Pensioners profit, young lose out

Why are wages so low for so many people? Basically because ordinary workers have lost a lot of their bargaining power.

Pensions have risen by $67 a week in the last five years – while the incomes of parents of children born into low income and beneficiary households have fallen further and further behind.

The gap is poised to grow even larger as the country enters a long period of low inflation because while pensions are pegged to average wage rises, benefits are linked to living costs, or the CPI.

The latest round of benefit adjustments painted a stark picture of the growing disparity. Pensions increased 2.07 per cent, or $11.60 a week for a married couple, in line with wage rises. But other benefit rates rose by only 0.51 percent.

Prime Minster John Key admitted yesterday that children were increasingly worse off in relation to retired New Zealanders – and confirmed measures in the Budget to arrest the decline.

‘‘Child poverty and material deprivation is addressed in the Budget ... you are right, it’s not just in recent years, it’s over quite a long period of time. If you look at the analysis by [the Ministry of Social Development] you will see that effectively for people, or kids in that category, they’ve getting – relative to retired New Zealanders – worse off. The reason for that is the way that we actually price those particular benefits and entitlements.

‘‘So for New Zealand superannuation, it’s 66 per cent of the net after-tax average wage. So as average wages rise, pensioners have been getting quite big increases. And that’s why if you look at material deprivation, only about 3 per cent of older New Zealanders are in any form of material deprivation.

‘‘But people on a benefit or that are in low or very low income households, over the last 30 or 40 years all they’ve had is the CPI increase.’’

Analysis of household data by Stuff.co.nz shows Government payments to over-65s have eclipsed those of any other age group, sparking harsh criticism the Government prioritised elderly over the young, which make up nearly half of New Zealand’s lowest earners.

The average weekly income from Government transfers for people aged over 65 has gone up by 26.5 per cent according to the NZ Income Survey.

A government transfer covers all government payments from welfare to superannuation and Working for Families.

In the same period there has been no net gain for 15 to 19-yearolds, and several other age brackets have seen their income from Government payments decline.

Since 2007, pensioners have gained an increase to their super, from $252 to $319 a week in 2014. That was compared to the two age groups encompassing 20 to 24-yearolds and 25 to 29-year-olds – their weekly average for Government payments rose from $56 per week, to $61 and $62 respectively.

Both those groups made up 45 per cent of the country’s bottom 20 per cent of earners, while those over 65 accounted for just over 3 per cent. Those aged 35 to 44 suffered a net loss to their income. All of those age groups were among the most likely to be supporting children.

The data spans seven years of the NZ Income Survey, carried out by Statistics New Zealand. It forms part of an interactive data project by Stuff.co.nz, laying out the extent of inequality in New Zealand ahead of Thursday’s Budget.

Max Rashbrooke, author of Inequality: A New Zealand crisis, said it was difficult to talk about what was going on at the bottom end, without talking about what was going on at the top.

‘‘Why are wages so low for so many people? Basically because ordinary workers have lost a lot of their bargaining power and so the income that they generate is being diverted to shareholders and investors and the people who are running companies.

‘‘Why are benefit levels so low compared to most other places in the western world? Probably because we don’t have a big enough tax base to pay higher benefits, and that’s because we don’t generate enough income from people at the top,’’ he said.

‘‘What I think the Government is likely to do in the Budget is not really address anything that’s going on at the top end, because I don’t think that’s at all a priority for National voters, in fact it’s quite the reverse.’’

While some valuable measures might be instilled around child poverty, they were unlikely to deal with the structural problems New Zealand faced.

Auckland University associate professor Mike O’Brien said poverty had not decreased by any meaningful amount.

‘‘One of the pieces that is really critical in that mix is Working for Families, and the way that hasn’t protected people in low-income jobs – 37 per cent. That’s children living in households with two parents in paid work, still in poverty.’’

According to Otago University data, there were 260,000 children living in poverty, and 63 per cent of those, or 163,800, were in families where one or more parents were on a benefit. In 2010 the Government adopted a policy change, to index superannuation with the average wage, while benefits remained driven by inflation. GST rose to 15 per cent that year, and tax cuts were not applied to benefits.

Labour Party finance spokesman Grant Robertson said while the elderly had been looked after, Government policy meant younger generations would not reach retirement with the same level of savings or income base.

‘‘If you look at the 2010 tax cuts, they very specifically protected the incomes of the elderly, and that’s good that they did that.

‘‘But at the same time they completely failed, and in fact went in the opposite direction, for people on main benefits. They took a policy decision to deliberately exclude those on main benefits from having their incomes protected, so to me that is definitely to the detriment of other age groups.’’

Max Rashbrooke Author