Former Economics Editor of the NZ Herald

Brian Fallow: Poverty beyond counting

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How many Kiwi kids are living in hardship? Far too many is the only answer that matters
Grim hardships exist in New Zealand to a significant degree. Illustration / Anna Crichton
Grim hardships exist in New Zealand to a significant degree. Illustration / Anna Crichton

People can argue till the cows come home about how to define and count the number of New Zealand children growing up in poverty and/or hardship. It is a sterile debate.

The only sensible answer to the question "how many?", is "way too many". The focus needs to be on how we can reduce the number, not what number we are trying to reduce it from.

A report this week for the New Zealand Initiative, which draws largely on the careful work of Bryan Perry at the Ministry of Social Development, argues that for advocacy groups to cherry pick the highest numbers from the range of measures available is counterproductive.

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That approach invites reactions like: "300,000, or more than one in four? It's nothing like that many."

"Many voters are likely to put the needs of their own children, for example, ahead of those of strangers in or outside of New Zealand," say the report's authors, Bryce Wilkinson and Jenesa Jeram. "Their need to be persuaded that more distribution from them to others is desirable is understandable."

But they acknowledge the statistics demonstrate that "grim hardships exist in New Zealand to a significant degree, regardless of semantic niceties."

For example, in 2014, 80,000 children were in households which ticked more than half the boxes in the MSD's 17 tests of material deprivation -- like putting up with feeling cold to save on heating costs or postponing visits to the doctor.

You can be scandalised that it is so many, or heartened by the fall from a peak of 105,000 in 2011.

A wide range of measures is available, which all carry different information.

Some are based on relative incomes. How many people, or children in particular, fall below 50 per cent or 60 per cent of the median income? Should you take the current median or, if you are more interested in progress or the lack of it over time, a median anchored in some past date like 2007 or 1998?

The around 230,000 children who do not qualify for the full [Working for Families] package have been left behind.
Susan St John, Child Poverty Action Group

Unsurprisingly, measures after housing costs find much more relative income poverty than those before housing costs.

The report's authors argue that there are many reasons why incomes rise and fall over a lifetime, so relative incomes are less relevant than measures of material hardship.

But again, there is room for argument about where to draw the line of concern: more than seven of the MSD's 17 indicators, in which case 145,000 kids are on the wrong side of the line? Or more than nine, in which case it is 80,000?

The incidence of hardship among children in households primarily dependent on a benefit is particularly high, the report says: 51 per cent are lacking on at least seven of the MSD's 17 indicators, compared with 10 per cent among those in households reliant on labour market income.

Hence the Government's preoccupation with policies intended to incentivise the parents of impoverished children to get a job. That is evident in the Working for Families system of tax credits, which does little for the children of non-working families, or the conditionality attached to the forthcoming welfare benefit increases announced in last year's Budget.

But Susan St John of Auckland University and the Child Poverty Action Group, describes the welfare system as a Kafkaesque nightmare: "Working for Families is supposed to reduce child poverty and make work pay. In fact it does neither of these things well. The around 230,000 children who do not qualify for the full package have been left behind."

The system gives with one hand and takes back with the other, by way of abatement rates for benefits which impose high effective marginal tax rates, which when combined with childcare costs largely swallow up any income gain from working.

Grim hardships exist in New Zealand to a significant degree.
Researchers Bryce Wilkinson and Jenesa Jeram

The NZ Initiative report quotes an OECD report last year that estimated the effective tax rate, including childcare costs, for a sole parent moving to full-time employment is over 80 per cent.

Add the transport costs of getting from a substandard house to a low-paid job and home again at the end of the day, and the incentive to work can disappear entirely. It is a classic poverty trap.

And that's if the job is there. The labour market statistics at the moment are clear that it is, on the whole, a buyer's market in which supply outstrips demand.

It is likely that one thing standing in the way of better policy in this area, or at least of policy that would cost the taxpayer money, is popular prejudice.

A survey of perceptions commissioned by the Child Poverty Action Group in mid-2014 found opinion evenly divided on the primary cause of child poverty in New Zealand.

Forty per cent said it was due to economic factors like unemployment, low wages and rising living costs.

But just as many attributed it to bad parental choices: a lack of budgeting and not putting the needs of children ahead of spending on alcohol, cigarettes and drugs.

"Stop calling it child poverty and call it child neglect" was one comment.

Aucklanders were less likely than New Zealanders as a whole to consider child poverty a problem: 73 per cent in the city against 80 per cent nationwide.

Aucklanders were also less likely to say they personally knew of any child or children living in poverty, with 18 per cent saying they did, against 24 per cent nationwide.

That says more about social stratification within the city than relative levels of poverty or hardship compared with the rest of the country.

You just have to consider the relevance of housing costs. Using the benchmark of 60 per cent of current median income, 53,000 more children count as poor if housing costs are factored in than if they are not.

It is a reminder, if any were needed, that the social costs of Auckland's housing crisis are not confined to frustrated aspirations for home ownership.

Read full document here:

Debate on this article is now closed.

- NZ Herald

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Former Economics Editor of the NZ Herald

Brian Fallow is a former economics editor for the New Zealand Herald. A Southlander happily transplanted to Wellington, he has been a journalist since 1984 and has covered the economy and related areas of public policy for the Herald since 1995. Why the economy? Because it is where we all live and because the forces at work in it can really mess up people's lives if we are not careful.

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