The labour income share in New Zealand

Authors

Dean Parham

Lisa Meehan

Paul Conway

Date published

5 February 2015

Downloads

Report The labour income share in New Zealand [568 KB]

Cut to the chase The labour income share in New Zealand [75 KB]

Media release Productivity crucial for higher wages in New Zealand [57 KB]

Data used in the working paper [517 KB]

There is international interest in changes in the labour income share. In part, this reflects concerns that in a number of countries, real wage growth has not kept pace with labour productivity growth in an environment of rapidly changing technology.

This paper investigates changes in the labour income share in the “measured sector” of the New Zealand economy and provides insights into the causes of these changes. Changes in the labour income share are decomposed into contributions from productivity growth and changes in quantities and prices in labour, capital and product markets.

Industry contributions to changes in the labour income share are also examined, and comparisons with Australia are drawn. It turns out that the labour income share has fallen in the measured sector of the New Zealand economy over the past 35 years, in no small part because of sharp falls over three short periods. Aside from these falls, results also show that growth in real wages has been closely aligned with productivity growth and that there is no systematic relationship between strong productivity growth and falls in the labour income share. Indeed, the important message from this paper is that strong productivity growth sustains strong growth in real wages.

JEL Codes E25, Aggregate Factor Income Distribution; J30, Wages, Compensation, and Labor Costs – General; J38, Public Policy, J39, Other.

Tags Labour market

Research

Understanding New Zealand’s productivity performance

Our research aims to understand New Zealand's productivity performance and the role of policy in lifting productivity.

Explore our publications below, hear us present at an event or contact us with your productivity questions.

A photo by Richard Clyborne of Music Strive

Productivity growth

The goal of our research is to facilitate a move from an economy that grows by using more “inputs” (such as labour or natural resources), to one where productivity plays a greater role in driving economic growth – essentially, working smarter, with greater financial and knowledge capital employed per worker.

Our research explores a wide range of productivity issues: employment, firm dynamics, technology diffusion, innovation, regional development, spatial and public-sector productivity.

Working together

The commissioning of research and the practice of collaboration with others is important to us. It enables us to access subject/sector specialists and benefit from the cross-promotion of ideas and insights. You will find research from the Commission, as well as research we commissioned, below.

Strengthening learning

Our Economics & Research team is independently evaluated every two years to understand how to improve and enhance our impact. See the latest evaluation report and 2020 survey results here.