Greatest risk

by Lindsay Mitchell / 12 September, 2014
Joining the debate about child poverty, Lindsay Mitchell pinpoints the problems and panaceas.
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Getty Images


In 1960s New Zealand, houses were smaller and families bigger. Paradoxically, overcrowding and child poverty weren’t major issues. Most families had two parents and many could even afford a stay-at-home mum. A very small percentage experienced financial hardship associated with an absent father.

What changed?

In 1973, influenced by the Royal Commission on Social Policy’s urgings, the Government introduced a statutory benefit for sole parents, regardless of the reason for their single parenthood. In the following 20 years, the number of births to unmarried mothers where there was no resident father more than quadrupled, from about 2500 to 12,000 – 22% of all births – annually. The relatively generous Domestic Purposes Benefit saw single mums dropping out of the workforce. The Royal New Zealand Plunket Society partially blames this development on the eventual non-viability of Karitane hospitals, which had provided live-in employment for unmarried mothers.

By the early 90s, about a quarter of a million (mostly) mothers and children were dependent on the state for their survival. But the benefit kept them above the poverty threshold.

When the incoming National Government of 1990 opened the Treasury’s books, the news was bad. This is where the authors of Child Poverty in New Zealand, Jonathan Boston and Simon Chapple, pick their story up. They describe “benefit cuts of between 10% and 30% for many beneficiaries supporting children”. In fact, for a lone parent with one child, the cut was 10.7%; for those with two, 8.9%. The universal Family Benefit was abolished, but half the savings were reallocated into increasing family support for beneficiaries and low-income families.

Nevertheless, the drop in income was enough to push beneficiary households below the poverty threshold (though they had probably been barely over it before). Compounding this was the high number of partnered jobless parents created by an unemployment rate exceeding 11% in 1992. From that time, the proportion of children in poverty – measured at below 60% of median disposable household income after housing costs – has been flat to falling slightly.

Some 64% of children in sole-parent households are poor, compared with 15% in two-parent families. Today, a lone parent heads about 30% of all families with dependent children. Long-term dependent sole-parent families aren’t typically the result of a marriage breakdown. They tend to involve very young mothers with no educational qualifications, work skills or regular partner.

Every year, about one in five newborn babies will be reliant on their caregivers’ benefit by Christmas. This pattern has persisted from at least 1993. For Maori, the number jumps to more than one in three. Add to this the Treasury’s advice to the 2013 Ministerial Committee on Poverty, “… around 1 in 5 children will spend more than half of their first 14 years in [a] household supported by [a] main benefit. This group is at the highest risk of material hardship and poor outcomes across a range of dimensions.”

The worrying aspect of this pattern is its persistence through good economic times. In 2007, when New Zealand had record low unemployment, the percentage bottomed at about 19%. More than three-quarters will rely on a sole-parent benefit, the remainder on either an unemployment or disability benefit. Although some of the reliance will be due to unforeseen circumstances, such as job redundancy, most could have been predicted by the parent.

Graph1ALTERING THE PATTERN


In a recent Listener article (“New deal for kids”, June 28), Boston and Chapple wrote “… it is worth pausing and considering how easy we would find it to raise children under such circumstances”. The same counsel should be put to those people who can actually change the pattern – although, according to the book, too much emphasis on “personal responsibility” would give less weight to “fairness and compassion”. Why these societal attributes would be mutually exclusive is unclear.

Not all poor children live in beneficiary families. Fortunately, though, low incomes in working families are often short-lived. Crucially, Boston and Chapple find: “Sustained full-time employment of sole parents and the full-time and part-time employment of two parents, even at low wages, are sufficient to pull the majority of children above most poverty lines, given the various existing tax credits and family supports.”

The reality is that raising children on one income is more difficult than on two. Compounding this are lower educational qualifications and work skills among the beneficiary population. Any moral judgment about single parents is irrelevant. Sole parents can raise children well, but it’s nearly always a financial struggle.

So, now we know where the major share of chronic poverty lies, what can be done?

Currently, sole parents must be available for part-time work when their youngest is five, and full-time work at 14. Boston and Chapple suggest full-time work expectations much sooner. Following the Nordic states’ example, work-testing when a child is between one and three is mooted. As well, much stronger “employment activation policies” are urged. But the question of why education and training would work post-parenthood when it failed pre-­parenthood isn’t addressed. It is the first-time failure of education that makes having a baby at 16 or 17 look like a palatable prospect. (Also not dealt with is the significant population of sole parents in a multitude of small towns such as Kawerau, Kaikohe and Ruatoria.)

To satisfy the authors’ recommendation, the economy would need quickly to produce about 60,000 jobs for newly work-tested parents, not to mention the 100,000 or so people on an unemployment benefit. That is a very big ask.

But not impossible. To meet the needs of mothers expected to work when they have infants, a substantial expansion of early childhood education is needed. That in itself presents work opportunities. Our rapidly ageing population demands a growing workforce of residential and in-home carers. Many more jobs could be created by transferring funds from Work and Income’s budget into education and health. These job creation schemes could be expenditure neutral.

But Boston and Chapple want a good deal more government expenditure and increased revenue – not only to support the “employment activation policies”, but to pay higher benefits. It is improbable that raising income tax, introducing a capital gains tax, re-introducing inheritance tax and redirecting child support offset are likely to generate the economic growth needed to produce thousands of new jobs.

Even more concerning, raising benefit incomes is an enormously risky solution to solving child poverty. Multiple studies from a wide array of countries show a strong correlation between the level of benefits and unmarried births. Last year, Innsbruck University found “the welfare state decouples marriage and fertility, and therefore alters the organisation of the family”.

OECD research shows when English-speaking countries reduce poverty through the benefit system, they simultaneously increase the number of workless households.

If the gap between income from welfare and income from work is further reduced, the incentive to take a job is diminished. An average sole parent with two children in South Auckland receives $642 weekly, a combination of the basic benefit rate, Family Tax Credits and the Accommodation Supplement. That’s 73% of the median weekly income from wages or salaries in Auckland. A large portion may go on rent but that’s ultimately the parent’s choice. Importantly, the poverty rate for sole parents who live within a wider household is only 23% versus 69% for those who live as a separate unit. Perhaps the most accessible and immediate financial relief for single mums is to pool resources: flat together, live with their own parents or take in boarders.

There is no doubt that some New Zealand children are doing it very hard. Treasury estimates the number exposed to long spells of low income associated with “significantly worse outcomes” is 180,000 (50,000 spend 13-14 years on a benefit; 130,000 spend half of their first 14 years dependent).


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Getty Images

A RAFT OF CHANGES


It’s a shame that some advocates insist on promulgating inflated numbers. That turns the debate from practical remedies to fighting over definitions.

Recognising most of the deep-seated deprivation occurs in beneficiary families, the Government is acting accordingly. Aware that very young parents produce the most vulnerable children, it has changed the way support is provided. Under the new Young Parent Payment regime, dedicated mentors ensure rent and power is paid directly, funds for groceries are loaded onto a payment card and only a small cash allowance is given. Parents are required to attend a teen parent unit and enrol their child in the WellChild programme and with a local GP. Extra income can be earned by attending parenting and budgeting courses. Paternalistic? Yes. But the priority is the babies. Simply paying young parents a non-conditional cash sum doesn’t protect their children or break the inter-­generational dependence shown by 90% of 16- and 17-year-old beneficiaries coming from welfare-supported homes. On a positive note, a cause for optimism is the significant decline in teen birth rates since 2008, and an associated drop in benefit reliance. For older parents not coping, who are repeatedly turning up at Work and Income needing extra cash, it’s highly likely the payment card regime will be extended. Provision is signalled in the planned rewrite of the Social Security Act 1964. This is supported by Labour "where there are known child protection issues and it is considered in the best interests of the child, especially where there are gambling, drug and alcohol issues involved".

Many other practical developments over the past few years have targeted poor children. Insulation of more than 200,000 homes, increased access to GPs, an intensive campaign to reduce rheumatic fever, boosted budgeting advisory services, low-cost procurement of household essentials such as washing machines, low-interest loans to combat loan sharks, partnering with charities providing food and clothing, home visitation programmes, such as Early Start, extended income-related rents to non-government social housing, and Whanau Ora are some of the measures taken.

Second-hand clothing stores, such as SaveMart and Rebound, with prices and quality better than many retailers, make it hard to understand why a child would lack a warm jacket or more than one pair of shoes.

In relative terms, New Zealand remains a rich country where social security protects against grinding poverty. But it is vital to recognise benefits have influenced a major change in family structure.

Boston and Chapple say “all children should have the opportunity to fully participate in and belong to New Zealand society”. Exactly the same sentiment ushered in the DPB 40 years ago. Yet the hoped-for panacea only exacerbated the problem. A small level of insufficiency at the margins developed into a major shortfall.

Employment for existing sole parents, and deterrence for prospective – particularly young – sole parents, is the most effective approach to reducing child poverty. In that respect, Boston and Chapple’s prescription is half right. But a strong and competitive economy capable of producing the necessary jobs won’t result from the greater taxation and wealth transfer the authors advocate.

A prevailing attitude that only government can solve child poverty is actually a large part of the problem. If there is a solution, it largely lies in the hands of those who choose the circumstances in which their children will be raised.

Lindsay Mitchell is a Wellington-based welfare researcher, commentator and blogger.

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