10 May 2012

Study shows 1 in 5 households trapped in low income

6:12 am on 10 May 2012

One in five New Zealand households are trapped in a cycle of low income, according to the findings of a new study.

The University of Otago study followed about 18,000 people for seven years between 2002 and 2010 and found 21% of households had an income of less than $27,000 per year.

A person working full time on the minimum wage makes about $24,700 a year.

The study defined low income as a household income below 60% of the median household income before tax.

Lead author Kristie Carter says most people's income varied a large amount during the seven years. However, 21% of people were trapped in the low income bracket throughout the period.

Dr Carter says the next step in their research will be to find what factors stop people leaving the low income bracket and what policies could help them bring in more money.

The Otago researchers are also exploring the link between low income and poor health.

The Child Poverty Action Group says the Otago study confirms other research showing people become trapped in a low income environment.

The group says while the one in five figure may seem large, it is an accurate representation of the scale of the problem.