Abstract

This report, commissioned by the Treasury, reviews the international and New Zealand evidence on trends in the distribution of earnings over the past 20 years. It assesses the international evidence on the strength of the various explanations for changes in the earnings distribution. It concludes with suggestions on how the trends in the earnings distribution in New Zealand might be further analysed. Considerable variation has occurred in trends in the distribution of earnings between industrialised economies, with English speaking countries showing the greatest increases in earnings inequalities, and European countries showing the least. The New Zealand evidence also shows a growth in earnings inequality, and indicates that this has been due to both growth in inequality in wage rates and in weekly hours of work. Trends in earnings inequalities together with changes in the distribution of employment appear to explain much of the movement in income inequality in New Zealand. The international literature has attributed changes in the distribution of earnings to labour supply side factors (eg, education, age, gender), demand side factors (eg, technological change, international trade), and institutional factors (eg, union effects, labour market regulation). The

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