The Cost and Challenge of Child Poverty in New Zealand

1. The Cost and Challenge of Child Poverty in New Zealand Jonathan Boston Co-Chair, Expert Advisory Group (2012) Professor of Public Policy, VUW Director, Institute for Governance and Policy Studies 19 June 2013

2. The importance of children Nelson Mandela (1985): There can be no keener revelation of a society’s soul than the way in which it treats its children. Old Indian Proverb: To plan for a year – sow a rice paddy field To plan for a decade – plant trees To plan for a future – nurture children

3. Outline • What is poverty? • Measuring poverty • Child poverty in New Zealand • What are the causes? • Common views about poverty • Does child poverty matter? • What should be done? The EAG’s recommendations • The Government’s response • Next steps • Conclusions

4. What is Poverty? How should poverty be defined? How should it be measured? The topic of child poverty is uncomfortable; it is often emotionally charged; we need careful, calm analysis, but also an appropriate moral concern – care for our ‘neighbours’, especially those who are most powerless and vulnerable

13. What is Poverty? • Poverty can be defined in various ways: • deprivation or lack of material resources: • unable to satisfy basic human needs (food, shelter, health care) and/or • unable to participate fully in economic, social and political life c.f. poverty of spirit, lack of aspiration, social/cultural deprivation • Different degrees/kinds of poverty: • best to think in terms of a continuum, from very severe … to moderate • abject poverty (lack of basic necessities; regular hunger and starvation) • relative poverty (missing out on those things that most people regard as necessary for a fulfilling life) • most measures of poverty are relative in some way or other • both the severity and persistence of poverty matter in terms of outcomes

14. What is Poverty? • Developed countries use two main ways of measuring poverty: • income below a certain agreed threshold • material deprivation – missing out on more than a certain number of essentials • these measures generate different results and only partially overlap • Setting the relevant benchmarks is complex; many technical issues (e.g. equivalence scales, before or after housing costs, etc.); a range of approaches possible; no international consensus, but some common approaches • There is no single correct measure of poverty – need a range of measures to highlight different features of the problem • Only a few countries have official poverty measures (e.g. US, UK, etc.); NZ does not

15. Measuring Poverty As noted, there are various ways of measuring poverty: Income measures: • Moving line versus fixed line (constant value) • Thresholds – 50% or 60% of median equivalized household disposable income, before and after housing costs • Why 50% or 60% of the median? • Why use median rather than average income? • Why adjust for household size and composition? • Why is housing important? Common misunderstandings Need multiple measures – no one ‘right’ measure

16. Child Poverty in NZ Poverty measurement in New Zealand: Various approaches and studies (see work of Byan Perry, MSD) Main features/trends: • Poverty rates depend on the precise measure used: • Income poverty rates for children in NZ are around the OECD average or slightly above on most measures • Material deprivation rates for children in NZ are higher than comparable rates in Western Europe • On a moving line basis, child poverty rates in NZ are much higher now than during the 1980s; on a constant value basis, there was a higher percentage of children in poor households in 2007 than during the 1980s (i.e. on various measures we are doing less well for our children …) • Poverty rates for children are much higher than for most other groups, especially those aged 65+; this has been the case for several decades

17. Child Poverty in NZ • Child poverty rates are particularly high in: • Families with young children and larger families (50% of children in poverty are in families with 3 or more children) • The families of beneficiaries: the rate is 6-7x higher than for families where at least one adult is in full-time employment • But over a 1/3 of children in poverty are in families where one adult is in full-time employment (reflects low wages and inadequate child assistance) • Maori and Pasifika families (2-3x the Pakeha rates)

18. Child Poverty in NZ • About 50% of poor children are in sole parent families; NZ has a high prevalence of sole-parent households; sole parent employment is low by OCED standards • In 2012, close to 180,000 children lived in households where no adult was in paid work, and a further 64,000 in households with only PT work • More than half of all children under 15 years of age spend some time in families supported by a main welfare benefit (DPB/UB, etc.): • around 6% (50,000) spend 13-14 years in a benefit-supported family • around 21% (180,000) spend more than half of their first 14 years in a benefit-supported family If welfare benefits are inadequate, the implications are clear …

19. Proportion of all individuals in low-income households by age, 60% REL threshold (AHC)

20. Proportion of children below selected thresholds (AHC): fixed line (CV) and moving line (REL) approaches compared (Perry 2012)

21. Numbers of poor children in New Zealand

22. Long-term Trends in Child Poverty in Australia

23. Child Poverty and Overall Poverty in OECD Countries

24. Child Poverty among Couple and Sole Parent Households in OECD Countries, 2008

25. Identifying Deprivation

26. Australia -- Overall Changes in Deprivation, 2006 to 2010 (weighted %)

27. Deprivation Rates: 3+ enforced lacks, using 9 item EU index (%), 2007

28. Australian data -- Are Identified Essentials Robust?(unweighted percentages)

29. Australian data -- Are Children’s Needs Universal?(unweighted percentages)

30. The causes of child poverty in NZ Why are many family incomes low? • Parental unemployment or under-employment: • Overall labour market conditions • Mismatches of supply and demand – relative lack of jobs for those with limited skills or qualifications • Family break-ups, dysfunction and social hazards • Low wages: • Most low-skill jobs are relatively poorly paid • The design of government policies: • The structure, level and complexity of family assistance • Low take-up rates for some child-related benefits • Child support arrangements • Employment and training policies • Childcare, ECE, OSCAR and related policies

31. Some common claims There are many myths, misconceptions and half-truths about poverty, both here in NZ and elsewhere. Let me briefly consider 9 claims: Claim 1: There is no real poverty in NZ; no one misses out on anything really important; no child goes hungry Response: • There may be little abject poverty (i.e. starvation), but there is evidence that many children (20,000+) go to school hungry and/or have no lunch on a regular basis; and large numbers miss out on many other ‘essential’ items and opportunities • The negative consequences of low incomes/material deprivation on children are many and varied (see later slides)

32. Some common claims Claim 2: People are in poverty because they are lazy and don’t want to work; they deserve to be poor; and/or Claim 3: People are in poverty because they are addicted to drink or drugs; they deserve to be poor; and/or Claim 4: People are in poverty because they don’t know how to manage their money properly; they are incompetent Response: • Why did child poverty rates rise 2-3 times during the late 1980s and early 1990s? Was it because of an outbreak of parental laziness, and/or financial incompetency, and/or substance abuse? There are rather better explanations … • Should children be expected to suffer for the inadequacies of their parents? Should we simply say: ‘bad luck, you should have chosen your parents better?’

33. Some common claims Claim 5: People are in poverty because they have too many children (‘the more they breed, the more we [taxpayers] bleed’) Response: • This is partly true, but what is the appropriate policy response? How much paternalism and/or coercion is justified? What are the relevant moral principles? • Should we sterilize poor people so they cannot ‘breed’? • Should we tell the poor that they should not have children – this is only a privilege for the better off? Or • Should we try to ensure that all children get the best possible start in life?

34. Some common claims Claim 6: The problem is poor parenting not poverty Response: • There is evidence of both poor parenting (neglect, abuse, etc.) and poverty • There is evidence that poor parenting is at least partly the product of poverty (which causes parental anxiety, stress, poor health, etc.) • We need to address both poverty and poor parenting; it is not one or the other; both are important and amenable to policy action

35. Some common claims Claim 7: Helping those in poverty just makes the situation worse Response: • There is little empirical evidence to support this claim. • If the claim were true, then several millennia of Christian charity and 100+ years of a welfare state has been a waste of time • The way help is provided obviously matters – need cost-effective assistance and interventions that build capability, extend opportunities and reduce undesirable dependency

36. Some common claims Claim 8: Giving the poor money does not help; they will simply misuse it Response: • Some people find it hard to manage money well; but this is not limited to the poor. The poor have less margin for error. • Why do we think that the rich benefit from tax cuts, but the poor do not benefit from having more income? • There is much evidence that income matters, and that providing additional income to poor families generates positive outcomes • But income is not the only thing that matters; in-kind assistance is often appropriate and desirable (e.g. free education, free health care, social housing, etc.)

37. Some common claims Claim 9: We cannot afford to reduce child poverty Response: • We could equally say that we cannot afford NOT to reduce child poverty. Why? Because child poverty imposes significant costs (see next slide); investing well in children produces positive returns (and saves on future fiscal costs) • Child poverty can be reduced; we have much lower rates of poverty and material deprivation amongst those 65+ in NZ. • The scale and severity of child poverty/deprivation is a partly matter of societal choice. Fundamental issues: What do we regard as an adequate social ‘safety net’? Do we expect most of those on welfare assistance to live in poverty? Since the early 1990s we have chosen to tolerate child poverty of significant levels and duration; reducing child poverty has not been a high policy priority. Why?

38. Does child poverty matter? • This is an ethical issue – there is much relevant empirical evidence, but weighing up this evidence depends on our values • There are many theological grounds for saying that child poverty matters: • The value of all people in God’s sight (‘imago dei’) • God’s special concern for the vulnerable and powerless (widows, strangers, orphans, etc.) • The second commandment – love our neighbours (broad conception of neighbour) • The importance of everyone having a stake in their society and economy Jesus said: "Let the little children come to me, and do not hinder them, for the kingdom of heaven belongs to such as these” (Matthew 19:14) • There are many other grounds for saying that child poverty matters: • Principles of social justice, notions of rights, minimization of harm, economic considerations, etc. (often based on theological grounds)

39. Does child poverty matter? A large and growing body of research highlights: A. The negative impacts of family poverty on children, including: • Greater likelihood of death in childhood • 3x higher incidence of ill-health, including 2x greater likelihood of hospital admission for acute infectious diseases • 5-6x higher incidence of hospitalisation from assault • Lower participation in ECE and higher school absenteeism • Negative impact on cognitive development and educational attainment • Higher residential mobility, poor housing and homelessness • Lower family resilience – higher parental stress and separation rates B. The negative impacts of childhood poverty on the wider society, including: • Higher unemployment and lower productivity growth • Higher fiscal costs: health care, benefit payments, criminal justice system, etc. • Significant overall economic and social costs

40. Does child poverty matter? Further, the evidence suggests that: • Child poverty imposes greater costs/harms when it is severe and/or persistent • Evidence suggests that hardship tends to increase the longer a family is on a low income • Child poverty imposes greater costs/harms when it occurs in early childhood

41. What should be done? • Establishment of Expert Advisory Group (EAG) by the Children’s Commissioner, Dr Russell Wills (13 members) • EAG’s Terms of Reference – advice on how to reduce child poverty and mitigate its effects • Issues and Options paper (late August), 24 Working Papers and 4 Background Papers • Consultation process for 7 weeks • 23 public meetings around the country • 100 web-based survey responses • 233 formal submissions (many substantial) • 300 children consulted • Final Report published on 11 December • Government’s response on 28 May

42. The Approach of the Expert Advisory Group • Acknowledge policy complexity, trade-offs and tensions • Build on current government policy initiatives to enhance employment opportunities, improve the quality of childcare/ECE, encourage beneficiaries into the workforce, set targets, take an investment approach, etc. • Draw on the best available international evidence regarding what works and what is cost-effective • Draw on a range of ethical principles and considerations to guide policy development • Focus on both reducing child poverty and mitigating its effects • Focus on boosting incomes via both an employment strategy and a complementary social assistance strategy • 78 recommendations covering many areas of public policy

43. Core messages • Child poverty can, and should, be reduced • New Zealand needs a strategic policy framework based on multi-party agreement (as for National Superannuation) – with official poverty measures, specific reduction targets, and a proper monitoring and reporting framework (including child poverty-related indicators); consistent with the Government’s targets under ‘Better Public Services’ • The EAG recommended reducing child poverty rates by at least 30-40% and severe and persistent poverty by well over 50%, with the aim of achieving child poverty rates that are comparable to the best performing OECD countries • Implies raising the disposable incomes of many low-income families by at least $100 per week (e.g. taking those on 50% of the median household disposable income to 60%)

44. Core messages How to achieve such targets? • Need a mix of policy measures; no single magic bullet • Boost the incomes of low-income families: • Focus on assisting younger children and larger families via changes to Family Tax Credits • Reform child support • Reform housing assistance • Encourage and support child-age appropriate employment by parents (especially sole parents) • Provide additional in-kind support, e.g. • Free child health care from birth to 18 years • Develop a national strategy for food in schools (especially for year 1-8 students in low-decile schools) • Establish multi-service hubs in low-decile schools

45. The Government’s Response • The Government has responded positively to many of the EAG’s 78 recommendations, but not those relating to income support; nor has it accepted the EAG’s proposals for a comprehensive child poverty reduction strategy • Some new initiatives to mitigate the worst consequences of poverty have been announced (e.g. an extension to the food in schools programme); some other proposals are under active consideration (e.g. low-interest loans) • Hopefully some of the EAG’s proposals relating to income support will be taken up in future budgets; otherwise child poverty and material deprivation rates are unlikely to fall much over the medium term

46. Next steps • Note the response of other political parties, community groups, etc. • We need to change public attitudes, values and priorities: • Many New Zealanders appear ready to tolerate significant child poverty (and some appear not to care about the welfare of poor children) • Survey evidence points to a loss of public support over recent decades for progressive taxation and income redistribution • How might public attitudes be changed? • Aristotle: logos, ethos and pathos • Reason (evidence, logic); ethical arguments; emotional appeal (based on suffering and shame) • The Christian community needs a stronger focus on child poverty issues (action and advocacy)

47. Conclusions • Child poverty is a serious issue in NZ, with significant long-term economic and social implications • The level of child poverty is partly a matter of policy choice • NZ has tolerated much higher rates of poverty (and especially child poverty) than was the case in the immediate post-war period • Fundamentally, we need to increase the incomes of low-income households (especially families) – this requires a combination of measures: increased employment, more generous child assistance, changes to child support, increased subsidies for childcare and training, etc. • But also need to address some deeper issues: economic performance, the level of income and wealth inequality, family functioning (how to reduce the incidence of sole parenthood?), social values (what kind of society do we want to live in?)

48. Supplementary slides • Policy principles • Poverty measurement • Specific proposals • The global picture • Acknowledgements

49. Principles for policy design for addressing child poverty The following principles and considerations should guide policies: • The rights enunciated in the UN Convention on the Rights of the Child • The best interests of the child, including the child’s developmental needs • The provisions and principles of the Treaty of Waitangi • A ‘social contract’ that recognizes: • The mutual responsibilities of parents, the community and the wider society for the care and wellbeing of children • The requirement to provide social assistance to those unable to work or secure paid employment sufficient to meet the basic needs of children • The importance of parental employment in reducing child poverty, but in a context where the developmental needs of children are protected (e.g. through accessible, affordable, high-quality childcare, ECE, etc.) • The vital role of housing, high-quality education, and equitable access to health care • The desirability of a strong future focus, and hence an investment approach • The desirability of selecting policy measures that are simply, effective, efficient and fair • The need for fiscal responsibility

50. Measuring Poverty Need a range of poverty measures (should be official/authoritative). The EAG proposed: • Moving line – 60% of median equivalized household disposable income, annually adjusted, AHC and BHC • Fixed line/constant value – 60% of median equivalized household disposable income, adjusted every 10 years, AHC and BHC • Material deprivation – material wellbeing index score in levels 1 or 2 out of 7 • Severe poverty – mix of (a) and (c); and poverty gap (distance of median income of the poor from the moving-line measure) • Persistent poverty – at least 3 of 4 years, using both (a) and (c) • Supplementary measures: inter-generational transmission, life-cycle, and geographic