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Child Poverty: Myths, Misconceptions and
Misunderstandings
Jonathan Boston
Professor of Public Policy, VUWDirector, Institute for Governance and Policy Studies
Co-Chair, Expert Advisory Group (2012)
12 June 2014
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)
The importance of children
1. Contrasting views about child poverty2. Nine frequent claims about child
poverty3. Assessing the claims4. A policy agenda to reduce child
poverty5. Conclusions
Outline
1. There is no real child poverty in NZ2. Many parents deserve to be poor – they are lazy, irresponsible
or misuse their resources3. The real problem is that some people have too many children4. Assisting poor families simply encourages them to have more
children5. The real problem is not poverty but poor parenting6. We cannot do anything about child poverty7. We cannot afford to reduce child poverty8. Reducing or even eliminating child poverty is relatively easy9. Merely increasing the incomes of poor families will not solve the
problem
Nine frequent claims
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)
Claim 1. There is no real poverty in New Zealand
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
There is no real poverty in NZ
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 approaches4. 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
Measuring child poverty
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 1980s– on a constant value basis (60% threshold, AHC) , more children are worse off
now than in the mid 1980s
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
Child Poverty in NZ
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
BHC AHC
HES year
BHC ‘moving 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 210,000 170,000 240,000 240,000
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
Numbers of poor children in New Zealand (i.e. the number of children in households with incomes below the selected thresholds,
Perry, 2014; revised)
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
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
50% of 2012 median
60% of 2012 median
Sole parentOne child
$0 $30 $82 $148
Sole parentTwo children
$0 $78 $111 $194
CoupleOne child
$0 $69 $156 $244
CoupleTwo children
$0 $110 $184 $286
Families reliant on a benefit:Income gap for different poverty lines
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
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 1990s 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 2: Many parents deserve to be poor
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 3: The real problem is that some parents have too many 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$11K 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 4: Assisting poor families encourages them to have more children
1. TV3 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 5: The problem is not poverty but poor parenting
Three theses:1.Perversity thesis – attempts to alleviate poverty will exacerbate the problem2.Jeopardy thesis – attempts to alleviate poverty will be costly and put other policy goals at risk3.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 well-designed 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 6: We cannot do anything about 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 $900m
per annum (Treasury)– increasing the top rate by $10 per week for 0-5 year olds, would cost about
$150m 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 7: We cannot afford to reduce child poverty
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 8: Reducing or even eliminating child poverty is relatively easy
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
matters2. Money matters more (in terms of outcomes) when
children are young3. Evidence from the outcomes of conditional and
unconditional cash transfers in many developing countries (Brazil, Kenya, Mexico, etc.)
Claim 9: Raising incomes doesn’t solve the problem
Need to address the distinctive features of child poverty in New Zealand, including:
1.High housing costs and poor quality housing2.High rates of poverty in beneficiary households3.High rates of sole parenthood, but employment rates below OECD average4.Defective arrangements for child support5.Poor design of income support for families, including Family Tax Credit, In-Work Tax Credit and Accommodation Supplement6.Lack of, and inconsistent, indexation of social assistance7.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
A strategy for reducing child poverty in NZ
1. Need a strategic policy framework based on multi-party 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 ($900m)• 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 support5. Reform housing assistance
A strategy for reducing child poverty in NZ
Additional in-kind support:
1. Free primary health care for all children up to 18 years2. Increase stock of social housing3. Improve quality of private rental stock (WoF)4. Increase funding for ECE and low-decile schools5. 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 schools7. 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 vulnerable2. Providing services to the poor – what priority
for children? What kinds of services?3. Theological reflection, preaching and teaching4. Implications at different levels: – National church leadership– Social services agencies– Local congregations– Individual Christians
Conclusions
1. Child poverty is real and damaging – for everyone2. 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 fieldTo plan for a decade – plant treesTo plan for a future – nurture children
CPAG: youtube series on child poverty in NZ
https://www.youtube.com/watch?v=9t_HDffwU9A
Australia -- Overall Changes in Deprivation, 2006 to 2010 (weighted %)
Essential items 2006 2010Warm clothes and bedding, if it's cold 0.3 0.4Medical treatment if needed 2.1 1.7Able to buy medicines prescribed by a doctor 4.5 3.5A substantial meal at least once a day 1.2 0.9Dental treatment if needed 14.5 13.1A decent and secure home 7.1 6.7Children can participate in school activities and outings 4.9 4.3A yearly dental check-up for children 13.2 11.0A hobby or leisure activity for children 7.8 6.8Up to date schoolbooks and new school clothes for school-age children 5.9 4.7A roof and gutters that do not leak 4.8 7.4Secure locks on doors and windows 5.0 5.8Regular social contact with other people 4.7 6.2Furniture in reasonable condition 2.8 2.2Heating in at least one room of the house 2.1 2.5Up to $500 in savings for an emergency 19.6 17.8A separate bed for each child 2.2 2.1A washing machine 1.1 1.0Home contents insurance 11.1 9.5Presents for family or friends at least once a year 6.8 5.5Computer skills 4.6 2.9Comprehensive motor vehicle insurance 9.8 9.1A telephone 1.9 3.8A week's holiday away from home each year 23.6 19.8Average deprivation rate 6.7 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)
