Emily Keddell: When carrots are actually sticks

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A carrot, or incentive, works only if the lure is achievable - in this case if there are jobs to be had, and people can do them. Photo / Getty Images
A carrot, or incentive, works only if the lure is achievable - in this case if there are jobs to be had, and people can do them. Photo / Getty Images

The word "incentive", the Oxford English Dictionary tells us, means "a thing that motivates or encourages someone to do something".

You would hope that when used in social policy (a) people are actually able to do what they are being "incentivised" to do, (b) the incentive itself isn't creating harm, and (c) it takes into account wider economic and social conditions.

Based on these fairly straightforward principles it seems incredible that the Court of Appeal failed to uphold the Child Poverty Action Group's complaint over the discriminatory rules around the in-work tax credit last month.

The in-work tax credit is one of three categories of payment in the Working for Families tax credit package that most families with children receive to meet the ever-increasing costs of raising said children. But families who are reliant on benefits do not qualify for the in-work tax credit component of the package, worth about $60 per child per week.

Child Poverty Action argued this was discriminatory under the Human Rights Act because it discriminated on the grounds of employment status.

Clearly, it does, and the Court of Appeal agreed it does, but decided the level of discrimination was justified to create the "greater good" of incentivisation of beneficiaries into work, arguing that overall, entrance into the workforce was the best way to address poverty.

Child Poverty Action said the "greater good" achieved by incentivisation was out of proportion to the discrimination level.

The court disagreed, persuaded by the Ministry of Social Development that the extent of discrimination was of the "minimum extent necessary to achieve the objective".

The implications are threefold. First, the decision takes at face value that jobs are out there waiting to lift beneficiaries out of their dire poverty, if only they would get off their backsides and take them up, and a monetary incentive is the best way of spurring them on to do so.

Lack of jobs, or barriers to accessing them, are invisible in this formulation. If it was that simple then we would have, one assumes, very small numbers of beneficiaries, so motivated would they be to take up the surfeit of appropriate jobs.

Instead it's clear that incentivisation can work only if there are jobs to be had, and people can do them. If there are no jobs, not the right kind of jobs, or people cannot work for money because of childcare commitments, then it's perverse to retain an inequity designed to create a lever into employment that is either nonexistent or unachievable. It's Kafka-esque. It's Dr Seuss. It's nonsensical.

The "right kind" issue is especially important for single parents. Many factors impinge on their ability to take up other employment, including the age and number of children, the lack of appropriate part-time work, children's needs, and the fact that single parents do the exhausting work of two parents in the home when there is only one of them. To take up paid work is possible only with family-friendly hours, low costs of work (such as transport, clothes, childcare) and good informal supports, such as the grandparent or neighbour who can cover for emergencies. Without these, paid work is impossible, factors no amount of "incentivising" will improve.

Second, in terms of creating harm, the level of poverty of those on the benefit remains shamefully high, with 70 per cent of beneficiary children living in poverty.

In this context, judgments about the "extent necessary in relation to the objective" become highly subjective, or at least, relative to one's position. While the difference of $60 a week may seem the "minimum extent necessary" to a judge, to a person surviving on a benefit, $60 per child, per week, is significant.

A low disposable income means adults, and sometimes children, regularly go without food, heating or adequate clothing. We know this from countless studies of poverty. It is reflected in our poor OECD ratings on child wellbeing, with a position of 21/30 for material wellbeing, and 29 out of 30 for health and safety - factors strongly related to economic provision. So a judgment that says the object is "in proportion" to the size of incentivisation rings a little hollow.

Which leads me finally to (c), the wider conditions principle. A level of incentivisation might be acceptable if our benefit rates were themselves sufficient, and the inclusion of the in-work tax credit merely a pleasant top up to an adequate basic income. But as benefit rates in relation to average wages have been falling steadily since the mid-80s, and costs related to housing, food, petrol and power continue to rise (particularly in high-cost cities), the in-work tax credit ceases being a cushy optional extra and becomes necessary for ensuring survival.

Another "wider conditions" issue is that incentivisation relies on a difference between the total income on a benefit as opposed to total income on a wage.

Our minimum wage is so low about 40 per cent of children living in poverty are not living in beneficiary families, but have low-wage-earning parents. Their low wage suppresses the benefit rate, keeping both groups poor. Thus, incentivising people for the "greater good" of employment as a pathway out of poverty for many may be, as teenagers would say, a "fail".

One solution, given that both a rise in the minimum wage and now the in-work tax credit have been soundly knocked back, may be to increase one of the other components of the Working for Families package that both beneficiaries and low income earners qualify for. This would drag both groups out of poverty, and would still keep a level of incentivisation for beneficiaries in the system (as in this scenario they would still not qualify for the in-work tax credit).

The best solution is that, whether incentivising beneficiaries or not, the real income of both beneficiaries and low income earners is increased. This will address child poverty. The lack of political will to achieve this end is disheartening.

This decision, alongside the fact that not a single recommendation of the Expert Advisory Group's in-depth report on solutions to child poverty has been adopted, leads me to conclude that it's not beneficiaries who need some incentives to do the right thing. Hmm - what "incentivises" politicians, I wonder?

Dialogue: Contributions are welcome and should be 600-800 words Send your submission to dialogue@nzherald co nz. Text may be edited and used in digital formats as well as on paper

- NZ Herald

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