Pay rates falling well behind price rises

6 October 2011

Income gap growing - Pay rates falling well behind price rises

“Pay rates are falling well behind cost increases for most people,” says CTU Economist Bill Rosenberg.

The median hourly pay rate (half of people earning wages and salaries earned less than this) had its lowest increase in the year to June since 2001. At 1.9 percent it was well behind CPI inflation of 5.3 percent. “People on these rates got little if anything out of last year’s tax cuts and so will be falling behind in their spending power,” says Rosenberg.

However, the average hourly rate has risen by 3.8 percent. “The difference between the rises in median and average wages is an indication that income gaps in the community are growing”, Rosenberg says. “It comes on top of the tax cuts which favoured higher incomes.”

Total incomes have risen faster, but this has been because people have been working longer hours and because there has been a disproportionate loss of lower income jobs, Rosenberg says.

There is conflicting news on the gender pay gap. The pay gap for the median hourly wage has reduced from 10.6 percent to 9.6 percent, but for the average hourly wage it has increased from 13.4 percent to 14.1 percent.

On average hourly wages for part-timers, the gender pay gap has increased from just 1.5 percent to 15.5 percent and for full-timers from 11.4 percent to 12.4 percent.

Some families are hit harder than others. Single parent families’ median incomes in 2011 were lower than 2008 or 2009 and only 1.9 percent more than in 2010. Their incomes have been falling further and further behind price increases. There is a similar picture for couples with three or more children, whose median household incomes have fallen every year since 2008.

Personal incomes for Māori and Pacific peoples are much lower than they were in 2008 – median incomes for Māori are 8.0 percent lower and for Pacific peoples 14.3 percent lower, with very small increases, well behind inflation, in the last year.

ENDS

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