NZ income mobility remains good

I have often blogged that in NZ we should focus more on income mobility, and less on income inequality. An income inequality focus means you are comparing a 18 year old first time worker with a 45 year old experienced worker, and complaining they don’t get paid the same.

There is nothing wrong with the fact that some jobs and people get paid a lot less than others. What would be concerning is if those on low incomes stay there their entire life. We need a focus on opportunity, not on outcome. Labour’s core policy is to try and ensure equality of outcome, while I believe it is equality of opportunity that counts.

A further Treasury working paper has found:

To summarise the patterns of mobility, we analyse the income changes over the short-term (annual) and a longer term interval (eight years). There is change in incomes between one year and the next, with over 60 percent of the population changing income decile group. The movements in income group are more of a short distance (to adjacent income groups) than long distance. There is substantial change in income over the long-run in both absolute and relative income. Only 22 percent stay in the same income decile group eight years later.

So year on year, 60% of the population change income decile, and over an eight year period, a massive 78% move into a different income decile. This is a good thing.

Of those households in the lowest income quintile, only 45% are still there eight years later. 25% are in the second quintile and 30% in the middle or upper quintiles.