Income bands

Classification criteria

The income bands within the classification are determined by the analysis of income data collected by Statistics New Zealand's detailed income collections. This analysis identifies emerging income trends in areas such as benefit levels, and middle and upper income earners. These bands are reviewed periodically to remain relevant to societal trends.

The income band data is collected for gross income where detailed information is unable to be collected or where it is not required. This classification has been developed to primarily cater for self-administered collections and collections requiring less detailed income band data. Collections that obtain detailed income data may output income within bands following the methodology outlined by subject matter experts, currently in the Standard of Living unit at Statistics NZ.

Aggregation and disaggregration of the standard classification of income bands are known as flexible classifications and remain standard if they are comparable to the standard classification of income bands.

Classification

The standard classification of income bands is a flat classification. The first two categories reflect income loss and zero income; there are 13 income bands and a list of residual categories.

Coding process

Guidance to support best practice in the collection and output of income band data.

1. Collection
Income bands are able to be aggregated or disaggregrated as required to match the purpose of the survey and the detail required by users, as long as they remain comparable to the standard classification. Criteria are as follows:

• aggregation and disaggregation must compare to the standard classification
• categories must be structured in the same format used in the standard classification of income bands, for example, using categories $10,001–$15,000 rather than $10,501–$15,500
• aggregation and disaggregation must be whole bands
• output groupings must not exceed '$150,001 or more' if the standard classification has been used for collection
• groupings must meet the standard classification criteria.

Examples of the guidelines:

Aggregation must compare to the standard classification

Disaggregation must compare to the standard classification.

 Aggregation and disaggregation must be whole bands.

Loss income
If a respondent has indicated that they receive income from any source of income except self-employment and/or investments in the source of income question, then they should not respond as loss in the income band question.

Zero income
People can respond with a zero amount if they have:

• no source of income
• have a source of income but have not yet received anything from that source
• have received a net zero amount because some of their income came from self-employment and/or investment income.

Collection of family or household income as bands
A survey may ask a question about family income or household income rather than deriving it from the income of each individual in the family or household. In doing this, some income bands may be aggregated or disaggregated in line with the guidelines (above).

Proxy responses
In some limited situations proxy response may be used to provide income band data. Proxy responses should not be used to provide detailed income data.

Intra-household transfers
Intra-household transfers, such as pocket money and payment of board, should be excluded from income collected as bands, as this may inflate household or family income.

2. Output
Income for families and households can be derived by taking an income value for each individual in the family or household (usually the median of the income band) and combining the results for all individuals in the household. For each derivation a representative value should be assigned to each input income band by the Housing, Income and Expenditure (HIE) section in the Standard of Living (SoL) business unit of Statistics NZ. The highest output income band for derived variables cannot exceed the highest input income band used.

Disaggregation and aggregation guidelines that apply to input, also apply to output of income band data. Input bands may be aggregated for output purposes but not disaggregated.

Information on the criteria used for income data collection is required when releasing income band data. For example, reference period, and definition of source of income.

Any income data derived from income bands is an estimate and a caution to this effect should be noted in publications and releases.

Income bands may be output as median income, as quartiles, quintiles and deciles, by following a method that removes residuals and ranks the bands in ascending numerical order, and then applying the method of linear regression. See the Housing, Income and Expenditure (HIE) section in the Standard of Living (SoL) business unit of Statistics NZ for advice.

Metadata is required with the release of income band data as median, quartiles, quintiles and deciles, to explain the method and the constraints. Guidance can be sought from the Client Services and Liaison and Standard of Living business units of Statistics NZ.

Residual categories are assigned to the classification for specific surveys to meet their requirements and cater for mode differences. 'Absent' is an additional residual category required for some collections. The residual categories may be output separately or combined. Where a combination item of residuals is to be used in output, this item should be labelled ‘not elsewhere included’ and should have a footnote indicating its composition.

3. Data comparison
Comparability issues may exist when integrating income data from different collections and these factors need to be considered:

• reference period of collection
• individual or household income bands data
• sources of income used
• income concepts used in each collection and operationalisation of the concepts
• collection mode
• context within which the income data was collected
• non-response for the collection and non-response for the income question.