A full-time job is no longer enough to keep thousands of New Zealand households from wallowing in debt, with children bearing the brunt, writes Colleen Brown. What does this year’s budget mean for the working poor?
May’s Budget and the recent changes to pay equity legislation have only heightened concerns about the erosion of real incomes due to inflation, particularly in the education sector. The government announced a reduction to its KiwiSaver contributions and signalled changes to the Working for Families income assistance programme, while there is no funding set aside for the Ka Ora Ka Ako School Lunch Programme after 2026. The Kāhui Ako Communities of Learning programme, helping students to achieve their potential, will be axed after this year.
Policy analyst Alan Johnson doesn’t believe the Budget will lead to any improvement in deprivation statistics, nor does he see any real interest from the government in meeting child poverty targets – pointing to Treasury forecasting no progress towards meeting those targets over the next three years. Johnson also believes minor adjustments to Working for Families tax credits and the accommodation supplement will lose value due to inflation (2.5% in the year to March 31.)
Among many pay equity claims and reviews derailed by the government’s rule changes are those affecting schools. NZEI Te Riu Roa says a pay equity review under way for teacher aides is now “on the scrap heap”. Reviews were also in train for librarians, science technicians, school administrators, te reo support leaders and therapists.
Lincoln Heights School employs 40 learning support staff in teacher aide roles, as well as 37 teachers, five therapists and five admin staff. Principal Leisha Byrnes worries whether staff’s earning potential will keep pace with comparable roles and the cost of living. “Many of our staff are from this community, so the lack of resolution over pay equity will have an impact on the money coming into the local economy.”
Byrnes also worries how the changes to KiwiSaver will affect those in the retirement savings scheme. The government is halving its annual contribution to a maximum $260 and people will need to contribute an extra percentage point of their income by 2027. She says this alone would offset the 1% pay rise offered to teacher aides this year. She asks who will fill the teaching jobs now being vacated by staff heading overseas to better wages and conditions.
Financial mentoring agency FinCap is looking for policy changes to help the working poor its members counsel. “More and more households with unmanageable debt are seeing financial mentors,” says its senior policy adviser Jack Lilley. “Debt collectors will continue to get away with unfair fees and practices unless we see action now to bolster protections.”
Manurewa High School’s Pete Jones sees very little in the Budget to support his kura and community. MHS will lose funding with the end of Kāhui Ako which will mean the loss of 10 positions. “Our whānau and rangatahi will continue to do it tough as this government does not see them, hear them or support them and seems to have little understanding of our context or the challenges we are facing,” says Jones.
Child poverty campaigner Susan St John, an honorary associate professor in economics at the University of Auckland, says the state pension has been remarkably successful in preventing hardship for over-65s who own their own home. The equivalent programme for children, Working for Families tax credits, is focused on parents in paid work, she says, and therefore doesn’t meet the basic needs of all children. Changes to the tax credits over the years have been few and inadequate, with disturbing results. About 200,000 children in families on benefits got no help from the $25 a week increase in the in-work tax credit in last year’s Budget or the small rise in the abatement threshold (at which point funding starts to decline) in Budget 2025.
The more fortunate of the poorest families will get an average increase of around $7 per week from next April. “It’s a pittance,” says St John. “Child poverty and hardship rates are grossly unacceptable. It’s time to take Working for Families as seriously as we take NZ Super.”
You can read Part I of Colleen Brown’s Working Poor two-part series here.
