More Pensioners, Less Income Inequality? The Impact of Changing Age Composition on Inequality in Big Cities and Elsewhere

As is the case in most developed countries, the population of New Zealand is ageing numerically and structurally. Population ageing can have important effects on the distribution of personal income within and between urban areas. The age structure of the population may affect the distribution of income through the life-cycle profile of earnings but also through the spatial-temporal distribution of income within the various age groups. By decomposing New Zealand census data from 1986 to 2013 by age and urban area, this paper examines the effects of population ageing on spatial-temporal changes in the distribution of personal income to better understand urban area-level income inequality (measured by the Mean Log Deviation index). We focus explicitly on differences between metropolitan and non-metropolitan urban areas. New Zealand has experienced a significant increase in income inequality over the last few decades, but population ageing has slightly dampened this trend. Because metropolitan areas are ageing slower, the inequality-reducing effect of ageing has been less in these areas. However, this urban-size differential-ageing effect on inequality growth has been relatively small compared with the faster growth in intra-age group inequality in the metropolitan areas.