Median Income in New Zealand

In this post I want to discuss median income, and how it has changed in New Zealand in the last ten years.

When economists want to analyse how the wealth and living standards of people within a country are progressing, most of the time they look at GDP per-capita. The use of this statistic has a couple of key advantages:

• It is (relatively) straightforward to measure.
• It is positively correlated with many other standard-of-life indicators (e.g. life expectancy, education, life satisfaction).  

However, there is one key disadvantage of GDP per-capita, and that is it is a very indirect way of approximating living standards. many items that are included in GDP calculations do nothing to improve living standards (e.g. profits from foreign owned companies sent back overseas) while some activities that improve living standards are not included in GDP estimates (e.g. a new public transport initiative that reduces pollution and commuter time). To get a better grip on changes in living standards, researchers use other data sources to complement GDP data, such as wage levels, indices like the human development index, or even happiness surveys. To analyse standard of living changes, I like to use yearly median income, as it directly measures what people are earning in the country. Compared to average income, median income is less biased as it can't be skewed upwards the average income inevitably is.

And so on my analysis. I have used inflation adjusted New Zealand income data from the IRD. As with my Gini coefficient study, I only wanted to consider full-time workers, so I removed anyone who earns less than the full-time wage for each year. I thought that this would reduce the bias in my investigation, and besides, I am more interested in the changes in median income and not the actual value.

Year	Median income (nominal values)	Median income (2010 prices)
2001	$28,500	$35,800
2002	$29,500	$36,000
2003	$30,500	$36,700
2004	$32,500	$38,200
2005	$35,500	$40,600
2006	$37,600	$41,300
2007	$40,500	$43,600
2008	$42,500	$44,000
2009	$43,500	$44,200
2010	$43,500	$43,500

As you can see from the table and chart, the first ten years of 2010 have been a decade of two halves. From 2002 to 2007 median yearly income jumped from $30 000 to $40 000, an increase of around 4% per-year in real terms. After 2007, growth in median income vanished, probably as a result of the Global Financial Crisis and subsequent recession. It would be very interesting to see how median income will change in the coming years.