Child Poverty Myths Misconceptions and Misunderstandings Jonathan Boston

Child Poverty: Myths, Misconceptions and Misunderstandings Jonathan Boston Professor of Public Policy, VUW Director, Institute for Governance and Policy Studies Co-Chair, Expert Advisory Group (2012) 12 June 2014

The importance of children Jesus said, "Let the little children come to me, and do not hinder them, for the kingdom of heaven belongs to such as these. ” (NIV, Matt 19: 14) There can be no keener revelation of a society’s soul than the way in which it treats its children. Nelson Mandela (1985)

Outline 1. Contrasting views about child poverty 2. Nine frequent claims about child poverty 3. Assessing the claims 4. A policy agenda to reduce child poverty 5. Conclusions

Nine frequent claims 1. 2. 3. 4. 5. 6. 7. 8. 9. There is no real child poverty in NZ Many parents deserve to be poor – they are lazy, irresponsible or misuse their resources The real problem is that some people have too many children Assisting poor families simply encourages them to have more children The real problem is not poverty but poor parenting We cannot do anything about child poverty We cannot afford to reduce child poverty Reducing or even eliminating child poverty is relatively easy Merely increasing the incomes of poor families will not solve the problem

Claim 1. There is no real poverty in New Zealand Such a claim is often based on a mental picture of absolute (abject or extreme) poverty – malnutrition, hunger, starvation, etc. … or those living on less than US$1. 25 per day (the bottom billion)

There is no real poverty in NZ 1. There are different types and degrees of poverty 2. Helpful to distinguish between absolute (abject or extreme) poverty, and relative poverty 3. If absolute poverty is defined narrowly, most poverty – in both developed and developing countries – is relative (but with many gradients – a very long continuum) 4. Relative poverty matters – even if absolute poverty is worse (note Adam Smith)

There is no real poverty in NZ How to distinguish relative poverty from not being ‘well-off’? – Missing out on (enough) things that most people in a particular society regard as essential (material deprivation) – Specific items for measures of material deprivation – partly culturally and technologically determined; need regular updating – Deprivation measures can be used as a guide for setting income-based measures of poverty

Measuring child poverty 1. Two main relative poverty measures: income and material deprivation 2. Setting the relevant benchmarks is complex; many technical issues (e. g. equivalence scales, before or after housing costs, etc. ); which deprivation items to include and how many, etc. 3. No consensus, but some common approaches 4. There is no single correct measure of poverty – need a range of measures to highlight different features of the problem 5. Only a few countries have official poverty measures (e. g. US, UK, etc. ); NZ does not – but moving in this direction

Child Poverty in NZ Various approaches and studies (see work of Bryan Perry, MSD) Main features/trends: 1. Income poverty rates for children in NZ: – – around the OECD average or slightly above on most measures lower if measured on a before housing costs basis current rates are twice those of the 1980 s on a constant value basis (60% threshold, AHC) , more children are worse off now than in the mid 1980 s 2. Material deprivation rates for children in NZ (at about 18%) are higher than comparable rates in Western Europe – Using ELSI data in 2012, the deprivation rate was about 17% 3. Child poverty rates (including deprivation) are higher than for most other groups, especially those aged 65+; this has been the case for several decades

Proportion of all individuals in low-income households by age, 60% REL threshold (AHC) (Perry 2013) (NOT REVISED)

Proportion of children below selected thresholds (AHC): fixed line (CV) and moving line (REL) approaches compared Perry, 2014, revised

Numbers of poor children in New Zealand (i. e. the number of children in households with incomes below the selected thresholds, Perry, 2014; revised) BHC HES BHC ‘moving year line’ 60% AHC ‘moving line’ 50% AHC ‘moving line’ 60% AHC ‘fixed line’ 60% (07 ref) 2001 250, 000 215, 000 310, 000 380, 000 2004 270, 000 200, 000 290, 000 320, 000 2007 210, 000 170, 000 240, 000 2009 210, 000 195, 000 270, 000 230, 000 2010 245, 000 200, 000 300, 000 260, 000 2011 230, 000 210, 000 285, 000 255, 000 2012 220, 000 205, 000 285, 000 240, 000

Proportion of households with housing cost OTIs greater than 30%, by BHC income quintile Perry, 2014, Revised

Poverty rates for children in ‘workless’ and ‘working’ households (AHC 60%, fixed line, 1998 and 2007) (Perry, 2013) Not revised

Families reliant on a benefit: Income gap for different poverty lines Additional weekly net benefit income required to get a family over four poverty lines Before housing costs After housing costs 50% of 2012 median 60% of 2012 median Sole parent One child $0 $30 $82 $148 Sole parent Two children $0 $78 $111 $194 Couple One child $0 $69 $156 $244 Couple Two children $0 $110 $184 $286

Identifying Deprivation

Deprivation Rates: 3+ enforced lacks, using 9 item EU index (%), 2007 Children 0 -17 Aged 65+ Total Population New Zealand 18 3 13 UK 15 5 10 Ireland 14 4 11 Germany 13 7 13 Sweden 7 3 6 Netherlands 6 3 6 Spain 9 11 11 Italy 18 14 14 Czech 20 17 20

Claim 2: Many parents deserve to be poor 1. Many people make poor choices and end up poor (and often remain poor) – true, but: 2. There are many causes of poverty – bad luck, a bad start in life, poor health, limited educational opportunities, etc. 3. If poverty is primarily due to poor choices, why do poverty rates vary so much between countries and over time? – – Did lots of people in the early 1990 s suddenly become irresponsible? Why are income poverty rates and material deprivation rates so much lower for those aged 65+? 4. Growing evidence that poverty can reduce a person’s cognitive, reasoning and coping capacity (Mani et al. , Science, 2013) 5. How should society respond to poor choices by parents? Should we simply condemn their children to a bad start? Do child also deserve to be poor?

Claim 3: The real problem is that some parents have too many children 1. Having children is costly – the average weekly cost per child in a two-child family with an average weekly income in 2009 was $235 (or about $12, 000 per annum) – this excludes the costs of education, health care, etc. 2. Who should bear such costs? 3. Should child bearing be limited to the rich? If so, how might this be achieved? How much paternalism (including coercive paternalism) is justified?

Claim 4: Assisting poor families encourages them to have more children 1. Does increased government financial assistance result in more children being born? Will Labour’s ‘Best Start’ package, if implemented, cause a baby boom? 2. Economic theory – incentives matter; subsidies increase the demand for children; but: 3. International evidence: suggests only modest impacts – – US: ‘family cap’ policy (reduction or denial of benefits to women on a benefit who have more children) – has had little impact on the fertility of the target group (Kearney, 2004) Canada: study by Milligan (2005) – the main impact on fertility from larger family payments is for women on higher incomes Israel: study by Cohen et al (2013) – similar findings to Canada Russia: ‘maternity capital’ assistance of US$11 K to those who have at least 2 children (equivalent to $48, 000 in NZ in 2013 values); long-run fertility increased by 0. 15 children per women; larger increases for those with a degree and/or partnered (Slonimczyk and Yurko, 2013)

Claim 5: The problem is not poverty but poor parenting 1. TV 3 Programme, The Vote, June 2013: “Our kids – the problem’s not poverty, it’s parenting” (63% agreed) 2. But what is ‘the problem’? Not clear: Lack of love? Lack of money? 3. Poor parenting or poverty? – a false dichotomy, both are problems – these problems are connected, both need addressing

Claim 6: We cannot do anything about child poverty Three theses: 1. Perversity thesis – attempts to alleviate poverty will exacerbate the problem 2. Jeopardy thesis – attempts to alleviate poverty will be costly and put other policy goals at risk 3. Futility thesis – attempts to alleviate poverty may not make things worse, but will bring few net benefits Responses: 1. Local and international empirical evidence shows that welldesigned policy interventions can reduce poverty (including child poverty) 2. But yes, there are fiscal and other costs

Claim 6: We cannot do anything about child poverty Two misunderstandings: 1. Confusing median incomes and average incomes 2. Confusing inequality and poverty: – inequality is about people having more or less than others; poverty is about not having enough of what most people regard as essential in their particular society – some claim that incomes need to be equalized in order to overcome poverty. No, we ‘merely’ need to lift those at the bottom

Claim 7: We cannot afford to reduce child poverty 1. We need an investment approach: – well-designed interventions are likely to produce net gains over time – the economic and social costs of current levels of child poverty in NZ are substantial 2. Reducing child poverty substantially will be costly in fiscal terms: – – – raising all FTC rates to the max rate of $102 per week would cost about $900 m per annum (Treasury) increasing the top rate by $10 per week for 0 -5 year olds, would cost about $150 m per annum (Treasury) cutting poverty rates by 50% (using 60% of median income, AHC) would probably cost well over $1 billion per annum • this excludes the costs of other interventions (e. g. to improve the quality and quantity of rental accommodation)

Claim 8: Reducing or even eliminating child poverty is relatively easy 1. Reducing poverty measured on an income basis is relatively straightforward, but involves significant up -front fiscal costs 2. Reducing poverty measured on a material deprivation basis is harder: – fewer direct policy levers – need a mix of in-kind and cash assistance – need to combine an income strategy and an employment strategy

Claim 9: Raising incomes doesn’t solve the problem 1. Extra income to families will be wasted; the children will be no better off (agency issues); no point ‘throwing money’ at the problem International evidence: 1. Money does matter – but it is not the only thing which matters 2. Money matters more (in terms of outcomes) when children are young 3. Evidence from the outcomes of conditional and unconditional cash transfers in many developing countries (Brazil, Kenya, Mexico, etc. )

A strategy for reducing child poverty in NZ Need to address the distinctive features of child poverty in New Zealand, including: 1. High housing costs and poor quality housing 2. High rates of poverty in beneficiary households 3. High rates of sole parenthood, but employment rates below OECD average 4. Defective arrangements for child support 5. Poor design of income support for families, including Family Tax Credit, In-Work Tax Credit and Accommodation Supplement 6. Lack of, and inconsistent, indexation of social assistance 7. High electricity prices (fuel poverty)

A strategy for reducing child poverty in NZ Need to recognize the magnitude of the challenge fiscally and politically: 1. Lifting families on 50% of the median household disposable (AHC) income to 60% will require an increase in weekly incomes of around 20% (or $100 +/- per week depending on family size and composition) • • But 20% of children are in families with incomes below 50% of median (AHC) At 60% of median incomes (AHC) families are still poor 2. Major problems in NZ’s housing market – long lags and high cost to fix

A strategy for reducing child poverty in NZ 1. Need a strategic policy framework based on multiparty agreement for children (as for New Zealand Superannuation) – with official poverty measures, specific reduction targets, and a proper monitoring and reporting framework 2. The aim should be child poverty rates that are comparable to the best performing OECD countries – – implies a 40 -50% reduction focus on low-income families with young children, and in severe or persistent poverty

A strategy for reducing child poverty in NZ How to achieve such targets? Two critical steps: 1. Boost the incomes of low-income families 2. Provide additional in-kind support

A strategy for reducing child poverty in NZ Boost the incomes of low-income families: 1. Encourage child-age appropriate employment by parents (especially sole parents), with adequate support for child care, after-school care, etc. 2. Reform Working for Families: • • lift all Family Tax Credit rates to maximum rate ($900 m) review and revise IWTC introduce a Child Payment in longer term, universal for infants index all family assistance to wages (as for NZ Super) 3. Review the structure, rates and indexation of first-tier welfare benefits 4. Reform child support 5. Reform housing assistance

A strategy for reducing child poverty in NZ Additional in-kind support: 1. 2. 3. 4. 5. Free primary health care for all children up to 18 years Increase stock of social housing Improve quality of private rental stock (Wo. F) Increase funding for ECE and low-decile schools Develop a more comprehensive national strategy for food in schools (especially for year 1 -8 students in low-decile schools) 6. Establish multi-service hubs in low-decile schools 7. Expand low-interest loan scheme, etc.

The prospects of success 1. Depends on changing public attitudes, values and priorities Survey evidence points to a rise in concern about inequality and child poverty after several decades of lower support for egalitarianism – 2. How might public attitudes be changed? Aristotle: logos, ethos and pathos – • • • – Reason (evidence, logic) Ethical arguments (principles of justice; rights) Emotional appeal (suffering and shame) Framing issues

Implications for the Christian community 1. Public advocacy on behalf of the vulnerable 2. Providing services to the poor – what priority for children? What kinds of services? 3. Theological reflection, preaching and teaching 4. Implications at different levels: – – National church leadership Social services agencies Local congregations Individual Christians

Conclusions 1. Child poverty is real and damaging – for everyone 2. The rate of child poverty is partly a matter of policy choice 3. New Zealand should aspire to having amongst the lowest rates of child poverty in the developed world – – children deserve a good start we need fairness across the generations 4. Need a comprehensive, long-term strategy with multiparty support (as for elderly) 5. Need to address deeper issues – ethics and of the spirit – – – what kind of society do we want to live in? income and wealth inequality family functioning (the high incidence of sole parenthood)

Conclusions 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 CPAG: youtube series on child poverty in NZ https: //www. youtube. com/watch? v=9 t_HDffw. U 9 A

Australia -- Overall Changes in Deprivation, 2006 to 2010 (weighted %) Essential items Warm clothes and bedding, if it's cold Medical treatment if needed Able to buy medicines prescribed by a doctor A substantial meal at least once a day Dental treatment if needed A decent and secure home Children can participate in school activities and outings A yearly dental check-up for children A hobby or leisure activity for children Up to date schoolbooks and new school clothes for school-age children A roof and gutters that do not leak Secure locks on doors and windows Regular social contact with other people Furniture in reasonable condition Heating in at least one room of the house Up to $500 in savings for an emergency A separate bed for each child A washing machine Home contents insurance Presents for family or friends at least once a year Computer skills Comprehensive motor vehicle insurance A telephone A week's holiday away from home each year Average deprivation rate 2006 0. 3 2. 1 4. 5 1. 2 14. 5 7. 1 4. 9 13. 2 7. 8 2010 0. 4 1. 7 3. 5 0. 9 13. 1 6. 7 4. 3 11. 0 6. 8 5. 9 4. 8 5. 0 4. 7 2. 8 2. 1 19. 6 2. 2 1. 1 11. 1 6. 8 4. 6 9. 8 1. 9 23. 6 6. 7 4. 7 7. 4 5. 8 6. 2 2. 5 17. 8 2. 1 1. 0 9. 5 5. 5 2. 9 9. 1 3. 8 19. 8 6. 2

Acknowledgements 1. Expert Advisory Group, Solutions to Child Poverty in New Zealand: Issues and Options Paper for Consultation, August 2012 2. Expert Advisory Group, Solutions to Child Poverty in New Zealand: Evidence for Action, December 2012 3. Bryan Perry, Household Incomes in New Zealand: Trends in indicators of inequality and hardship, 1982 to 2012, Wellington, Ministry of Social Development, 2013) 4. Bryan Perry, Household Incomes in New Zealand: Trends in indicators of inequality and hardship, 1982 to 2012, Revised Tables and Figures Wellington, Ministry of Social Development, 27 February 2014) 5. The NZ Treasury, Improving outcomes for children – Initial Views on Medium-term Policy Directions (2013)