New Zealand recorded the worst inflation-adjusted wage growth of any OECD country over the last five years, according to a recent employment outlook report from the Organisation for Economic Co-operation and Development. Real wages in New Zealand fell 6.4% below 2021 levels, leaving workers significantly worse off despite nominal pay increases.
OECD Data Shows New Zealand Leading Global Wage Decline
The OECD report, released Tuesday, highlights a stark disparity in how different nations recovered from the cost-of-living crisis. While most analyzed countries saw real wages regain some ground, New Zealand and Australia remain near their lowest points. In New Zealand, the decline is the most severe among the 37 countries studied.
The data also tracks the minimum wage. According to the OECD, the minimum wage decreased year-on-year in April across 11 countries, including the United States, Canada, Australia, and New Zealand. This indicates that the bottom end of the pay scale failed to keep pace with inflation.
Disputed Metrics: Labour Cost Index vs. Annual Wages
Not all economists agree with the severity of the OECD’s 6.4% figure. The OECD relies on the Labour Cost Index (LCI), which tracks what employers pay for specific roles. Gareth Kiernan, chief forecaster at Infometrics, argues this measure may overcorrect for skill level changes, such as promotions from analyst to senior analyst.
Kiernan points to Stats NZ’s unadjusted LCI as a more accurate reflection of reality. That data suggests no increase in wages adjusted for inflation over the past year and a slight fall of 0.1% since 2021. While still poor, it is significantly less dire than the OECD’s findings.
Comparing Wage Growth Perspectives
| Source/Metric | Reported 5-Year Change | Context |
|---|---|---|
| OECD (LCI) | -6.4% | Worst in OECD |
| Stats NZ (Unadjusted LCI) | -0.1% | Kiernan’s preferred measure |
| Westpac (Annual Wages) | +2.6% | Near OECD average of 3% |
Productivity Failures and the Migration Mask
The struggle to raise real incomes is tied to a deeper structural problem: low productivity. Gareth Kiernan of Infometrics notes that New Zealanders are not productive enough when they work, which directly suppresses real incomes. He suggests that high migration levels in the second half of last decade masked these underlying economic issues.
This trend isn’t unique to New Zealand. Michael Gordon, a senior economist at Westpac, notes that Australia also remains one of the worst performers, with a 1.4% decline over five years when using annual wage data. Both nations face a cycle where high costs and low productivity keep wage growth stagnant.
Frequently Asked Questions
Why are New Zealand wages falling in real terms?
According to the OECD, inflation has outpaced pay increases, meaning the purchasing power of wages has dropped. Infometrics attributes this to poor productivity growth.
Is the OECD data the only way to measure this?
No. Economists like Gareth Kiernan suggest the unadjusted Labour Cost Index from Stats NZ provides a different, slightly less severe perspective on wage loss.
How does New Zealand compare to Australia?
Both are poor performers. While the OECD puts New Zealand at the bottom, Westpac data shows Australia’s real wages declined by 1.4% over five years.
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