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Income and wealth distribution

by Brian Easton

After the Second World War, distribution of personal income in New Zealand became increasingly more equal. But from the mid-1980s income became less equally distributed. In 2009 almost half of New Zealand’s wealth was owned by the richest 10% of households.

Factor income

How is income distributed in New Zealand? There are no simple answers to this question because there are a number of different ways to characterise income distribution.

The first is factor income. In a market economy, factor income is the returns earned by the three factors of production:

  • land, which earns rents
  • capital, which produces profit
  • labour, which is paid in the form of wages or salaries.

Because the amounts from land rentals are small in New Zealand, they are included in capital.

Land, capital and labour

In 19th-century New Zealand, as in Britain, the division between land, capital and labour was considered important because income was seen as going to three social classes: land owners, capitalists and workers.

Before the Second World War

Information was not collected on wages or profits on capital for New Zealand before 1939. The first evidence was derived from payments of social security tax.

In Britain, the share of national income that accrued to labour had grown over time. However, this may not have been true in New Zealand, due to the high levels of self-employment and the Māori economy.

Wool boom

Between the 1949–50 and 1950–51 seasons, during the Korean War, prices for New Zealand wool more than doubled. This was not because wool was needed for military uniforms, as many thought at the time, but simply because the international tension created by the war led the United States to stockpile wool. The blip was temporary, and by 2008 wool prices in real terms were 6.2% of the prices during the Korean War boom.

Labour share after the Second World War

From the Second World War until the mid-1970s the labour share of income rose slowly, although there was the occasional blip – mostly because profits are highly volatile during business cycle upswings and downswings. An exceptional blip was in 1950–51, when farmers received very good incomes because wool prices were unusually high. When export prices plunged in 1975, employees’ share of income rose, because their real incomes did not fall as much as those of farmers. In the late 1970s labour’s share of factor income was at a record high – but in the 1980s and 1990s it fell (at a similar rate to its rise over the previous three decades).

Of every 100 workers in 2006, 21 were self-employed. If their labour income is included in the labour share, the changes are not so dramatic but the basic direction remains the same.

Return on capital

The other factor income is the return on capital, including rent from land.

The total return on capital is assigned to three groups, in roughly equal amounts:

  • house owners (owner-occupiers), equivalent to the rent they would pay if they rented their homes to themselves
  • domestic investors
  • foreign investors. In 2009 New Zealanders received only around 92% of the income the economy produced, and that proportion had been falling for many years. This is a net figure, with New Zealanders’ income from overseas investments subtracted.

New Zealanders also benefit from capital investment that does not give a market return, such as roads.

Market and total income

Market income

All the incomes to factors of production add up to market income. This includes wages, salaries, self-employed income and returns from investments.

Total income

Total income includes, in addition to market income, the money people receive from the state in the form of social security benefits and retirement pensions. Data for total income before tax has been collected in New Zealand since 1981.

Market and total income in 1981

Looking just at market income, the 1981 census showed that 22% of adults (aged 15 and over) reported no income, and 47% reported less than $5,000 a year ($18,900 in 2008 dollars). At the time the average wage was about $11,000 a year (but many people were not in the labour force).

In terms of total income, the proportion without any income was 7% (or a third of those without any market income). These were mainly school students and mothers at home. However 42% still reported income of less than $5,000 a year.

Individuals on high incomes also got some of these social-security benefits, because in 1981 high-income recipients over 60 were entitled to national superannuation.

Changes since 1981

Entitlements, benefit levels and workforce practices have changed since 1981. But in 2009, social security continued to give people with zero market income a modest total income, and also affected some with high incomes.

The pattern is modified if market and total income includes the impact of income tax.

Personal income distribution

2006 census data

In the 2006 census – as in other censuses since 1981 – New Zealanders aged 15 and over were asked to provide information on their personal income. This was their total income before tax – their market income plus social security benefits and pensions.

In 2006 the distribution of income among individuals had a similar pattern to that in previous census years. The greatest number of the adult population were in the $10,000 to $15,000 per annum range. Many in this category would be on New Zealand superannuation or a social security benefit. The unemployment benefit in that year was $8,800.

There were a few people with losses of income (typically self-employed and investors) and some (such as students or stay-at-home mothers) had zero or very low incomes. One-tenth adults made less than $280. The bottom half of the population had only about a sixth of the total income.

There were also people with very high incomes (the top tenth had incomes of over $64,800). Over half of the country’s personal income went to the top fifth of the adult population. The average (or mean) income was $32,500, but the median (the middle income, with half the adult population above this figure and half below) was only $24,500.

Changes in income distribution


From 1951, census statistics for personal incomes included Māori. From 1951 to 1981, personal income distribution became increasingly equal. The share of the top tenth of the adult population fell from 38.5% in 1951 to 34.9% in 1981. One reason was that immediately after the Second World War a large proportion of women did not earn income. As they entered the workforce – initially part-time for many, but increasingly full-time – those with zero incomes in the past began to report market incomes.

However, income distribution was also getting narrower. This was probably partly because the rising labour-market share of earnings reduced the relative incomes of capitalists, and because margins for skill (the difference in income between skilled and unskilled workers) was decreasing.

Since 1981

After 1981 social security benefits and pensions were included in the statistics. The distribution of income continued to become more equal until the mid-1980s, but reversed after that. The earnings of capital rose, and margins for skill began to increase (especially at the top end of the market for managerial and professional occupations). By the 1980s and 1990s most women were already in the paid workforce, so there was no further reduction in those without incomes. The 1991 cuts in many social security benefits reinforced the increasing inequality.

After 1996 the distribution did not change radically, although in the early 2000s there was some evidence of a slight reduction in the inequality in personal income distribution – probably as people who had been out of work entered the workforce.

International comparison

It is notoriously difficult to compare income distributions across countries, but OECD data suggest that New Zealand has become comparatively less equal over time. In the mid-1980s New Zealand’s income distribution was more egalitarian than the OECD average, but by the mid-1990s it was considerably less equal than the OECD average. Since 2000 there has been a slight narrowing of the difference.

In terms of poverty rates in 2004 New Zealand was in the middle of the OECD.

Income distribution by gender, age and ethnicity


In 2006 about three-fifths of total income (before tax) was received by men, and two-fifths by women. In the 1950s women received less than one-fifth, but as they joined the paid labour force and equal pay was introduced (so women and men were paid the same for the same job) the gap diminished.

The gap remained in the 2000s because women:

  • were still less likely to work in the paid labour force than men
  • worked shorter hours
  • were in lower-paid jobs
  • lived longer in retirement.

The shares of income have been almost the same since 1991. Women have a higher share of total income than market income, because they get a higher proportion of social security benefits than of market earnings.


In terms of age, low incomes are typical of teenagers and people in their early 20s, when many are still in education or training. Low incomes are also common among retired people. A big drop in income occurs after 60 when people stop working but do not have a private pension. At 65 everyone is entitled to New Zealand Superannuation, so the income of some individuals increases.

High incomes are typical of people aged 25 to 60 – as is a far greater degree of inequality of incomes.

The distribution of incomes among age groups does not necessarily represent the experience of an individual over a lifetime. As economic growth occurs, average real income levels increase regardless of a person’s age. Over a lifetime these small annual increases accumulate, so at retirement the average income for a person aged 60 may be 50–75% higher than it was when the person was 20. Also, a person may not be on the same track all their life. Some of those in the upper-income quartile as teenagers may have left school early without qualifications, and may remain on a low income for the rest of their life. Meanwhile a student who stays on at school and university may be in the lowest quartile at age 20 but rise to the top quartile when working.

Women tend to have a different pattern for income over their life from men, because they earn less (or nothing) in the years when they are bringing up children.

Total income does not include the effect of home ownership. Because many people pay off mortgages when they are younger, and have low housing outgoings when they are older, their effective disposable income is higher later in life than the figures may suggest.


In the 2006 census, people who identified themselves as ethnically New Zealanders or European reported the highest incomes, followed by Māori, then by Pacific peoples. Those who identified themselves as Asian were the lowest (probably because they include a high proportion of visiting students).


The most reliable data source for Māori income, the census, uses different definitions in different censuses.

Those with a loose attachment to their Māori connections (such as those of Māori descent who don’t describe themselves as of Māori ethnicity) have higher incomes on average than those with stronger connections (such as those who describe themselves as of sole Māori ethnicity).

Māori women earn less than Māori men. However in relative income terms, Māori women’s earnings are closer to non-Māori women than Māori men are to non-Māori men.

There appears to be a closing of the income gap between Māori and non-Māori since the Second World War, but the convergence is very slow. It stagnated in the 1990s and possibly even reversed. The closing of the gap then resumed in the early 2000s.


As well as income, a person may own assets that generate income. The income they save adds to their wealth; borrowing for consumption may decrease it. A person’s net wealth is their assets minus their liabilities (such as consumer debt and mortgages). The main forms of wealth are:

  • personal property like houses and cars
  • savings held in accounts in banks and other financial institutions
  • investments in income-producing businesses, normally in the form of shares or bonds.

Household wealth

To get a clearer picture of people’s quality of life, it is useful to examine the wealth of households rather than individuals.

The two most recent official surveys of household wealth are the Household Survey of 2001 and the Survey of Family, Income and Employment (SoFIE) in 2003/4.

In 2003/4 the SoFIE subject population of 2.9 million adults recorded a combined net wealth of $467.67 billion, representing the difference between $559.41 billion of total assets and $91.73 billion of total liabilities. Average wealth per adult was $160,000. Because there are people with great wealth, which raises the average, the median – the level of wealth that half the population falls below – was only $70,000.

The most important single asset for most households is the house they live in. In 2001 such houses made up 42.4% of net wealth. Add in other residential properties (6.2%) and other properties (5.7%) (but not farmland), and property came to over half (54.3%) of all household net wealth. Offsetting this were mortgages, which represented over a quarter of the value of the property.

Businesses that households own came to over a fifth of the total wealth. This was almost equally divided between farms and other businesses.

Financial assets such as bank deposits, superannuation, life assurance and family trusts together amounted to about a quarter of the total assets. Shares and managed funds were 6.9%, and possessions such as motor vehicles and household goods were just over 8%.

Household wealth distribution

Wealth is much more unequally distributed than income. The 2003/4 SoFIE survey found that the top 10% of economic units owned 51.8% of the net wealth of households. They averaged $835,000 each in 2001. The top 1% owned 16.4% of wealth, averaging $2.6 million each. The bottom 20% of economic units had zero or little wealth – some were in debt.

Some 6.5% (191,000) of those surveyed in 2003/5 had negative net worth. This was most common in the age group of 20–24-year-olds (some 70,000), many of whom would have had student debt (and perhaps some credit-card debt).

This data does not include ‘human capital’ – the ability to earn income through work. Most people have some of this ability, which is why income is more equally distributed than wealth. The data also does not include pension entitlements.

Rich women

In 2008 there were eight New Zealanders whose wealth exceeded $1 billion. Only one, Lynette Erceg, was a woman. Erceg’s money derived from the sale of her late husband’s liquor company. The richest New Zealand woman previously was Jan Cameron, who founded the outdoor clothing company Kathmandu.

Wealth distribution is strongly affected by the life cycle. Some (but not all) of those with little or even negative wealth are young adults who may have student loans, but have a high ability to earn income. As they get older they may pay off their loans, buy houses and pay off the mortgage, acquire inheritances, invest in the pension and make other savings, thereby steadily increasing their wealth. In 2003/4 net worth peaked between the ages of 55 and 69 with a mean net worth of $285,000. The median was $170,000.

Even so, there is considerable variation in wealth within any age group.

How to cite this page: Brian Easton, 'Income and wealth distribution', Te Ara - the Encyclopedia of New Zealand, (accessed 19 September 2021)

Story by Brian Easton, published 11 Mar 2010