Story: Class

Page 6. A new society, 1980s onwards

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In the two decades of the 20th century, evidence of increasing economic differences appeared.

Income – wealth and poverty

Between 1951 and 1981 there was a slight narrowing of income differences, with the top 20% of the population going from earning 58.6% of the total market income to 54.4%. But in the late 1980s and 1990s the reduction of top income tax rates, the introduction of GST which hurt those on lower incomes and the cutting of benefit levels in 1991 considerably increased inequality. Census figures suggest that in 1986 the top 20% of the population earned 46.3% of the total income (which includes benefits and pensions), while the bottom 30% earned 6.9%. So even at that stage inequality was significant. But by 2013 the share of the top 20% of total income was 51.5%, and the bottom 30% had fallen to 5.1%. The international Gini coefficient table suggested that in 2014 New Zealand had become the eighth most unequal society by income of the 34 OECD countries as compared with 20th in 1985.

The Household Surveys also pointed to great change. When housing costs were subtracted from income, those at the 20th percentile saw their real incomes increase by just over a fifth from 1982 to 2016; but those at the 80th percentile had 50% more to spend, and those at the 90th had over two thirds more money.

In terms of holdings of wealth by 2014 the top 10% of households held almost 53% of the total, making  New Zealand the tenth least equal society by wealth in the OECD – more unequal than Japan, Australia and the United Kingdom. Such differences became more conspicuous. In 2015 there were four individual and three family group billionaires in the country, and 56 individuals or families with more than $200 million.

On the other hand, there was growing evidence of material poverty especially among children. By 2016 over 200,000 children (19% of the total) were below the poverty line defined as 50% of the median household income (after housing costs). Poverty levels were about the OECD average.

Visible affluence

In 2010, when investors in Hanover Finance were suffering major losses, the public became outraged when the company’s co-owner Mark Hotchin continued to build a $30-million mansion on fashionable Paritai Drive in Auckland. He also owned a holiday home on Waiheke Island valued at $13.8 million.

Occupation

Since 1980 there was a continuing decline in the numbers employed in the rural workforce and in manufacturing. Globalisation led to a loss of unskilled jobs. Instead, by 2013 70.2% of the labour force was in the tertiary and services sector. This placed more emphasis upon educational qualifications. Children of professional parents were far more likely to attend university than children of manual workers. As the proportion of national income going to wage and salary earners fell by comparison with operating surpluses, more women went out to work to sustain family incomes, but at significantly lower average pay than men. 

Home ownership

There also emerged considerable disparities in property ownership. Property values increased faster than inflation and this rewarded those who owned houses. But the levels of home ownership fell - in 1991 73.8% of households were owner-occupiers; in 2013 the figure was 64.8%. Tenants of rental properties tended to be more mobile which hurt children’s schooling and they suffered from unhealthy cold and damp conditions. As rents rose, those in the bottom 20% of households were paying 51% of their income on rents. Even for home owners, there were striking contrasts. In March 2018 the average house price in the luxury resort of Queenstown was $1,121,000, while in Invercargill it was only $262,000. The average price of a house in Auckland city was over seven time the price of a house in Wairoa.

Increases in house prices had generational effects. Older people who were likely to be home owners benefitted from increases in house prices, while younger people found it increasingly difficult to buy their own home.

Major social differences

By the 2010s there were clear differences of lifestyle and prospects within New Zealand society.  Families of top professional people and business executives had homes in wealthy parts of the city and a second place by the beach, while their children grew up healthy with better food, books in the house and were likely to attend university. Those from families headed by an unskilled manual worker rented over-crowded properties, while their children had higher levels of sickness and were more likely to fail at school. 

How to cite this page:

Jock Phillips, 'Class - A new society, 1980s onwards', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/class/page-6 (accessed 19 November 2018)

Story by Jock Phillips, published 5 May 2011, reviewed & revised 22 May 2018