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Home / Business

'Low-wage economy': What you need to earn to be an above-average earner in NZ

Aimee Shaw
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Aimee Shaw
13 Jan, 2019 03:55 AM4 mins to read
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Earning figures show New Zealand is a low-wage economy. Photo / 123RF

Earning figures show New Zealand is a low-wage economy. Photo / 123RF

In case you missed it: This was one of the Herald's top stories on social media this week.

New Zealand workers need to earn more than $52,100 before tax each year to be considered an above-average earner.

In a relatively low-wage earning society, full-time workers earning $1000 a week can think of themselves as lucky, as about 40 per cent of our full-time workers are on the minimum wage ($34,320 annually or $660 per week) and earning significantly less.

Figures show the median annual income for a New Zealand man working full-time is $56,700 and for a woman that amount is almost $10,000 less, at $47,500, according to the latest available income statistics from Stats NZ.

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Compared to Australia, New Zealand's weekly earnings are considerably less.

Australians need to earn more than A$82,435 (NZ$87,168) a year before tax, or A$1,585 each week, to be considered an above-average earner.

Dr Ganesh Nana, chief economist and executive director of Business and Economic Research, said New Zealand was a low-wage economy.

Factors such as a much smaller population size and a lower minimum wage rate was part of the reason New Zealanders earned significantly less than Australians.

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"We've got a business model based on low wages. We've had settings in place over the last two to three decades that have minimised wages, and focused on wages as a cost rather than an investment in labour," Nana said.

"We've been trying to put a lid on wage costs which supposedly translate into improved profitability and productivity but that model hasn't worked."

Minimum wage in Australia is A$18.93 ($19.83) per hour, which totals $719.20 each week or about $750 in New Zealand dollar terms.

Australia's hourly rate sits closer to the prescribed Living Wage of $20.55 per hour.

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"We're a low-wage economy and have an export sector that is now even more focused on commodities rather than on value. We are driving everything down - it's almost the race to the bottom in terms of income and wages," Nana said.

The mentality of the public sector, and society, to reduce costs and wages to be rewarded a project, for example, did not incentivise quality or value, he said.

"We're not getting productivity growth that we would like and some of the productivity growth that we do get doesn't translate into wage growth. Behaviour that has been set in place over the last few decades has reinforced that disparity."

Scientific goods wholesaling is the country's highest-earning industry, according to Stats NZ, with median weekly earnings of $2302. Motion picture and video production is second with median weekly earnings of $1918 and beer manufacturing at $1822 per week.

Liquor retail is considered the country's lowest-earning industry with weekly median earnings of $560, followed by hairdressing and beauty services at $600 and bakery product manufacturing at $630 each week.

Wellington is New Zealand's highest-earning region, with a median weekly earning of $1151, followed closely by Auckland with $1144.

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After the capital and the country's largest city, Christchurch come in third place with a median weekly earnings of $1092.

Waikato and Bay of Plenty median weekly earnings sit at $1055. Marlborough and the Tasman region are the least prosperous parts of the country, with a median weekly income of $920.

Between April 2014 and April 2017 the minimum wage increased by 50c each year. It increased from $15.75 to $16.50 in April this year.

The minimum hourly rate will increase again to $20 in 2021.

In the past decade there have been marginal changes to significantly lift the wages of New Zealanders, Nana said.

"We still have concerns from various sectors that when minimum wage does go up there will be increased costs and therefore reduce profits, and so it's that spend-save mindset we, and that leading sectors, are focusing on," he said.

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"We haven't had a behavioural shift to a high-wage economy - which is what we have always claimed we want but our behaviour doesn't reflect that."

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