Low income families hit hardest by global crisis and high housing costs

“The effects on families of the global financial crisis, lack of adjustment of the accommodation supplement and high housing costs show up in the latest Household Incomes Report from the Ministry of Social Development,” says CTU Economist Bill Rosenberg.

“The report shows the impact of the recession was felt hardest on the 60 percent lowest income households but recovery for them has been no faster than for others. These lowest income households have had no increase in their take-home incomes after the rising cost of living (CPI) is taken into account between 2008 and 2012, while those with higher incomes saw a 5 percent gain”, says Rosenberg. “This takes no account of the fact that GST hits low income families harder, and that the cost of living for low income families has risen faster than for those on higher incomes.”

“The cost of housing is taking a deep toll. Housing stress – where housing costs exceed 30 percent of disposable income – is at its highest levels in decades for all households," Rosenberg said.

The report comments that because are incomes rising more slowly than housing costs and that Accommodation Supplement rules have not been properly adjusted since 2005 so that half of recipients were on the maximum in 2013 compared to only a third in 2007. In 2013 almost all of the people receiving the supplement to help with rents were in housing stress, and almost half were spending more than half of their take-home incomes on rent.

“Clearly, this is not a good time to be toughening up rules on eligibility for state housing and income-related rents as the government is doing, and wages are not keeping up with rising housing prices.” Rosenberg said.

“Meanwhile, people surviving on benefits are falling further and further behind with their real net incomes falling between 2007 and 2014.” Rosenberg said.

"While the Ministry is unwilling to say that inequality has increased, there are clear warning signs. Half of households have seen no increase in their incomes between 2008 and 2012. The 80/20 percentile income ratio after housing costs has been higher than it was in the 2008 year for four years now. The Gini coefficient has jumped up again. Even if the Gini’s movement is not statistically significant, inequality is far higher than it was in the early 1980s, and far higher than it should be.”

“Our tax system is weak compared to other countries in reducing this inequality. We need changes to our wages system so before-tax income is shared more fairly, and a more progressive tax system on income and wealth. Such changes are essential to ensure that the income from a growing economy will go to those who have earned it and most need it,"Rosenberg said.

ENDS

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