Distribution of income in New Zealand

A Lorenz curve is a simple, well-used way of representing inequality in an economy. The graph is a typical example. If there was a completely equitable distribution of income, then this would be represented by the 45 degree line on this diagram. The Gini Coefficient is derived from the same information used to create a Lorenz Curve. The co-efficient indicates the gap between two percentages: the percentage of population, and the percentage of income received by each percentage of the population. In order to calculate this you divide the area between the Lorenz Curve and the 45° line by the total area below the 45° line eg.

Area between the Lorenz Curve and the 45° line ÷ Total area below the 45° line

If the income distribution is equal, this coefficient will have a value of 0. At the other extreme, if all income accrues to just one person, then the Gini coefficient is 1 – data is sometimes shown in percentages therefore 100% represents full inequality. Both extremes do not occur in reality – the norm is for coefficients to be somewhere between these two values. A Gini coefficient of 0.3 therefore indicates a more equal distribution of income than say a coefficient of 0.5. The smaller coefficient would be indicated by a slimmer segment on the Lorenz curve. In 2020 New Zealand has a gini-coefficient of 0.32 (32%) – see below.

Income distribution in New Zealand Although the median net worth of New Zealand households has increased between 2015 and 2021, there has been no significant change in the distribution of wealth over this period. The top 10 percent of New Zealand households continues to hold approximately 50 percent of New Zealand’s total household net worth.

Sources:

• Distribution of wealth across New Zealand households remains unchanged between 2015 and 2021 – Stats NZ

• Income Inequality – OECD

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