Income Adequacy – who suffers most

On November 16, Statistics New Zealand released the second quarter of Wellbeing Statistics. These statistics are being collected across four quarters - June 2020, September 2020, December 2020, and March 2021 - as part of the Household Labour Force Survey (HLFS). Within the Wellbeing Statistics is an interesting economic topic: income adequacy.

In the HLFS survey, respondents are able to choose one of four responses (not enough money, only just enough money, enough money, and more than enough money), when asked the following income adequacy question:

Overall in the September 2020 quarter, as shown in the graph below, almost half the respondents answered they had enough money to meet every day needs. A further 22 percent said had more than enough, while 24 percent said had only just enough money, and seven percent did not have enough money to meet every day needs. So while only seven percent of respondents currently do not have enough money to meet every day needs, a further 24 percent only just have enough, and are therefore at risk of income inadequacy.

It should be noted that even seven percent of the New Zealand population aged 18 years and older is still around 250,000 individuals.

While the data can be broken down into different regions, data for some smaller regions is of lower quality. Also examination of regional data reveals a similar picture to the overall national one. Only by looking at the breakdown between urban and rural areas do we see a different picture emerging.

As indicated in the graph below, 7.5 percent of those living in urban areas do not have enough money, 24.6 percent have just enough money, and 67.8 percent either have enough or more than enough money. For those living rurally, just four percent do not have enough money, 21.3 percent have just enough money, and 74 percent have either have enough or more than enough money. This shows us that income adequacy is not as much of a concern in in rural New Zealand.

Diving deeper into the data and examining income adequacy by the ethnicity, we can see differences . As shown in the graph below, Pasifika (22.8 percent) and Māori (11.9 percent) are much more likely to not have enough income, when compared to European (five percent) or Asian (8.5 percent) ethnicities.

The graph also shows, when we also consider those that only just have enough money, the percentage of people is:

• Pasifika – 63.1 percent
• Asian – 43.7 percent
• Māori – 39.2 percent
• European – 25.1 percent.

This means almost two-thirds of Pasifika have not enough money or only just enough money.. Additionally,, both Māori and Asian populations have around 40 percent in these lower two income adequacy groups. Consequently, all three ethnic groups have more people with inadequate income compared to the European population, with 25 percent.

This tells us that, while overall 31 percent of the population have either not enough money or only just enough money, the individuals in these two income adequacy groups are mainly non-European.

Outside of ethnicity, other groups also have high amounts of people with inadequate income:

• Sole parents – 17.9 percent of sole parents do not have enough money, while 44.9 percent only just have enough money
• People with low life satisfaction (a ranking of zero to six out of 10) – 19.4 percent of those with low life satisfaction do not have enough money, while 34.9 percent only just have enough money
• Unemployed people – 28.6 percent of unemployed do not have enough money, while 36.4 percent only just have enough money
• People caring for children or others – 16.8 percent of those caring for children or others do not have enough money, while 33.2 percent only just have enough money
• People not able to work due to illness, injury or disability - 26.5 percent of those unable to work due to illness, injury or disability do not have enough money, while 37.7 percent only just have enough money.

It is highly likely that these groups are interlinked.

In conclusion, while overall only a small percentage of individuals have inadequate income, further exploration shows income inadequacy heavily impacts some groups disproportionately.

Given that many of those experiencing income inadequacy are on a benefit (Sole Parent Support, Jobseeker, Supported Living) or are supported by a benefit (Accommodation Supplement), the most obvious way to address their income is through increasing benefit payments. Secondary ways would be through lowering barriers to work and training. This could include paying training incentive allowances, decreasing training costs, raising the abatement thresholds for benefits for people working part-time, or decreasing abatement rates.