Myths that hurt children

By   /   August 27, 2018  /   26 Comments

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Blaming WFF for low wages is a bit like pointing to our high rate of suicide and blaming it on the existence of the mental health services.  The true cause of low wages is found in casualised hours, precarious employment, automation, globalised labour markets and falling wage share of output due to loss of union power.

 

I am a huge fan of Jane Clifton in the Listener. She is insightful, pithy and witty and takes no prisoners in pricking bubbles of self-importance. I well remember a brilliant mocking piece on Third Way politics that was better than any learned treatise on the topic.  Her articles with the accompanying cartoons by Chris Slane are the highlight of my weekly read.

Trouble is, sometimes she is dangerously wrong.  When she repeats a myth as if it is true, it further cements the myth into the culture- with a lot more credence than if it came from other less talented writers.  And so it was with this throw-away line in the Listener August 25th 2018.

 

Her uncritical belief that Working for Families (WFF) is some kind of subsidy to employers, i.e. ‘credibly cited as a cause of persistently low wages’, shows the power of the recent myths perpetrated by Bryce Edwards, Matthew Hooton, and Eric Crampton and others.  For Hooton WFF is some great communist plot! While I have tried to counter their story- here and here  and here  clearly, such efforts have been completely ineffective.   

Blaming WFF for low wages is a bit like pointing to our high rate of suicide and blaming it on the existence of the mental health services.  The true cause of low wages is found in casualised hours, precarious employment, automation, globalised labour markets and falling wage share of output due to loss of union power.

A generous system of WFF for children is as necessary as a generous state pension for the old.  Its purpose is to protect the interests of children regardless of what parents earn. No wage system in the 21st century can be credibly based on family circumstance but that appears to be what Clifton and others hanker after so unrealistically.

It is not fair to say the left and the right are putting government under pressure to  “rethink working for Families”. The CTU for example is fully supportive of well-designed and generous WFF tax credits as the proper way to reflect the lower ability to pay tax when there are dependent children in the family.  Some of the other unions may have parroted the Clifton line but even the living wage movement see how vital well supported tax credits are—without them the living wage rate would have to be much higher, and those without adequate hours, or no hours of paid work would face devastating child poverty.   When CPAG says they want WFF rethought they mean that it ought to be more inclusive and more generous not less.  

It is a myth too that Working for Families arrived fully formed with Labour: “a Labour-instituted policy’. Commentators forget that all their mothers had the family benefit and many also had additional Family Support tax credits. Following Ruth Richardson’s mother of all budgets, Family Support was eroded and neglected, and child poverty soared.  In 2005, WFF built on Family Support with the primary intent to reduce child poverty and was a long overdue catch-up. If Clifton’s myth is correct WFF should not have been necessary (as employers should have been be paying higher wages and somehow that would have meant no child poverty).

It is also completely wrong to say that National found it ‘too popular to wind back’. Over the last decade National deliberately cut WFF and failed to index it. This meant the package was $700m per annum lower by 2018, child poverty was at unacceptable levels and a lot of catch-up was due as even National acknowledged, albeit only in election year.   

Finally, there is no substance at all in the claim that WFF is “more of a top up for employers than a safety net for families”.  WFF may have a few design faults but it spreads the costs of bringing up children for all but the top income families, among society at large.    We don’t say NZ Super allows employers to pay wages that are too low for people to save for their own retirement. We don’t expect employers to pay for childcare subsidies, or childhood education or healthcare or even paid parental leave, so we should not expect them to pay for the weekly costs of bringing up children in low income families.   Indeed, how could they take on this role given that the most need is in families that don’t work full time and that the cost of children varies with family size not hours of work.

Let’s change the name to reflect what WFF is really for.  What about KiwiKids’s Tax Credits (KKTC)? Other ideas?

 

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

26 Comments

  1. countryboy says:

    Firstly, WFF IS a subsidy. It’s a subsidy for Banksters. And the now off shore investors in what were once OUR services and amenities. Generally speaking, it’d be fine to be on current rates of pay if our electricity was still ours and the supermarkets were not gouging, rorting, rapacious, price fixing scum bags while Farmers markets produce is more regulated than a well armed paedophile P dealer living in a nuclear reactor beside a high school for the terminally gullible.
    If we still had subsidised passenger rail, instead of a twinkle sparkle tourist trap Disney Land attraction to shovel people into our mountains and river valley’s while we get rorted for public transport that goes to fuck-all, fuck-anywhere? WTF?
    Before we get all hot and flustered about increases in wages, get all gleaming in the eye about tax breaks, all hot and sweaty about how a board room full of corporate arse holes start talking charity as if they’ve just dropped good E we, WE ! Should start getting super fucking angry at why what was once our stuff and things is now theirs and those who brokered those grifting, dodgy, back room deal, dirt bags.
    Get our stuff back, run the banksters out of NZ / AO THEN talk better wages, conditions and tax breaks.

    I read this in The Guardian.
    First Dog On The Moon.
    ” Well actually our only hope is understanding that it is the system not the personalities within it that cause the problem. Did you know that by focusing on the personalities rather than the structure of the system we make the system stronger? True Story. “

  2. Siobhan says:

    I argue that the WFF was used to ‘soften the blow’ of no real wage increases, and to help weaken unions.
    WFF allowed working families to survive through means other than wages. If it wasn’t there, workers would have had to fight for better wages and employment conditions.
    But with the wff you could easily just say “oh well, my wages suck, but hey, I’m getting $…. money so I can still pay the rent..sweet!’
    I have no doubt that the ubi will also be used to weaken the resolve and bargaining power of workers.
    The best we can hope for is its just enough for us to afford the implants our grandchildren will need to get part time jobs at the Amazon warehouse.

    • Susan St John says:

      Stoban
      so why didn’t workers without children who don’t get WFF fight for better wages? WFF doesn’t pay the rent it pays for the costs of children

      • Siobhan says:

        If you take out the workers with children in any workplace you further limit the number of workers motivated to take action.
        Even in the fast food industry, which employs largely young childless people, you tend to look to the older workers for encouragement and strength in dealing with the bosses or even contacting the Union. The older workers…ie those with, usually, children.
        WFF pays the rent. I know this, because that’s what we used it for. As did most of our friends. Those with mortgages used it for paying the mortgage.
        But that’s a pointless conversation, all the money a family receives, wages, wff, accommodation payments, it all goes into the same pot. And if you are a low wage earner, half of that money will go on rent. That’s just a fact. For people on low income..rent is the most important cost, it comes before food and warmth every time.

        • Susan St John says:

          Stobhan
          Sure because children need housing along with everything else that makes it more expensive to have kids. WFF is a payment for children

  3. It is what is is: Family Support. Any other acronym takes away from the primary purpose of this payment; to shield families from the predations of the neo-liberal system.

    And those who suggest that superannuation is a universal benefit, without labelling it “communism by stealth” display a blinkered view of income re-distribution.

    It can all be distilled down to the Victorian notion of “the deserving/undeserving poor” so that selfishness can be pandered to with convenient, rational-sounding labels.

    Mr Hooton labels WFF as “Communism By Stealth”. The corollary to that is a brutal alternative; “Capitalism At Any Price”.

    • Susan St John says:

      Frank
      I agree that reversion to the name Family Support is needed. We chose rogernomics — flattish income tax, high GST on everything– the quid pro quo is the need for adequate compensation for low incomes. We forgot that and children have suffered the most

    • Wensleydale says:

      True. Then again, anything with the name Matthew Hooton attached to it should be disregarded out of hand, given he’s little more than a mercenary turd polisher for vested interests.

  4. Alex says:

    Who is going to spend the money? It seems like one of the few things right with WFF is that the name correctly reflects that it is targeted at families. Although a small number of people clearly value government subsidies for just existing or children’s own decisions above parental autonomy, unsurprisingly, that’s not what I hear people say they want and isn’t the recipe for health family or societal dynamics. I’m not convinced the stories are myths, from personal experience, WFF is more like a curse and if you’ve received you know what a burden it is to be beholden to the government and to be concerned about every additional dollar you earn and the sense of exasperation when you somehow manage to earn a payrise and you still go backwards overall because of the rising cost of living.

    • Who is going to spend the money?

      Is the same question asked of superannuitants, Alex?

      WFF is more like a curse and if you’ve received you know what a burden it is to be beholden to the government

      Far better than the curse of sleeping in cars and living in garages, Alex. Or constantly reliant on food parcels and the tender “mercies” of WINZ for top-up payments.

      All of which evades the fact: neo-liberalism has failed in it’s promises.

      The State has stepped in, to stem our downward spiral to wretched poverty.

      How long should we be waiting for “trickle down” to deliver the much heralded higher wages and living standards we were promised in the 1980s and 90s? Answer: thirty years was sufficiently long enough.

      • Alex says:

        Don’t disagree with your points at all Frank. My first comment was that it’s families who receive the support and parents that spend the money, not children – so family support is as good a name as any.
        Something certainly has to be done and now but it’s largely down to the political lottery that we have WFF rather than large-scale tax cuts promised by National at the same election – goodness knows what else would have come along with that too though.
        Notwithstanding the need to support those most vulnerable and at the very lowest ends of the income spectrum I can’t help but wonder whether we would have seen the negative effects on collective bargaining and therefore persistent low wages if Labour had approached this through tax cuts and more targeted support for the most vulnerable rather than a convoluted income redistribution scheme that ropes in such a huge proportion of families.

        • Mjolnir says:

          With tax cuts come slashed social services and suppressed wages for teachers, nurses, support workers, etc. On top of which we get increased user-pays in health and education. Its a zero-sum gain.

        • Susan St John says:

          Alex
          Of course children don’t spent the money– WFF all goes to the caregiver. More targeted support for the vulnerable would make it an even more ‘ convoluted income redistribution scheme’ and roping in a large number of families is not an objection – you could say NZ Super ropes in 100% of those over 65-do you find that offensive too?

          • Alex says:

            What’s with your aversion to the words family and parent? It”s not offence I felt when receiving it it was more like feeling hopeless and demoralised at not be able to make any headway. I don’t think support to elderly people who can’t work anymore is the same as welfare for working people.

            • Susan St John says:

              Alex
              Many people over 65 work or have substantial assets. WFF is not welfare for working people- it is a weekly payment for children paid to the caregiver not to the worker.

  5. countryboy says:

    BTW? Did anyone else see that horrific photograph of jenny shipley and helen clark snuggling up together on the cover of the NZ Womans Bleakly’s current edition?
    Better than thinking about dead kittens to stall the inevitable during sexy times, I can tell you that for nothing.

    • OnceWasTIm says:

      Or indeed a Clifton snuggling up to a McCully on a chaise longue.
      Some things are best left alone and kept to the darkest recesses of the mind

  6. Eric Crampton says:

    I have hardly been one of the ones claiming that WFF is some big subsidy to employers. I instead said that any such aspect of WFF is very likely minor.

    I was arguing against those saying that it’s a big feature of WFF.

    • Sam Sam says:

      Depends if pre-schoolers are turning in tax reform policy. When the focus is on tinny sectors of society then sure. Give alcoholics cash they’ll spend it on you guessed it, alcohol. But you also lose sight of the real top line numbers where employers and employees are cutting salaries just to survive. So there does come a point when WFF stops working and people disappear off of employment and welfare stats only to magically reappear at the salvos. But how particular governments chooses to manipulate data has little to do with tax and welfare reforms.

      The real danger is when we’ve got things like David Farrars Kiwi Blog and Lynn Prentices TheStandard weaponising the Internet and weaponising cheap rhetoric like bene bashing and rich shaming, so trying rig elections. And the difference with places like the Daily Blog is we won’t just criticise others we’ll criticise our own and ourselves.

  7. Susan St John says:

    Eric

    What do you mean by this?
    “Wage subsidies place the burden of supporting the employment of those with lower productivity on the tax base in general. Minimum wages place that burden on those who would employ those workers, their customers, and on workers disemployed in the process. The former seems to me both more efficient and more equitable.”

    Can you please tell me what you think WFF is actually for?

    • Eric Crampton says:

      The In Work Tax Credit in Working for Families works to boost the incomes of those in employment on low incomes if they are in households with children. That helps encourage labour force participation of those who’d face higher barriers to participation: single parents. I always understood that to be the point of the Clark government’s reforms: to reduce the benefit count by making work relatively more attractive.

      • Susan St John says:

        Eric The IWTC is a small part of WFF. The two are conflated in what you write. The main point of WFF was to reduce child poverty. And as I have explained elsewhere it would be hard for an economist to design a worse work incentive than the IWTC. The courts said very clearly the IWTC is a payment for children and by excluding the worst of 270,000 they are harmed. The way that it worked out was not to incentivise work but to punish families who lost work. We have 140,000 children under the lowest poverty line of 40% AHC – their exclusion from the IWTC is a big factor.
        Do you as an economist still support the IWTC as a work incentive at a cost of $6-700m pa that goes right up the income scale and is paid to partnered caregivers even though they are not in paid work ?

  8. Zack Brando says:

    WFF is a punch in the face to single people who are responsible and don’t have children.

  9. Marc says:

    It is all relative, with have a global socio economic reality that provides for parallel universes on the same one planet.

    We have people in countries like NZ Inc expect at least a ‘liveable wage’ and also some state support that enables people to survive. The minimum wage is the bare minimum that a worker must be paid, but even that does not provide for some.

    We have some contract workers, or so called ‘self employed’, who work hours that result in per hour earnings, after costs, that do not even match the minimum wage in some situations.

    We have a middle class ‘earn’ from property speculation, and other ‘investments’, expecting ‘returns’ that are either lowly taxed or tax exempt.

    And we have people here consume goods made in virtual slave working conditions in Bangla Desh, China, Vietnam and other places, and sold in retail shops that do operate a bit like import cartels, so they ensure themselves to get their cut out of the supply chain deals. Prices for clothes for instance are relatively high in NZ Inc, while the manufacturing of these cost a mere fraction of the end price at the shop.

    So many dealers, middle men and women, so many getting their cuts out of endless deals, so many ‘landlords’ and ‘investors’ who own property, or shares in residential or commercial real estate, earning high lease incomes, and so many greedy at the top, having a top tax rate of only 33 percent on incomes.

    Some have trusts and so constructed to keep themselves lowly paid, even as ’employee’ in their own limited companies, so they never pay much tax, using various ways to protect their wealth.

    How about offering people in Bangla Desh WWF then, how about giving all humans a decent living situation? It is not talked about, because we are all lamenting our individual circumstances, our national circumstances and our frustration about not achieving our aspirations.

    We grow food, like many other nations, export this, export raw materials and resources, low value added primary production goods, logs, fish and so forth, only some higher end tech products.

    We compete, we trade, we import nice, shiny SUVs from countries where they are made, and expect apples, kiwifruit, milkpowder and so pay for that. Hence the speculation in real estate, hence the immigration scan, the Ponzi Scheme called ‘Kiwi Dream’ we sell to new migrants, giving hope, but exploiting many, to pay for the future, that comes also with debt and strings attached.

    WWF is just a small part of the whole equation, I guess, perhaps worth and necessary having, but are there not other issues, and other ways of dealing with the problems we have?

  10. […] SUSAN ST JOHN’S INDIGNATION at the way the Working For Families (WFF) payment has been cast as an employer subsidy is palpable. “Blaming WFF for low wages”, exclaims Susan “is a bit like pointing to our high rate of suicide and blaming it on the existence of the mental health services.” Neither is she slow to sheet home the “true cause of low wages”. This, she says, is to be found in “casualised hours, precarious employment, automation, globalised labour markets and falling wage share of output due to loss of union power.” […]

  11. Janio says:

    How does the Trust benefit from their ‘work’? They sound like a disaster for those who need their support.