Education and Māori Relative Income Levels Over Time: The Mediating Effect of Occupation, Industry, Hours of Work and Locality (WP 02/17)

Abstract

This paper examines ethnic differences in the relationship between educational attainment and income in New Zealand over the period 1986 to 1996. In particular, it uses a 50% sample from the Census in each of those years to determine how far ethnic differences in income are explained by educational qualifications, access to higher paying occupations and industries, hours of work, locality of residence and marital status. The study is restricted to all those employed.

Over the period under study, the gap between Māori and European incomes increased. This reflects Māori lower educational qualifications and concentration in occupations and industries that experienced low employment growth at a time when income returns to educational qualifications increased. Those with higher educational qualifications also experienced growth in hours of work, reflecting increasing demand for skills. Nevertheless income returns to qualifications were higher for Māori than for non-Māori in both years. This reflects the particular and increasing disadvantage faced by Māori with no qualifications compared to Europeans with no qualifications and the fact that the gap between mean incomes of Māori and Europeans reduces as qualifications rise. Māori participation in higher education increased strongly over the period.

Controlling for a wide range of characteristics, Māori residing in rural areas are more disadvantaged than any other group. Māori are also less likely to be married. Not being married is associated with lower incomes for males.

By 1996 there was little difference among ethnic groups in access to managerial and professional occupations for people with higher educational qualifications. Overall, most of the ethnic gap in incomes can be explained by differences in the characteristics of the groups, rather than by differences in the way in which these characteristics are translated into income.

Acknowledgements

I would like to thank Dr. Ron Crawford at the New Zealand Treasury, and Drs. Simon Chapple and Dave Maré then at the Department of Labour, and external referees for the Treasury for insightful comments on the study; Peter McMillan and Theva Thevathasan at Statistics New Zealand for providing the data sets and assistance with data processing; and Adam Warner and Calvin Chan at the University of Auckland for research assistance. None of the above individuals or organizations is, of course, responsible for the views expressed.

Disclaimer

The views expressed in this Working Paper are those of the author and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.