Child poverty, always a simmering election issue, took centre stage last month with the release of the book Child Poverty by Jonathan Boston and Simon Chapple.
Child poverty is best tackled by tackling poverty as a wider whole. New Zealand has many single people, and other poor households without children, who are also in poverty. Unlike children, we tend to class impoverished adults as the deserving poor; we write their poverty off as a consequence of their own imperfect choices. Nevertheless, in more sanguine moments, most of us realise that the impoverishment of any reflects badly on all. We have a collective duty of care to all; no exceptions.
Intractable individuals aside, poverty is a result of unequal market power, an unprincipled tax-benefit system, and our own lack of imagination. It’s accentuated by debt, which is also, for many, the only solution to a problem where immediate needs outstrip our financial resources.
In-Work-Tax-Credit
One of the main targets of the anti-child-poverty campaign is the ‘In-Work-Tax-Credit’ of $60 paid to most “working families” with children. The IWTC is income-tested only for such families who earn too much to receive any other component of the ‘Working for Families’ income-support package.
The problem is at the lower end of the income scale. The IWTC is payable to non-employed parents whose partners work at least 30 hours per week, but is denied to parents without partners who do less than 20 hours a week of paid work. Some working parents no not get it while many nonemployed parents do get it.
As I understand it, the view of both the present government and its predecessor is that ‘beneficiary’ parents do get this payment, but under another name. The basic Sole Parent Support Benefit (formerly the DPB) is $299 per week, $90 more than the Jobseeker Support Benefit (formerly the Unemployment Benefit). We could easily say that the last $60 of a beneficiary’s benefit is in fact the IWTC; just under another rubric.
However some beneficiaries with children receive no more from public funds than do “working” families. Where there is a liable parent paying Child Support, the ‘benefit’ is funded firstly by that Child Support. If the father (say) of a child whose mother is classed as a beneficiary pays Child Support of $239 per week, then the (probably hard-working) mother’s $299 is equal to the Child Support plus the de facto IWTC. She’s not actually a beneficiary at all, even though she is presented in the government statistics as a beneficiary, and hence as a burden on the state. We can be quite loose with our accounting when we want to make a political point.
Public Equity Benefit
In previous postings (here and here) I have noted that we have an implicit public equity benefit (of $9,080 per annum paid in full to about half of all adult New Zealanders (and not much less for most of the rest) embedded into our tax-benefit system. In essence, every adult New Zealander has, as a right, an entitlement to a payment from public funds of about $9,000. (For most New Zealanders, this is currently paid in the form of tax discounts; it is implicit, but could be accounted for in an explicit way, as a public equity benefit or dividend. The difference between an implicit benefit and an explicit benefit is an accounting issue only; not a policy issue.)
One of the key proposals to address child poverty is to extend the public equity concept to that of a universal benefit to children, a benefit payable as of right, not charity, to that child’s caregiver(s).
Much scepticism surrounds this proposal because a universal benefit is payable on behalf of children from poor and rich families alike. How then can it be a solution to poverty, the media proclaim?
The power of universal benefits is that they come as one half of a package. The second half is a higher income tax rate. That’s the main reason why it’s mainly the rich who dislike universal benefits.
Labour’s Timid Income Tax Policy
Labour has announced that it will raise the trust tax rate to 36%, and bring in a new 36% marginal tax rate for personal incomes in excess of $150,000 per year.
This is what I think a Labour-led government should do instead. Certainly they should raise the trust rate to 36%. But they could simply raise the present 33% rate to 36%, at the present threshold of $70,000. And they should allocate the funds from the present IWTC, plus some of the extra revenue from the 36% tax rate at the lower threshold, to create a Universal Child Benefit (UCB).
The new child benefit should be at least $25 per week, thereby restoring the purchasing power of the $6 Muldoon Family Benefit. This would be a welcome addition to the disposable incomes of our desperately needy ‘beneficiary’ families. It would however reduce the disposable incomes of some ‘working’ families with just one child; families who currently receive this windfall of up to $60 a week.
The UCB would acknowledge the extra costs that all parents face, vis-à-vis non-parent households. Higher-earning parents would however face higher taxes with higher incomes, so those who really do not need this benefit would not receive more disposable income. Those on high incomes without children would contribute most to the replacement of the IWTC with a UCB.
Further, such a tax policy, if implemented, would do what Labour governments should be doing: levying slightly higher income taxes, and paying a higher public equity dividend. If the proposed 36% tax comes in at $70,000, the tax system itself would change from one with a 33% core (ie undiscounted) rate and an implicit public equity benefit of $9,080, to one with a 36% core rate and a public equity benefit of $11,180. This $11,180, if properly universalised, could make serious inroads into the wider problem of poverty in New Zealand.
Its seems that the so called child poverty matter is and endless parade of statistics and figures. There is a well used phrase that goes like this: “Lies, damned lies, and statistics” is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments.
The fact that some organisation uses the formula of having less than 60% of median household income, after removing housing costs as being poverty unfortunately takes the subject straight into a discussion about statistics. And we know where that leads……
Poverty will never be solved by throwing money at it. I recall a discussion I had with Salvation Army guy who was bemoaning the problems of a woman in auckland who had several children (5 I think it was) who couldnt afford the rent to get a house in auckland. She wanted a house suitable for her and her children – 3 bedrooms I think. He wanted someone to give them more money.
He couldnt answer these questions: Where was the father(s)? where were her family? what help had her mother provided? Had she looked at sharing with someone else who was in a similar position?. As far as he was concerned it was ‘societies’ problem to give more money.
When I suggested that maybe actually the mother was possibly guilty of child abuse and that she needs to realise that she was never going to be able to afford a house in auckland and that her only solution was to move somewhere to rural New Zealand he seemed shocked that someone could suggest something so sensible. I advised that it would be cheaper, that the children would almost certainly have a better life style and have the advantage of a rural school. His only response was that I didnt understand the problem.
In singapore people are expected to look after their ageing parents. If they dont and the burden falls on the state – then the children get a higher tax rate. Its not primarily the states (ie: societies) duty to look after ones older people – its falls to the family first. And if those who want to push poverties ravages in society took that sort of attitude in the first case then some progress will be made in this area.
But one thing is sure – arguing with a heap of statistics for more money is not going to fly. And the reason its not going to work is that almost no-one thinks it will work.
@Barry.
You speak again in ignorance of real knowledge of this matter. I hope you are never charged with policy making – or maybe you are the cause of current attitude of disdain for the poor and needy.
You have no idea why this mother is in the situation she is in, and obviously the Salvos do. Why don’t you just accept what the people who actually ‘care’ (the salvos) inform you of.
You do not know that she may have escaped her battering and abusing husband, and actually saved her children by leaving him. You have no idea.
There is only one judge, and one day he will surely get you, and your ilk. Try taking the plank out of your own eye before you condemn the speck of sawdust in others.
A man with an evil eye hastens after riches, and does not consider that poverty will come apon him. (Prov 28:22)
He who gives to the poor will not lack. But he who hides his eyes will have many curses. (Prov 28:27)
Opinion
Wow Barry you really have a downer on those less able to pick themselves up.
You clearly have no understanding of how some people end up living in cars or in slum housing, crowded housing, barely able to afford food, clothe themselves and their children.
I was reading in the paper of someone visiting a local doctor after hours and it cost $117 and $17 for the prescritipion. What are people supposed to do, not get sick, how do people on a minimum wage could suddenly find the money.
But more Barry I will tell you a wee tale
Two boys are standing by a school gate in south Auckland during the school holidays, they have come to help their teacher set up his new science labs, these boys are in year 10. Two of the teacher’s brightest students, but the science teacher says to me:
The one on the right will go on to tertiary education, it is within the realms of possibility, his uncle has been to university, it is not that great thing outside
The one on the left won’t. He is the eldest of 5 children, his father left, he hates his mother’s partner, he wants to leave home.
At the end of year 12 this boy moves to live on the streets, he takes his brother with him.
Now tell me what chance has this kid got.
Now who is to blame: him, his mother, his father, his mother’s partner, his extended whanau, his school, his community, society….
You see Barry it is actually quite complex.
The mighty dollar should not dictate how many children people can have. If we want to be full-time parents then we should be able to. This is a rich country but the top echelon have too much and the bottom too little.
The Salvation Army runs programmes to pick up the pieces – it is the politicians that make the decisions that allow many of the poor to get poorer.
There’s more common sense in this short article than the entire National Party Manifesto.
“Child poverty is best tackled by tackling poverty as a wider whole. New Zealand has many single people, and other poor households without children, who are also in poverty. Unlike children, we tend to class impoverished adults as the deserving poor; we write their poverty off as a consequence of their own imperfect choices.”
A VERY GOOD POST, Keith!
Re your comment to the ‘In-Work-Tax-Credit’ you write:
“However some beneficiaries with children receive no more from public funds than do “working” families.”
I suppose you mean, they receive less than working families.
In any case, Labour and Greens have made “child poverty” a major issue in this year’s election campaign (and already before), because it is a very “emotive” and stirring topic, appealing to people’s conscience. It is that topic and income inequality, which basically cover their “social” policy discussions and proposed policies. They do not talk about the poverty of single working poor and beneficiaries, which deserves attention as well. There are many sick and disabled on benefits long term, who are struggling to survive on the meager “support” they get. The latter also face very firm, draconian expectations to make themselves “work able” now, while MSD use questionable “science” arguing, that work has “health benefits” and is even “therapeutic”.
But they are not talked about, which I find appalling. Also – as you point out – poor children are usually the result of poor parents, who have not got the means and abilities to offer their kids a better life and care. So indeed, poverty is a wider issue, that must be addressed.
Living costs continue to go up, as recent visits to my supermarket shows me, same as the monthly power bill, phone bill, and especially housing costs show me. Here in Auckland cash fares for buses are being increased, and petrol is also going up for drivers. About half of workers have not got a pay rise for some time, and others only got very humble ones. The minimum wage is higher now, but who can life off that, let alone feed a family from it? Labour only want to raise it to $ 15, and later to $ 16, which will help, but only moderately.
So we have the well familiar problem. New Zealanders have higher living costs than people in many comparable countries, but lower wages and incomes. Benefits have not been adjusted to the levels before the slash and burn regime of the Nats in the early 1990s.
A Universal Basic Income may be the best solution, tied in also as serving as a basic tax free level of income for all that work or do not work. Top ups can be administered by a streamlined bureaucracy, which can operate while costing hundreds of millions less.
Labour have disappointed with their alternative budget, as it is not courageous enough. Indeed, the top rate should easily be 38 percent, say for those earnings over 100,000 dollars per annum, and 36 percent could kick in from 70,000 or 80,000 per annum.
I was also disappointed that Labour have given up lower GST rates for essential foods and so. It is common in most countries, and I do not buy the excuse used so often, that it would be too hard to administer. It can be done elsewhere, so why not here?
A financial transaction tax, and possibly a land tax, kicking in for certain urban properties, that are not appropriately used or developed for a number of years (e.g. rather used for “land banking”) should be considered. A capital gains tax is a no brainer, and yes, more could be done.
With the policies Labour has so far proposed, it is merely National Light again.
And Mana have been on about sorting out child poverty before either Labour or the Greens.
Ditch the GST and bring in a domestic finanicial transaction tax on all transactions will give everyone a helping hand.
It’s quite simple. Poor families are poor because they have less money to spend. Those who say that “throwing money at the problem” won’t help obviously have never had their ATM card declined at the supermarket checkout and have to start taking items out of their trolley to see how much they can afford to pay.
And if “throwing money at the problem” doesn’t work, then why did Key gift $30 million in taxpayer’s money to Rio Tinto?
Why did Key give Warner Bros millions in tax subsidies?
Why is National throwing tens of millions of dollars in taxpayer subsidies to Charter schools?
“Throwing money at the problem” seems to be the catch-cry of the Right when faced with poverty, but not it seems for corporate welfare.
Oh I love this reply it so right.
He who oppresses the poor to increase his riches, And he who gives to the rich, will surely come to poverty. (Prov 22:16)
Message from God.
The rich rules over the poor, And the borrower is servant to the lender. (Prov 22:6)
He who has a generous eye will be blessed, For he gives of his bread to the poor. (Prov 22:9)
The rich and the poor have this in common, The Lord is the maker of them all. (Prov 22:2)
But they could simply raise the present 33% rate to 36%, at the present threshold of $70,000. And they should allocate the funds from the present IWTC, plus some of the extra revenue from the 36% tax rate at the lower threshold, to create a Universal Child Benefit (UCB).
And here, in a nutshell, is why ‘the rich’ don’t like this particular universal benefit. We know that a major factor in child poverty, neglect and abuse is raising children on benefits. This proposal requires people raising children in less-risky ways to pay extra to subsidise further increases in the number of children being raised on benefits. No, we don’t like the idea and no, it’s not purely due to self-interest.
Not all of ‘the Rich’ think a Universal Child Benefit is a bad idea. And not all of us on comfortable incomes object to paying more tax.
Poverty isn’t going to by ‘cured’ by education or employment or even generous benefits. Poverty is experienced by people who struggle to get by – for whatever reason – mental or physical health, bad luck or an inability to fit in.
We should note that in NZ we have an invisible work force dedicated to supporting people who struggle to get by. A work force that is never mentioned by politicians and is not praised in Labour party speeches the way that the police, nurses and teachers always are. That is social workers.
These are the people – public sector and NGO – who spend their working lives dealing with families and individuals who live with poverty. This does not necessarily mean the lack of access to resources and opportunities but an inability to utilize them or make good life decisions. It is our social workers who try to bridge this gap for people who lack basic life skills.
For many people in poverty they actually need to be looked after – they are people with serious health problems (not necessarily physical) who do not have families that can support them. What’s more many of them will need to be looked after for their lifetime.
To my mind the debate on poverty needs to make a shift from being about ‘fixing’ the problem to accepting it and finding the best way to manage it. It’s about how we look after those who can’t look after themselves and this means continuing to find and fund the best support services and social work methodologies available.
For the record, I have no problem with additional tax being taken if it’s for a good purpose. This proposal would take more for a harmful purpose.
Poverty, violence, and crime can be successfully resolved. The trouble is, in structural systems, inequalities and therefore deprivation is necessary. Without Poverty we might al be treated equal! And hell, some people may not be able to cope without control…
We have a government, and mainstream media (e.g. Sean Plunket and Garner on Radio Live) continue a hate feast on Maori and the poor, full of blame arguments, about people being criminal, abusive and more, Garner this afternoon insisted, it is also A RACE ISSUE!
With that kind of crap going on, and them not realising, that race may be associated with poverty, and vice versa, and that the real issue maybe POVERTY, which happens to be more prevalent in certain ethnic groups, suffering generational discrimination, marginalisation, stigmatisation and more, we will NOT get anywhere.
The (racist) MSM are fueling the debate, and it is also easy, to attack and rubbish a judgment of a wrong but slightly privileged Maori youth, while the same ACCUSERS have never had the GUTS, to dedicate a whole program on preferential treatment of certain privileged WHITE youth before the courts.
This country is falling to pieces, because of lies, prejudice, manipulation and worse, generated by some politicians in government, and the complicit MSM. Where will this end, but in civil war one day, I fear.
So when discussing this topic, do not forget all that, as it is heavily linked to what should be discussed here.
“However some beneficiaries with children receive no more from public funds than do “working” families. Where there is a liable parent paying Child Support, the ‘benefit’ is funded firstly by that Child Support. If the father (say) of a child whose mother is classed as a beneficiary pays Child Support of $239 per week, then the (probably hard-working) mother’s $299 is equal to the Child Support plus the de facto IWTC. She’s not actually a beneficiary at all, even though she is presented in the government statistics as a beneficiary, and hence as a burden on the state. We can be quite loose with our accounting when we want to make a political point.”
Except only around 9-10 percent of the basic Sole Parent Support bill is offset by child support. Your example would be a rare case.
The book referred to identifies unemployment as one of the two main reasons for child poverty and recommends earlier work-testing for sole parent beneficiaries because:
“Sustained full-time employment of sole parents and the fulltime 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.”
That only works if their is work available and the benefit isnt rebated.
So the extra money earned actually is extra money not replacing money lost off the basic benefit .
Work can be made available, just like taxes can be raised, and would be a better approach. Also, money earned via work is a good in itself, regardless of how little extra it pays – if a person can’t recognise that earning their own living is inherently superior to drawing a dole, they shouldn’t be trusted to do the right thing in any other situation, including the raising of children.
Agreed but the moment you start to work, any money after the first $80.00 before tax, is rebated at 80% off leaving you with 20% from every dollar off your benefit. So you have to earn at least $300.00 plus before you actually gain. So part time work isnt enough .
It doesn’t matter what it’s rebated at. Earning your own money is an inherent good in and of itself.
“The book referred to identifies unemployment as one of the two main reasons for child poverty and recommends earlier work-testing for sole parent beneficiaries because: “Sustained full-time employment of sole parents and the fulltime 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.” ”
That may work when people get a LIVING WAGE, not with the minimum wage we have now. And those with children, that are perhaps able to work, part time I suggest, they need job security, when there is work, and the work must pay enough to afford a living, and childcare and transport, and more.
And you DO NOT address the challenges sick and disabled on benefits face, barely able to survive in decency on present benefits for them, even being scrutinised beyond reason, and pressured to work, no matter what work, as work is according to one “professor” from the UK, named “Aylward”, “therapeutic”.
What about single persons on benefits, and trying to cope?
The emphasis is all on parents with a kid or more, but singles, especially sick and disabled, are not even talked about, it is a damned bloody disgrace!
Agreed Just go ask any diabetic on the ridicxulous benefits and low income wages how they get on.
Hell i got a young guy that gets sacked everytime he doesnt turn up to work because he hasnt got enough money to pay rent food and buy his meds.
An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.
“If that sole parent works just 15 hours while receiving benefit, they would be $107 better off, taking home $750 a week.”
“If they are able to go off benefit and by working just 20 hours a week on a minimum wage, they would be $171 better off each week at $814.”
Going off benefit and working 40 hours a week on a minimum wage, that same sole parent would be $190 better off at $833 a week with the Family Tax Credit, Accommodation Supplement and In-Work tax credit.
http://www.beehive.govt.nz/release/better-work
You need to do your home work before you put that on paper. If you enter into work of 15 hours you loose money and ended up worse off then when you are on the benefit. I hope you never get to that stage but at the rate our business are closing you never know you might end up applying for a benefit. Both my partner and I work and earn just under 70,000 a year. We have one son still at school and we only qualify for $11.00 dollars for IWTC or Family Tax Credit.
Theresa,
These aren’t my calculations. They come from the Minister. The 15 hour example didn’t involve coming off benefit.
Perhaps you shouldn’t be so trustworthy of politicians?
If you did get those from a Minister, then s/he is lying their head off.
I’d like to see a link to the information you posted. Just so, you know, I can assist the Minister to correct their “information”.
By the way, Theresa’s comment regarding the $11 she gets for IWTC is backed up here; http://www.workingforfamilies.govt.nz/tax-credits/payment-table.html
You’re welcome.
I advocate for people that have lost jobs and could not go on benefits with the stand down periods, people that have part-time jobs and earn more than the $80.00 dollars allocated through work and income. The ministers say one thing and reality of what it is really like is another issue.
There are a lot of low income earners that won’t go to work and income for assistance because they are not made welcome by some offices some just tell these people sorry no assistance available to you.If you need food they ask if you had seek assistance with other members of your extended families.
Legislation states that state welfare systems were put in place so that the most vulnerable of our society are looked after and that means children and old people.
Our Children are our future and the pensioners have paid taxes so we could be a better society. Most of them are living in appalling conditions just like our children.
Hah, they come from the Minister, Lindsay writes.
That Minister is using smoke and mirror tactics all the time, is misrepresenting the truth, was once leaking the names and benefit income details of two or three sole parents, who dared criticising her and her government for restricting the training incentive allowance.
I do not know whether I should laugh or scream, reading your silly comment.
When people work more than 15 hours a week, they are considered “employed” and will lose certain benefit entitlements, maybe not the accommodation supplement and disability related allowances, but possibly the main benefit.
As for your 40 hour a week earnings on the minimum wage, I fear you have not deducted any income tax payable. Also people who work part or full time have extra costs, like for transport and additional clothing to cover.
So go back to school perhaps, to repeat some maths lessons, dear Lindsay, we know who you are.
Furhter to my comment to Lindsay –
I suggest “Paula Beneshit” does also go back to school and repeat some maths lessons, as the figures on the beehive website (see Lindsay’s link) do not stack up!
Both must not sit at the same table at school, so they cannot cheat by looking at each others’ notes.
Even if your figures are true Lindsay (and you’ve provided no evidence to that effect), you’ve left out a families outgoings; rent, ,power, food, etc.
But most important, you’ve left out the cost of child care.
Before as you well know, leaving kids alone at home, under 14, is illegal.
So, let’s see what a solo-parent can earn, part-time.
Let’s say a solo-parent, if s/he is lucky. can find a part time job between 10am and 2pm. It can’t be outside those times because the parent has to get the kids ready for school and then make his/her way to work.
So, 10am to 2pm equals 4 hours work. Five days a week, equal 20 hours.
20 hours @ minimum wage ($14.25/hr) = $285/wk, gross.
Then lets add In Work Tax Credit*: $60/wk
Plus Family Tax Credit*: $157/wk
= a princely sum of $502/wk, gross.
* http://www.workingforfamilies.govt.nz/tax-credits/payment-table.html
So I don’t know where you get “If they are able to go off benefit and by working just 20 hours a week on a minimum wage, they would be $171 better off each week at $814”?!
Disney’s Fantasyland?
If a solo-parent followed your suggestion, s/he would end up on the streets fairly quickly.
Then if we take a rental outgoing of $330/wk for a two bedroomed flat in South Auckland, then that leaves $172/wk for,
* food
* power
* medical expenses (prescriptions, doctors visits, etc)
* Phone (?)
* transport
* “voluntary” school fees
Your problem, Lindsay, is that you see the world through your affluent, middle class, rose-tinted spectacles. For you, the world ends at the boundaries of your upper middle class suburb and the world of low income families, whether beneficiaries or the working poor, is just a theoretical concept.
There is nothing we can learn from the likes of you.
20 hrs don’t qualify you with IWTC it has to be 30hrs.
The comment I left was verbatim from a ministerial press release. That is why I posted the link beneath.
Why don’t you take it up with her if the figures are wrong.
I worked as a volunteer with beneficiaries with dependent children for 5 years and came to the same conclusion that the Labour Party did when last in office. Employment is the best way out of child poverty.
I never get why you are so aggressive Frank.
Because its probably the 9millionth time he has replied to this type of ‘solution’!
Lindsay
I have to say that if you work as a volunteer for beneficiaries and their dependent children then you will know the true statues of their situations when on benefits.
If you are on a jobseeker of course the 3 main benefits are now job seeker- unemployment, sickness and invalids and lets not forget sole support. I just call it Jobseeker 1,2,3,&4. Have all got taxes deducted from it and the balance is their take home pay which everyone calls$299.plus cents. The jobseeker 1 is only $174 af.ter tax
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