has the lowest incomes (questions like “How many 18 to 24 year olds have low income?”)...... but there is no definitive answer to the question “which is the best measure?”...... nor answer questions about individuals (questions like “What happens to an 18 year olds who has a low income?”).... nor does it tell us if there is a “better or worse” level of inequality...
© The Treasury The new analysis Data: Survey of Families, Income and Employment follows more than 18 000 people surveyed annually between 2002 and 2009 with deprivation measured in 2005, 07 and 09; Analysts: Dr Kristie Carter and Fiona Imlach Gunasekara from Health Inequalities Research Programme (HIRP) Otago University with input from Bryan Perry, MSD and Treasury Analysis is ‘descriptive’ – provides a picture of the current situation – not finding causes Link to Treasury report and Otago paper at: http://www.treasury.govt.nz/publications/informationreleases/income-deprivation http://www.otago.ac.nz/wellington/otago032196.pdf
© The Treasury The new analysis Data lets us look at individuals over 7 years to understand: –Relative income mobility – how people moved within the income distribution (e.g. whether those who had one of the lowest 10% of incomes continued to be at the same relatively low income –Absolute income mobility – how people’s purchasing power changed (e.g. whether or not those who started with the lowest incomes continued to have the same low purchasing power. –Persistent low income – The characteristics of those with an income that was less than 60% of median pre-tax equivalised household income for 5 or more of the 7 years. –Persistent deprivation – The characteristics of those reporting a lack of three or more (of eight) basic needs in 2 of the 3 surveys –The link between persistent low income and deprivation
© The Treasury Relative income mobility Relative income in 2003 WAVE 1 (2003) WAVE 2 (2004) WAVE 3 (2005) WAVE 4 (2006) WAVE 5 (2007) WAVE 6 (2008) WAVE 7 (2009) Full income mobility There is substantial income mobility, both up and down....though ‘typical’ relative position remains.
© The Treasury Absolute income mobility Generally, those with the lowest relative incomes had a rise in real income......and those with the highest relative income had a fall in real income.
© The Treasury Persistence Though there was substantial income mobility: 16% had low income in 5 or more of the 7 years surveyed 6% were in deprivation at 2 or more of the 3 deprivation surveys Roughly two thirds of those with a low income in one survey had chronic low income (i.e. average income over the 7 years below the average low income)
© The Treasury Who has persistent low income? Characteristics of people with persistent low income? Aged 25 to 64, New Zealand European, have no qualifications and couple parents. Characteristics of people more likely to have a persistent low income? Over 65s, Maori and others who are not New Zealand European, no qualifications, sole parents
© The Treasury Who is in persistent deprivation? Characteristics of people in persistent deprivation? Aged 25 to 64, New Zealand European, have vocational qualifications and be sole parents. Characteristics of people more likely to be in persistent deprivation? Under 18s and youths, Maori, those with low qualifications, and be sole parents.
© The Treasury Low income and deprivation Is this: The welfare state working? A measurement issue? Or A reflection on the importance of wealth?
© The Treasury Lessons for policy Policy should emphasise mobility, deprivation and persistent low income. –Much of the debate about poverty uses income inequality as the key measure. These findings show static income inequality is only part of a much richer story. –Age, household type, number and age of children and education level are part of a life cycle. The wide range of mobility experiences warns against simplistic generalisations and further investigation is needed into what makes people resilient to falling into poverty. Policy should be designed with mobility in mind –Policies should be careful not to lean against this mobility through work disincentives. Lower income is often temporary and is not usually associated with deprivation. Targeting policy effectively can be difficult –Policies targeted by single characteristics are likely to both exclude many people who need help and include many who do not. –Targeting groups more likely to need help may miss most of the people who need the help Sole parents are perhaps the group to be most concerned about. –Incidence and overall prevalence of deprivation is strongest among sole parents, and mobility tends to be lowest.
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