Wealth and Income in New Zealand

Abstract

This thesis examines the level and distribution of wealth and income in New Zealand between about 1870 and 1939. To do so it draws upon the available aggregate statistics on wealth and income, and it uses a sample of wealth holders especially constructed to alleviate the data deficiencies which have arisen through New Zealand not having a wealth census. The evidence available suggests that New Zealand was correctly portrayed as having a high level of wealth with an egalitarian distribution. In 1893, the first year in which average wealth could be estimated, New Zealand was definitely wealthier than Victoria. This wealth was not evenly distributed but the gini coefficient of about 0.75 suggested that New Zealand was an egalitarian economy compared to the United States, Britain, or even Australia. Over the period to 1939 the average level of wealth increased by about 100 percent. Most of this increase took place between 1900 and 1922; the late 1920's and 1930's were periods of slow growth. But this increase was not sufficient to maintain New Zealand's high position relative to Australia, and probably to other countries. The growth of real wealth was accompanied by a redistribution of wealth and by the 1930's, the gini coefficient was only about 0.73. Most of this decline was due to the declining assets held by the very rich. In 1890 to 1895 the top one percent of wealth holders owned 55 - 60 percent of all assets, but by 1935 to 1939 this had fallen to 25 - 30 percent. The very rich had, in fact, never been rich by international standards. The case studies in the thesis did not include one millionaire. As a rule they were first generation wealthy men who came from a well-to-do background, who had superior education, but who had to achieve being wealthy through their own efforts. There were few women among the top wealth holders, and those who did appear inherited their wealth from their father or or husband. The wealthy did not show signs of being a closed elite. There was a considerable amount of upward mobility in the group, and the Scots especially tended to come from poor backgrounds. The practise of equal inheritance among all the children meant that few families remained very wealthy for more than one generation. The same social and occupational mobility was clear among our sample of estate holders. Only 50 percent of sons had the same social status as their fathers. The remaining sons were fairly evenly divided between those who rose and those who fell in status. The sample, which was constructed from probate valuations and death certificate records, suggests some of the factors which assisted and hindered upward mobility. Being born female at a time when women did not pursue careers, or own family property obviously influenced the wealth holdings of a considerable proportion of the population. For men, the place of their birth proved to be significant. The Scottish showed a marked tendency to be upwardly mobile, while being Irish or New Zealand born was a definite handicap. Those who were born overseas did better if they arrived as young adults between 1860 and 1880. Assisted migrants produced proportionately less probatable estates, but those who did had about the same estates as those not assisted. Wealth was concentrated among those involved in farming, trading and the professions throughout most of our period, but over time agricultural wealth showed signs of being replaced by industrial fortunes. The professions had the advantage of a comparatively high income which enabled people to accumulate fortunes. Lifetime income undoubtedly had the major influence on wealth at death. The level of average income increased probably three-fold in the period. Again most of this rise came between 1900 and 1920. It is probable that the distribution also became more equal, through the reduced incomes to the top earners. There was a strong trend for margins for skill to decline over time, even though they were already small relative to those found in the United States. The exception to this was teachers' salaries, which showed a marked rise as the occupation became more professional. The rise of teachers' wages, shop work and clerical jobs all changed the employment structure for women, which was reflected in a changed attitude towards higher education. The 1930's saw a reduction in incomes largely through unemployment and short-time. However, the reduction was heaviest among those in the top 10 percent. The depression had mixed effects on production levels, prices and wages, but only one of our three sample industries, butter and cheese making, showed strong evidence of wage overhang. In 1939 New Zealand was still a wealthy nation, though probably she would not have ranked as highly on an international scale as in 1890. The distribution of both wealth and income had changed over our period to being substantially more egalitarian.