Missing out?

Middle income earners have been missing out, according to today's Sunday Star-Times. Not only have their incomes grown slower than the growth in the minimum wage (causing a loss of relativity); they have also failed to keep pace with inflation since 1989:

In November 1989, the average worker earned $529.98 a week before tax, according to the Department of Statistics Quarterly Employment Survey.

In June last year, the average weekly income from wages and salaries was $592 a week, an increase of only 11.7% in 16 years.

Allowing for inflation, that means average pay is $148 a week less than it was in 1989.

Firstly, I think the question of minimum wage relativity is something we should be absolutely unapologetic about. The living standards of the poorest New Zealanders needed to improve, and raising the minimum wage is one way of doing this (the other obvious way is increasing benefit payments and transfers - something labour has refused to do). And as Matt McCarten has pointed out, allowing for inflation, today's minimum of $9.50/hour is still a long way below the level it was in 1984. Minimum wage workers have lost ground, and we are making it up.

As for the second point, it is simply false, and the reason is that the journalist mixed statistics from different sources. The 1989 figure is from the Quarterly Employment Survey, the 2005 one from the New Zealand Income Survey. The former surveys businesses, and calculates average weekly wages by dividing total weekly payroll by the number of full-time-equivalent employees; the latter surveys individuals and asks them "are you employed" and "how much are you paid?" From even this simple description, it ought to be obvious that the two will produce markedly different average figures due to part-time and casual workers.

Unfortunately, the NZIS only goes back to 1997, so I can't get the real numbers (there is probably an earlier series which asks the same questions, but I don't know where to look for it). But simply looking at the period 1999 - 2005 shows that the conclusion is false: in June 1999, average weekly income for people in paid employment from wages and salaries was $455; in June 2005, it was $592. That's a growth of 30% in six years. Over the same six years, the CPI [Excel] increased by only 15.8%. Middle income earners are hardly "missing out".