Low income households less likely to move up scale - study

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Chronic low income households earning less than $27,000 a year are the least likely to move out of their income group, a study has revealed.

The University of Otago's Dynamics of Income and Deprivation study involved data from 18,000 people between 2002 and 2009.

Of those 21 per cent were "chronic low income" households, with an average of less than $27,000 (before tax) over the period, and these people were more likely to become stuck in their income bracket, said researcher Dr Kristie Carter.

She said approximately two-thirds of people with a low income at any one point-in-time are chronically in low income.

Maori households with children and people aged over 65 year were more most likely to be low earners, according to the study.

"The study also shows that there is high persistence and recurrence of low income in New Zealand. For example, of those households who are initially on low income 65 per cent remain in low income in the next year," said Dr Carter.

"We found a strong correlation between the length of time households spent in low income and levels of deprivation - that is to say more years in low income results in higher levels of deprivation."

Low income was defined as a household income of between $25,800 and $33,950, which was experienced by about half of those surveyed during the seven-year period.

The research showed New Zealand is characterised by high annual income mobility, both up and down the scale, and gross household income can fluctuate markedly over a number of years.

The study found that 50 per cent of families and households in the middle income group were more likely to move up or down income groups each year.

More research was needed to find what caused people's income to change and why many were dipping below the low income line, said Dr Carter."

Finance Minister Bill English said the report showed only a small proportion of New Zealanders spent long periods on low incomes and in deprivation.

"The Government will continue with its programmes to help more New Zealanders to take advantage of opportunities to move into work, education and skills training,'' he said.