3. Data and methodology
3.1 New Zealand Income Survey
3.1.1 Background
Since 1997, the Income Survey (IS) has been carried out by Statistics New Zealand (SNZ) each June quarter as a supplement to the Household Labour Force Survey (HLFS). Taken together, the two surveys collect data on household structure, the socio-demographic characteristics of household members, and labour force activity in the reference week and recent incomes for individuals at least 15 years-old. The IS collects information on sample members’ actual pre-tax weekly income in the reference week for the survey, and uses a series of detailed questions on each component of income in an effort to ensure that the final estimate of total income (from all sources) is as accurate as possible.[9] The HLFS has a sample size of approximately 15,000 households and 28,000 adults. About 85% of these respondents also complete the IS.[10] Sampling weights are calculated by SNZ to increase the representativeness of the HLFS, and are used in all analyses in this paper.
The IS also records the geographical location of all interviewed households. This is coded in two separate variables: the first records the Local Government Region (LGR) of each household;[11] the second records whether the household is in a Main Urban Area, Secondary Urban Area, Minor Urban Area, or Rural Centre and other rural areas.[12] These variables can be used together to uniquely identify most main urban areas. For example, Auckland is the only main urban area in the Auckland LGR and thus all households located in the Auckland urban area are identified in the IS. In contrast, both the Wellington and Kapiti urban areas are in the Wellington LGR and thus it is not possible to differentiate in the IS between households located in these two urban areas.[13]
3.1.2 Analysis Sample
The sample for all analyses in the paper is adults aged 25–59 years (prime-age) with non-imputed income data in the 1997-2004 IS. This restricted age range drops most individuals who are studying or retired. As discussed in previous sections, this paper examines the economic performance of the Auckland urban area (population 1,074,507 in 2001 census) in comparison to other areas of New Zealand. Four comparison areas are focused on in all analyses: 1) the Wellington and Kapiti urban areas (population 373,416 in 2001 census), 2) the Christchurch urban area (population 334,104 in 2001 census), 3) a composite of all other main urban areas (population 872,823 in 2001 census),[14] and 4) a composite of all rural areas and minor urban areas (population 845,778 in 2001 census). Secondary urban areas are excluded from the comparison groups; these are large rural towns and it was unclear whether to include these in the other urban or rural comparison area.[15] Appendix Table 1 displays the sample size for each area in each IS year.
A subset of the analyses in this paper examines economic performance within the Auckland urban area. Auckland is divided by SNZ into four zones (see Appendix Figure 1), Northern (population 219,936 in 2001 census), Western (population 173,643 in 2001 census), Central (population 359,469 in 2001 census), and Southern (population 321,465 in 2001 census), which can be identified in the IS data.[16] Appendix Table 2 displays the sample size for each zone in each IS year.
3.1.3 Measures of Economic Performance
A range of measures of economic performance are examined in order to capture differences in both productivity and labour utilisation between Auckland and other areas in NZ (and within Auckland). The analyses in this paper focuses on six measures.[17]
The first three measure overall economic performance (income) and workplace productivity (wages) in each area:
(1) Real Annual Labour Income, which is the sum of actual income from wage/salary employment in the last week multiplied by 52 and actual self-employment income in the last year.[18]
(2) The Real Hourly Wage for Wage/Salary Workers, calculated by dividing actual earnings from wage/salary employment in the last week by actual hours worked in wage/salary employment in the last week.[19] The self-employed are excluded from this measure of labour productivity because hourly wages are notoriously hard to calculate for these workers due to the difficulty in separating investment returns from self-employment income and in reporting accurate measures of work hours. The next measure captures labour productivity for the self-employed subject to these caveats.
(3) Real Hourly Wage for All Workers, calculated by dividing annual labour income by actual total hours work in the last week multiplied by 52.
The second three measure labour supply utilisation in each area:
(4) Employment, which is whether an individual worked any hours in the last week for pay, was away from work but receiving ACC, or worked any unpaid hours for a family business.
(5) Weekly Hours Worked by the Employed, which is directly reported in the HLFS.
(6) Benefit Receipt, which is whether an individual received income from the tax or benefit agency for any social benefit besides superannuation or student allowances in the previous fortnight.
Notes
- [9]June quarter data are collected in April, May, and June. Most income and wage data are measured for the reference week prior to the survey and are not seasonally adjusted in the analysis undertaken in this paper. In principal, seasonality may differ across regions, thus impacting our results. However, we believe that seasonal effects are likely to be small in the survey months (as opposed to in the summer and winter months) and that wage rates for adult wage/salary workers, one focus of our analysis, are unlikely to be significantly affected by seasonality. Fortunately, self-employment income, which is likely to have a large seasonal component, is measured for the entire previous year.
- [10]Data are imputed for all HLFS sample members who fail to complete the IS. Individuals with imputed data are dropped from all analyses in this paper because, as discussed in Hirsch and Schumacher (2004), including imputed data leads to biased income gap estimates when the attribute being studied (here, geographical location) is not a criterion used in the imputation procedure. While non-income measures are unaffected by this issue, it was decided to keep all measurements based on a common sample.
- [11]Sixteen LGRs are recognised by SNZ: Northland, Auckland, Waikato, Bay of Plenty, Gisborne, Hawke’s Bay, Taranaki, Manawatu-Wanganui, Wellington, Nelson, Tasman, Marlborough, West Coast, Canterbury, Otago, Southland. Because of confidentially restrictions, Hawke’s Bay and Gisborne, as well as, Nelson, Tasman, Marlborough, and West Coast are aggregated together in the data made available to the authors.
- [12]Urban Areas are statistically defined areas with no administrative or legal basis. Main urban areas are very large urban areas centred on a city or major urban centre and have a minimum population of 30,000. Secondary urban areas have a population between 10,000 and 29,999 and are centred on the larger regional centres. Minor urban areas are urbanised settlements (outside main and secondary urban areas), centred around smaller towns with a population between 1,000 and 9,999. The remaining population is in rural centres, which have a population between 300 and 999, and rural areas.
- [13]Other main urban areas that are in the same LGR include Tauranga and Rotorua, Gisborne and Napier-Hastings, and Wanganui and Palmerston North. All other main urban areas (Whangarei, Hamilton, New Plymouth, Nelson, Christchurch, Dunedin, and Invercargill) can be uniquely identified in the IS.
- [14]Whangarei, Hamilton, Tauranga, Rotorua, Gisborne, Napier-Hastings, New Plymouth, Wanganui, Palmerston North, Nelson, Dunedin, and Invercargill.
- [15]These are Pukekohe, Tokoroa, Taupo, Whakatane, Hawera, Feilding, Levin, Masterton, Blenheim, Greymouth, Ashburton, Timaru, Oamaru, and Gore (population 235,686 in 2001 census).
- [16]Urban areas in the main conurbations have been divided by SNZ into urban zones, with each urban zone defined as a separate urban area. The five criteria used for determining these zones were: 1) strong economic ties; 2) cultural and recreational interaction; 3) services for major business and professional activities; 4) an integrated public transport network; and 5) significant workplace commuting within the zone.
- [17]All wage and income variables are converted into June 2004 real dollar values using the Consumers Price Index (CPI). Three additional measures of economic performance, the self-employment rate, the unemployment rate, and annual real non-labour income, are also examined. The results for these measures tell a similar story as those for the included variables, and thus are not presented to save space, but are available from the authors by request.
- [18]Individuals reporting real annual labour income less than -$100,000 or greater than $250,000 are dropped from all analyses for this measure. This is done because the income data has a small number of very large outliers that have a considerable impact on mean comparisons. It is assumed that these outliers are reporting errors. Large outliers in the wage data are also dropped for this reason.
- [19]Individuals reporting real wages less than $4 or greater than $150 are dropped from all analyses for this measure as well as the next.
