6 Concluding Discussion
The period since 1998 has seen strong economic and employment growth in New Zealand. Our analysis in this paper shows that this growth has resulted in broad gains in income to working-age individuals, measured at both the individual-level and also allowing for resource sharing within households, suggesting the spoils of growth have been shared widely across the income distribution. For example, mean incomes of working-age individuals grew 12 percent in real terms between 1998 and 2004, and income growth was generally stronger in the low-mid range of the distribution than at higher levels. Furthermore, individual earnings growth was even stronger, with the mean earnings growing 16 percent.
We have also provided an analysis of the relative contributions of changing socio-demographic characteristics and employment, and of economic returns to these factors (loosely speaking “wage” effects), to the observed changes in incomes at different points in the distribution. The principal results of interest here are that the income gains in the low-mid range of the distribution are primarily due to increasing employment, while the income gains observed higher in the distribution are more strongly due to increasing returns to demographic and employment characteristics. These findings are suggestive of employment gains at the lower end versus wage gains at the higher end of the distribution, however there are several caveats associated with such a simple interpretation. First, associated with the employment gains that have been concentrated in the low-mid range of the individual income distribution, there are possible non-random employment composition effects that may bias downwards measured wage growth, and thus understate the true wage gains for comparable individuals in this range. Second, the net income gain for those who moved into employment and out-of a benefit state will be far less than their earnings growth because of their lost benefit income.
