Treasury has now adopted their masters’ political line on income statistics. The latest Treasury MEI uses average after-tax wages to argue that an average worker is better off by 2% since October 2010.
The Quarterly Employment Survey showed gross average weekly earnings rose 4.3% (including a 1.2% increase in average hours worked) over the year to June; taking into account the fall in income tax rates from 1 October 2010, after-tax average weekly wages are estimated to have lifted around 7.5%. With the CPI rising 5.3% over the same period (an estimated 2% of this due to the increase in GST to 15%), someone on the average wage is around 2% better off in June 2011 compared to June 2010.
There are two problems with this – in real terms the average worker’s gross wage less inflation is 1% worse off. Also the average used by the Quarterly Employment survey is just over $1,000 a week, around $50,000 a year. This is a long way above the median wage as shown by the latest IRD distribution figures from 2009.
The truth is that a few are hugely better off, some are ok, and most are still losing. Treasury could have told us that the 90th percentile is 20% better off after the tax cuts – that would have been more honest.