Hard-working Kiwis getting less of the national income pie - report

  • 22/03/2018

A growing gap between rich and poor has led to Kiwi workers increasingly pocketing less of New Zealand's national income in recent decades, a new report has found.

The country's employees pocketed 55.6 percent of the national income in 2016, down from 57.4 percent in 1996, the Productivity Commission report, released on Thursday, found.

It looked at data from 16 industries to compile the findings and said the emergence of new technologies could further disrupt labour markets and reduce the share of income going to regular workers.

To combat this policy makers should focus on providing better education so workers gain the skills necessary to make the most of new technology, says Huon Fraser, author of the report titled The Labour Income Share in New Zealand: An Update.

"Investing in the complementary skills necessary to win the race between education and technology is critical to helping people benefit from new technology, while minimising any harmful effects," he said.

The report found that while the share of income pocketed by regular workers has been dropping consistently, most of the falls came in three short bursts between 1982-1984, 1992-1995, and 1999-2002.

Outside of these periods the declines have been gradual.

This showed that widely rising gaps between rich and poor found in other nations were not as noticeable in New Zealand, the commission's director of economics and research Paul Conway said.

"While international comparisons of these data are difficult, this suggests that New Zealand has not experienced the significant falls in the labour income share seen in other countries over the last two decades."

A number of factors influenced how much worker salaries grew.

Productivity was a key factor, with wages tending to also rise as productivity increases. For example, when productivity rose faster between 1996-2000 than from 2008-2016 so too did wages rise faster, the report said.

However, other factors influencing wage rises included changes in technology, globalisation, policy settings, and how much of the share of income business owners and investors grab for themselves.