On child poverty

Written By: - Date published: 10:27 am, April 29th, 2008 - 25 comments
Categories: families, labour - Tags: ,

The Child Poverty Action Group has released a report [PDF, 400k] showing there were 185,000 children living in poverty in New Zealand in 2004. That’s a big number but it is out of date and already well down from the dark days of the 1990s.

It is estimated that higher employment, higher wages, paid paternal leave, and Working of Families have combined to reduce child poverty by 70% since 2004. On top of that, improved public services, free early childhood education, subsidised doctors’ visits, and cheaper medicine have improved the lives of all children but aren’t caught by the poverty line measure, which only counts income, not the social wage. Moreover, it should be remembered that the poverty line is a moving target; it is 60% of the median household income. Since real incomes are up 15% since National was booted out, even someone living on the poverty line is 15% better off than in 1999.

Notwithstanding all that, more can be done to reduce child poverty. After nine years of centre-left government, the only children still living in poverty are those living in beneficiary households, who can’t get Working for Families. Something can be done for these families. One option would be to restore benefit levels to what they were before Ruth Richardson slashed them in the 1991 ‘Mother of All Budgets’. Another option would be to increase the child tax credit portion of Working for Families, which goes to beneficiary as well as working families. Both these measures would have the added benefit of putting more money into the pockets of people who are hardest hit by the slowing economy, which would create demand and stimulate their local economies.

That child poverty has been reduced 70% is of great credit to Labour but there shouldn’t be any child poverty in a nation as wealthy as New Zealand. It’s good to see the Minister agrees. The only way to get there is with better assistance to families in need. Tax cuts alone won’t cut it.

25 comments on “On child poverty”

  1. Steve Pierson 1

    Ever wondered why the 1991 Budget is known as the ‘Mother of All Budgets’?

    It was the first budget delivered by a woman but the real reason was that the Budget took place just after the second Gulf War. At the start of the war, Saddam had promised America and it’s allies the ‘Mother of all Battles’ if they tried to liberate Kuwait. In Arabic, calling something the mother or father of something is used to say it’s great or huge – the city Abu Dhabi means ‘father of gazelles’, lots of gazelles there it seems.

    And so ‘mother of all budgets’, a budget that delivered something big and terrible, benefit cuts that plunged the economy into recession and tens of thousands of kiwis into poverty.

  2. spanner 2

    Grey power have just asked Helen Clark what is alternative for food consumption, as they wrap themselves in blankets to keep warm.Wineter power cuts loom for them.

    Didn’t Helen Clark say that poverty in NZ was just “extrapolated from an anecdote”?

  3. Didn’t John Key say the answer to the “underclass” was muesli bars and more sports clubs? Oh and tax cuts for the rich? Ahhh… “trickle down” … those were the days…

  4. Dancer 4

    While like most NZers I support the elimination of child poverty we also need to recognise that it’s an area to “measure”. For example the report suggests it is providing a current “where we’re at” on child poverty in New Zealand, 2007. But the info they are working from are all from 2004 and previous years prior to Working for Families and other government policy changes. None of the material I’ve seen around (on poverty/ hardship etc) is actually for 2007.

    And missing out Working for Families is important – a family earning less than $35,000 now effectively pays zero tax.

    I was also surprised to see a call for the removal of KiwiSaver tax credits on the grounds that it benefits middle income earners. However people across income brackets, age groups, and ethnicities are signing up (http://www.beehive.govt.nz/release/kiwisaver+working+new+zealanders).

    And just last month we had the NZ Herald saying “Child poverty is finally on the way down in two of the three rich countries where it increased the most in the 1980s and 90s – Britain and New Zealand.” http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10503896&pnum=0

    So we are making slow progress?

  5. bill brown 5

    you’re on a hiding to nowhere if your definition of poverty is families with incomes below 60% of the median.

    By definition, this is always going to end up with people defined as in poverty.

    This is up there with “we want all kids to perform above average at school”

  6. Steve Pierson 6

    bill. to be fair, it’s not my defination, it’s the international one. The reason it is a fraction of median income, and not a fixed level is a recognition that poverty is different in different societies, it’s not about how much you have but how much you have relative to other people.

    And you’re right that reaching the rising bar is hard but it’s not mathmatically impossible, like having all kids above average at school would be. You just have to ensure that no family with kids has an income of less than 60% what the median household has.

  7. Craig Ranapia 7

    And you’re right that reaching the rising bar is hard but it’s not mathmatically impossible, like having all kids above average at school would be. You just have to ensure that no family with kids has an income of less than 60% what the median household has.

    Steve: Perhaps I’m showing my innumeracy here (not impossible considering that I’m doing really well if I can reconcile my bank statement the same way twice, two months in a row), but wouldn’t that move the median upwards.

    And I don’t know if it’s either politically or ethically wise to tell people who don’t have children that they somehow deserve to be in poverty, no matter how you define it.

  8. Phil 8

    Is this the report which stated “Child poverty is highly correlated to household income”?

    That’s gold – I bet it took them a lot of hard number crunching to work that one out…

    Seriously though, single point-in-time studies like these are pretty much useless for coming up with strategies to reduce poverty. To use a sporting analogy; they give you the score-card at the end of the match rather than a play-by-play.

    What is essential is having a logitudinal study of significant depth and breadth to begin looking at real dynamics and household mobility – that exists with SoFIE (http://www.stats.govt.nz/products-and-services/info-releases/sofie-info-releases.htm) and I really hope that once researchers get their teeth into that, it will produce some really positive outcomes

  9. And so ‘mother of all budgets’, a budget that delivered something big and terrible, benefit cuts that plunged the economy into recession and tens of thousands of kiwis into poverty.

    Um, no. The MOAB actually benefited NZ hugely and practically saved the economy. No one defends the MOAB by saying it was the best thing to do (save Richardson herself and Douglas, but that is no surprise) or that we should do it again, but let’s be honest it was the necessary thing to do at the time because of the terrible state of the economy.

    Upon winning the 1990 election, Bolger and Richardson quickly became aware of two unrelated financial crises: firstly, that the Bank of New Zealand required an immediate injection of capital to avoid insolvency as a result of the poor performance of a NZ$2.8bn loan portfolio in Australia, and secondly that the outgoing finance minister David Caygill’s projection of a modest fiscal surplus was inaccurate, and that the country instead faced a fiscal deficit of NZ$5.2bn if action were not taken immediately.

    So, the economy was in tatters (thanks to Labour) and the MOAL was designed to cut back and save money so that a recession was avoided. In fact, much of the economic buoyancy in Labour’s term, such as the massive surpluses, has been credited to the policies of Richardson. So really you ought to be thanking her, Pierson.

  10. Scarfie 10

    Perhaps I’m showing my innumeracy here … but wouldn’t that move the median upwards.

    Craig, no it wouldn’t. The median is the value which separates a population of values into two halves, values above and values below.
    http://en.wikipedia.org/wiki/Median

    The following two populations of values:
    “1 2 5 8 9”
    “4 4 5 8 9”
    both have the same median, 5. Now think of those numbers as representing family income, and compare the low ends.

  11. Matthew Pilott 11

    Craig Ranapia, there is a difference in the workings of the mean (average) and median in the example Steve gives.

    Let’s say the median is $60k – this will be the actual dollar value of the middle income. This means that if there are 21 people earning an income in the group being measured, the income of the 10th (when they are ranked in ascending order – imagine it as a list, the median is plucked from the middle) earner will be $60,000.

    If someone goes from, say, $45,000 to $55,000, on our hypothetical list, the median will not have changed. They may have gone from 3rd to 7th, but the median (10th) will not ahve changed. The median only changes when someone crosses the median – goes from below to above and vice versa. With what Steve is talking about, you have a hypothetical situation whereby there would be no family with an income of below $36,000 (or 60% of the median).

    I don’t think that it is mentioned, implicit or otherwise, that people without children deserve to be in poverrty, I’m afraid it appears to me you made that up, or are looking for a fight somehow!

  12. Ben R 12

    The majority of the children cited come from families receiving WINZ benefits. Isn’t there an obligation on those receiving WINZ benefits, or Housing New Zealand accomodation/allowances to use contraception?

    It’s an abuse of the welfare system & the social contract that underlies it to have large families while receiving benefits.

    Increasing payments may work in the short term, but will ultimately lead to the system collapsing under its own weight.

    With better family planning child poverty would reduce.

  13. bill brown 13

    It is implicit that if people with children’s incomes are bolstered so that they do not fall below the 60% threshold a proportion of people without children will be moved into the poverty bracket as the median will drift up.

  14. Steve Pierson 14

    bill brown, learn the difference between a median and a mean.

    Ben R, weirdest comment of the day

  15. Matthew Pilott 15

    Yes bill (if that comment is directed to what I said) but no one is saying that we should ignore poverty for families without children. This post is about child poverty though, which is why people are looking at and discussing…child poverty. And no one came remotely close to saying, as Craig implied, that people without children deserve to be in poverty.

  16. Ben R 16

    Steve,

    Could you explain what you don’t understand about my post?

    My point is that we have a form of social contract where we pay benefits to those in need. As with any contact/agreement there is some obligation on both parties. Surely those getting money from the state, should be using contraception to avoid increasing the amount the state needs to pay them?

    My other point is that while CPAG make some fair points, they seem to overlook family planning. When that is the clearest way to reduce child poverty. Women in third world countries often live in poverty because they can’t use contraception, but that’s not the case in NZ.

  17. Hillary 17

    Ben R, should we compulsorily sterilise beneificiaries, since they are breeding like rabbits at the taxpayers expense?

    If it was true that people are choosing DPB as a lifestyle, which I doubt, what would that say about other opportunities available to them?

    Labour have done alot to address child poverty, and its great to hear Dyson saying that child poverty can be eliminated. It must be.

    Which is why Labour has to win the election. I am seriously fearful about what would happen to children of working and not working families under National.

  18. Ben R 18

    Hillary,

    No, I don’t think the state should have that kind of coercive power – it would be pretty hard to say we lived in a liberal democracy if that happened.

    I just don’t see why family planning isn’t at least talked about as a way to reduce child poverty. It shouldn’t be viewed as a negative or taboo subject. As I mentioned above, reducing family size is one of the easiest ways historically for people, particularly women, to avoid poverty. I think CPAG overlooks this for ideological reasons, when it could actually help those in need.

  19. When the razor was taken to the benefit system by Jenny Shipley et al it wasn’t just the $ in the bank each fortnight, it was the added assistance that disappeared, which had previously enabled beneficiaries especially women on the DPB to manage their debt load as well as provide food, shelter and emotional support for their families. Things such as a maximum (repayable) $1000 loans for essential home repairs disappeared. The amount of casual part time work you could do before your benefit was shaved of the difference was reduced. Things became extremely rigid, kids started missing out on sports and other previously attainable social activities. I watched several friends struggle to explain that to their children. I am also again fearful for the children of beneficiaries under a National government.

  20. Mmmmm, beneficiary-bashing, it is delicious.

    Because of course the fact that “Working for Families” gives NO benefit to those families on benefits, and has in fact resulted in a net loss for some families, means nothing. It’s because the damn proles can’t keep it in their pants.

  21. Matthew Pilott 21

    How’s WfF caued a loss for some people, QoT?

    I often hear people complain that WfF doesn’t help people on benefits – perhaps a fair comment, although I’d say benefits not directly given in cash would be better – free quality training/education, basically things hat will help people get in to some form of work if they are able.

    Lastly, WfF provides a damn good incentive for someone on a benefit to get a job – and not a negative incentive (don’t work and you’ll be punished) but a positive one (get a job, and you’ll get that much more money). Gotta love that.

  22. ‘Working for Families’ would have the word ‘working’ in it because people are working. That would exclude people who don’t work, I suspect. Stop me if I’m being too obnoxious…but they would certainly have to rename it to pay it to people on welfare.

    It has also been called a tax cut, which also wouldn’t make much sense for people who don’t work and don’t pay tax.

    But the point I really wanted to make is that welfare causes poverty. After all, being welfare is not exactly the road to riches. Welfare payments are small to discourage the general population from giving up and going on welfare. Therefore if you are on welfare you are going to be poor.

    If someone can work out how to pay handsome welfare payments without having everyone quit, then please let us know, because this is the one question which can resisted solution by the most brilliant minds in economics for the past 60 years.

    It is an important question too, because there are people out there who are very badly treated by our welfare system. For example, I have been sickened by the plight of adults with learning problems, or physical disabilities, who never got anywhere in school. We should be spending a lot more on these people.

    Anyway, to reduce poverty you need to increase wealth. To do that you must reduce welfare roles.

  23. NP 23

    I had always understood that beneficiaries pay tax, yet do not receive ‘Working for Families’ assistance; hence the problem of the country’s poorest children becoming poorer over time, even if the remaining are in a better position than 1999.

  24. Draco TB 24

    Anyway, to reduce poverty you need to increase wealth. To do that you must reduce welfare roles.

    False dichotomy FTW?

    We need to help those to the opportunities available to them not just pay out welfare and expect them to suddenly become successful. They won’t simply because they don’t know how as they’ve never been taught. Throw in some confidence issues brought on by childhood abuse, probably a consequence of poverty itself, and you have some very real and very complex issues to deal with.

  25. lauren 25

    would national REALLY help the poor…whata joke! NO…VOTE LABOUR 2008, considering i come from a predominantly middle class family.

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