Understanding New Zealand: Demographics of Income

Some demographic patterns of income will already be apparent from voting patterns, and others are well-known by all, but this section will go into details.

There is a significant correlation between median age and median personal income – this was 0.27. Many will have expected this correlation to be stronger, in much the same way that the correlation between median age and voting National in 2014 was much stronger. But age is not as closely correlated with wealth as other demographic factors are.

Indeed, while there were significant negative correlations between being in any of the age brackets 19 years or below, this can be simply explained by the fact that this age group is generally too young to work.

The correlation between being in the 20-29 age bracket and median personal income was essentially uncorrelated at 0.04. Of course, people in this age band will nonetheless end up with less money than the average Kiwi on account of paying relatively more of their income in rent.

The vast bulk of the income received by anyone in New Zealand is received by the 30-49 age bracket, which had a correlation with median personal income of 0.73. This is actually the only age bracket to even have a significant positive correlation with median personal income.

The correlation between being in the 50-64 age bracket and median personal income was 0.18 – positive but not significant. This age bracket may contain a large proportion of the people who are in highly paid C-suite positions, but the absolute numbers of these people are small, and they are outnumbered many times over by the people in this age bracket who have wound down to part-time work.

Being in the 65+ age bracket had a correlation of -0.02 with median personal income. Although this is actually less than what people in the 20-29 age bracket get, people who are 65+ are far more likely to live on freehold land, and as a consequence their expenses will be relatively low.

Kiwis of European descent were the only ethnicity to have a significant positive correlation with median personal income – this was 0.35. Asians, however, were marginally significant at 0.22.

Being a Pacific Islander had a correlation of -0.29 with median personal income, and being Maori had one of -0.48, which tells us that the average Maori is a fair bit poorer than even the average Pacific Islander, probably a reflection of the fact that it is more difficult for the Pacific Islander underclass to migrate to New Zealand.

The religious tradition with the strongest positive correlation with median personal income was Judaism, at 0.63. Buddhism and Catholicism were next, with correlations of 0.32 with median personal income, and then was no religion with a correlation of 0.27.

These correlations mostly reflect that people of the first three religious traditions are especially likely to have immigrated to New Zealand on the basis of the points system, which gives bonus points to any applicant that has a degree.

The significant positive correlation between median personal income and no religion was mostly because of the fact that the indigenous New Zealand subcultures that value education the most are the same ones that are most likely to reject religion.

Further underlying the point that our immigration system makes it easier for people with degrees to move here, we can see that there is a correlation of 0.53 between being born in Britain and median personal income, and a correlation of 0.33 between being born in North East Asia and median personal income.

Similarly, the correlation between median personal income and being born overseas in general was significantly positive, at 0.34.

Education is clearly the decisive factor, above anything else, that explains most of the variance in the incomes of New Zealanders.

The correlation between having no academic qualifications and median personal income was a very strong -0.68, and the correlation becomes more positive with every step upwards in education all the way up to having an Honours degree, which had a correlation of 0.72 with median personal income.

The crossover point was close to what used to be known as 7th form – the correlation between having a highest educational qualification of NZQA Level 3 or 4 and median personal income was 0.12.

What this describes is a very simple pattern: generally speaking, the greater a person’s intellectual capacity, the greater the responsibility they will be capable of competently discharging, and the greater the responsibility so discharged the greater the renumeration they will receive.

Basically the entire taxpayer-funded educational system is predicated on this pattern and it is fundamental, not just to New Zealand, but to human life.

The industry that had the strongest positive correlation with median personal income was scientific, technical and professional services – this was 0.76. Other well-paid industries were financial and insurance services (0.69), information media and telecommunications (0.54) and rental, hirinig and real estate services (0.49).

Naturally, these are the industries that have the most highly educated workers.

Being male was right on the border of being significantly positively correlated with median personal income, at 0.23. If one takes into account that men are more frequently active in the labour force than women, then the lack of significance of this correlation tells us the idea of the “gender gap” in renumeration is overstated.

Underlining the degree to which median personal income is correlated with education, which is a proxy for intelligence, we can see that median personal income also correlates strongly with other correlates of intelligence.

For example, the correlation between median personal income and being a regular smoker was a strongly negative -0.61, whereas with never having smoked it was 0.57.

Contrary to the stereotype, people who take the bus to work have a higher income than those who take a private vehicle to work. The correlation between median personal income and the former is 0.51, and the correlation between median personal income and the latter is -0.24.

Some will find this very surprising, but the fact is that people who live and work in major urban centres have much better access to both bus services and to the jobs that pay the highest wages, and the opposite is true of people who live in smaller centres where taking a personal car to work is more viable or necessary.

The occupation with the strongest positive correlation with median personal income was professionals at 0.68. Next were managers at 0.49 and clerical and administrative workers at 0.43.

The occupation with the strongest negative correlation with median personal income was machinery operators and drivers at -0.59. Next were labourers at -0.51 and community and personal service workers at -0.31.

It doesn’t really make a difference which island you live on – the correlation between living on the South Island and median personal income was 0.03.

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This article is an excerpt from Understanding New Zealand, by Dan McGlashan, due to be published by VJM Publishing this winter.

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