Source: Radio New Zealand
Many self-employed people are earning less than the median wage. (File photo) 123RF
Self-employment is not proving a path to higher incomes for many New Zealanders, new data from Inland Revenue shows.
Many self-employed people were earning less than the median wage, and more than half of those for whom it was their main income stream were not even earning the minimum.
The data supplied to RNZ shows the median income among people who report wages or salaried income in the 2024 tax year was $62,115.
Self-employed people whose self-employed income was more than 50 percent of their taxable income had a median income of less than $45,000.
People reporting business income, and self-employment as a lesser part of their income, had median incomes in line with wage and salary earners.
More business income-earners were at the top end of the income scale.
Inland Revenue said 70 percent of people who reported self-employment income as more than 50 percent of their taxable income were earning less than the median income of all workers, compared to 58 percent of those earning wages and salaries and 55 percent of those with business income making up the majority of their earnings.
In addition, 53 percent of those who were primarily self-employed were earning less than the median wage.
Infometrics chief forecaster Gareth Kiernan said it could reflect the progression of a new business.
“When a person starts out, some will form companies, but many will just work for themselves – and then as their workload increases, they start to take on other people and/or progress to a different trading model, meaning that they shift into the business income categories instead.”
At the University of Otago, economist Dr Murat Ungor said there was a clear skew in the data.
Dr Murat Ungor. (File photo) Supplied
“The lower-income pattern emerges specifically when you narrow the focus to the unincorporated self-employed.
“Their overall median is $50,446, and among those for whom self-employment makes up more than half of total income, it falls further to $44,721; below even the all-individuals median of $45,232.
“By contrast, those who combine self-employment with wages report a much healthier $54,875. The skew, in other words, is concentrated among people whose primary source of income is self-employed income/sole-trader activity.
“Roughly seven in ten people who depend mainly on self-employment report taxable incomes below the national median wage, compared with fewer than six in ten wage earners. One might interpret this as a meaningful gap.”
He said there could be an element of how income was reported affecting the data.
“A salaried employee earning $70,000 typically reports close to that full amount as taxable income, whereas a sole trader invoicing $100,000 or more may deduct vehicle expenses, home office costs, depreciation, subcontractor payments, and prior losses before arriving at a taxable figure, which might land in the $40,000 to $60,000 range despite strong underlying turnover.
“The remainder of the gap reflects genuine earnings volatility. Seasonal work, contract gaps, business start-up losses, and part-year trading all make annual taxable income look weaker for sole traders than for wage earners with stable PAYE salaries.”
He said tough economic conditions recently probably amplified patterns that were already present.
“The lower-income skew among primarily self-employed individuals seems to be a persistent structural feature of how sole-trader income is measured and reported. That said, difficult economic conditions would make it more pronounced, increasing the share of people in the early-loss or low-revenue phase at any given time.”
He said some of the people reporting income of less than $20,000 a year, for example, could be early in their business life.
“Interest rates were high throughout this period as the Reserve Bank sought to reduce inflation by constraining demand, and economic growth was low or even negative in each quarter.
“Someone launching a business in that environment would plausibly show low or nil taxable income in their first filing, not because the business model is flawed, but simply because the conditions were tough and start-up costs absorbed early revenue.
“In general, in many countries, when employment markets tighten, some people move into self-employment not entirely by choice. This kind of reluctant or necessity-driven self-employment tends to produce lower and more volatile incomes than planned entrepreneurship. It seems reasonable that this pattern could also apply to New Zealand during a difficult economic cycle.”
Simplicity chief economist Shamubeel Eaqub said there could be a lot of variation in people’s experience of self-employment.
Simplicity chief economist Shamubeel Eaqub. (File photo) Supplied
“There some industries like arts, recreation, where you have to be a self-employed person to be able to do your job, right? If you think about, you know, if you’re a personal trainer, for example.
“And the issue with that data is that we just don’t have any idea what it is that they do, whether it requires a lot of capital outlay, if it doesn’t, how long they work, that kind of stuff.”
He said any costs that were being claimed to reduce income would be business costs reducing what people earned.
“It’s interesting that those people who tend to own businesses tend to have incomes that are a bit more top-heavy versus those who tend to be self-employed and wage earners are somewhere in the middle.”
Hnry chief executive James Fuller said income was not always the primary reason for pursuing self-employment, and when combined with those who earned business income, self-employed people were on average earning more than those working for other people.
Hnry chief executive James Fuller. (File photo) Supplied/Hnry
“While the varied nature of self-employment, encompassing a wide range of sectors and job types including, but not limited to, midwives, personal trainers, doctors, tradies, travel and tourism, gig workers, contractors, and side hustlers, makes it challenging to definitively provide the average earnings of a self-employed person; the data from Stats NZ relating to the income of those who are self-employed and do not have employees is the most representative and reliable measure of earnings across various sectors.
“Findings in the independent Sole Trader Pulse show that many sole traders consider factors beyond earnings in their decision to be self-employed, the October 2025 STP revealed that 46 percent said they had chosen to be self-employed to avoid being employed by someone else altogether and data from June 2025 showed that 76 percent valued the flexibility to choose the way they worked, as a result of being a sole trader.”
He said a desire for more flexibility, control and work-life balance were often drivers in the decision to pursue self-employment.
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