1. The Nature, Causes and Consequences of Child Poverty Jonathan Boston Co-Chair, Expert Advisory Group (2012) Professor of Public Policy, VUW Director, Institute for Governance and Policy Studies 19 September 2013

2. Nelson Mandela (1985): There can be no keener revelation of a society’s soul than the way in which it treats its children. 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 The importance of children

3. 1.The nature of inequality and poverty 2.Child poverty in New Zealand – a brief survey 3.Reasons for concern 4.The EAG’s approach and recommendations 5.The Government’s response 6.Reflections 7.Conclusions 8.Supplementary slides Outline

4. 1.The concepts of inequality and poverty are related but are not the same 2.Income and wealth inequalities are about some people having less than others; poverty is about people not having enough resources to meet their basic human needs 3.Assessing poverty requires a judgement about what is enough – i.e. what is the appropriate threshold (of income or resources) 4.Trends in inequality and poverty can move in different directions (e.g. income inequality can increase, while the proportion of people below a specific poverty threshold is falling) 5.The focus here is on child poverty in New Zealand and what to do about it Inequality and poverty

11. 1.Poverty involves a deprivation or lack of material resources to: satisfy basic human needs (food, shelter, health care) (the ‘absolutist core’ (Sen) and/or participate fully in economic, social and political life c.f. poverty of spirit, lack of aspiration, social/cultural deprivation 2.Different degrees/kinds of poverty: – best to think in terms of a continuum, from very severe … to moderate abject poverty (lack of basic necessities; regular hunger and starvation) relative poverty (missing out on those things that most people regard as necessary for a fulfilling life) – most measures of poverty are relative in some way or other – both the severity and persistence of poverty matter in terms of outcomes The nature of poverty

12. 3.Developed countries use two main ways of measuring poverty: – income below a certain agreed threshold – material deprivation – missing out on more than a certain number of essentials – these measures generate different results and only partially overlap 4.Setting the relevant benchmarks is complex; many technical issues (e.g. equivalence scales, before or after housing costs, etc.); a range of approaches possible; no international consensus, but some common approaches 5.There is no single correct measure of poverty – need a range of measures to highlight different features of the problem 6.Only a few countries have official poverty measures (e.g. US, UK, etc.); NZ does not The nature of poverty

13. Various approaches and studies (see work of Bryan Perry, MSD) Main features/trends: 1.Poverty rates depend on the precise measure used, but: – Income poverty rates for children in NZ are around the OECD average or slightly above on most measures – Material deprivation rates for children in NZ are higher than comparable rates in Western Europe 2.On a moving-line basis, child poverty rates in NZ are much higher now than during the 1980s; on a constant value basis, there was a higher percentage of children in poor households in 2007 than during the mid 1980s (i.e. on various measures we are doing less well for our children …) 3.Poverty rates for children are much higher than for most other groups, especially those aged 65+; this has been the case for several decades Child Poverty in NZ

14. Proportion of all individuals in low-income households by age, 60% REL threshold (AHC) (Perry 2013)

15. Proportion of children below selected thresholds (AHC): fixed line (CV) and moving line (REL) approaches compared (Perry 2013)

16. BHCAHC HES year BHC ‘moving line’ 60% AHC ‘moving line’ 50% AHC ‘moving line’ 60% AHC ‘fixed line’ 60% (07 ref) 2001250,000215,000310,000380,000 2004270,000200,000290,000320,000 2007210,000170,000240,000 2009210,000190,000270,000230,000 2010215,000170,000270,000230,000 2011200,000170,000270,000230,000 2012195,000175,000265,000215,000 Numbers of poor children in New Zealand (i.e. the number of children in households with incomes below the selected thresholds, Perry, 2013)

17. Long-term Trends in Child Poverty in Australia

18. 4.Child poverty rates are particularly high in: – Families with young children and larger families (50% of children in poverty are in families with 3 or more children) – The families of beneficiaries: the rate is 6-7x higher than for families where at least one adult is in full-time employment – But over a 1/3 of children in poverty are in families where one adult is in full-time employment (reflects low wages and inadequate child assistance) – Maori and Pasifika families (2-3x the Pakeha rates) Child Poverty in NZ

19. Poverty rates for children in ‘ workless ’ and ‘ working ’ households (AHC 60%, fixed line, 1998 and 2007) (Perry, 2013)

20. 5.About 50% of poor children are in sole parent families; NZ has a high prevalence of sole-parent households; sole parent employment is low by OCED standards 6.In 2012, close to 180,000 children lived in households where no adult was in paid work, and a further 64,000 in households with only PT work 7.More than half of all children under 15 years of age spend some time in families supported by a main welfare benefit (DPB/UB, etc.): – around 6% (50,000) spend 13-14 years in a benefit-supported family – around 21% (180,000) spend more than half of their first 14 years in a benefit-supported family If welfare benefits are inadequate, the implications are clear … Child Poverty in NZ

21. Identifying Deprivation

22. Australia -- Overall Changes in Deprivation, 2006 to 2010 (weighted %) Essential items20062010 Warm clothes and bedding, if it's cold0.30.4 Medical treatment if needed2.11.7 Able to buy medicines prescribed by a doctor4.53.5 A substantial meal at least once a day1.20.9 Dental treatment if needed14.513.1 A decent and secure home7.16.7 Children can participate in school activities and outings4.94.3 A yearly dental check-up for children13.211.0 A hobby or leisure activity for children7.86.8 Up to date schoolbooks and new school clothes for school-age children5.94.7 A roof and gutters that do not leak4.87.4 Secure locks on doors and windows5.05.8 Regular social contact with other people4.76.2 Furniture in reasonable condition2.82.2 Heating in at least one room of the house2.12.5 Up to $500 in savings for an emergency19.617.8 A separate bed for each child2.22.1 A washing machine1.11.0 Home contents insurance11.19.5 Presents for family or friends at least once a year6.85.5 Computer skills4.62.9 Comprehensive motor vehicle insurance9.89.1 A telephone1.93.8 A week's holiday away from home each year23.619.8 Average deprivation rate6.76.2

23. Deprivation Rates: 3+ enforced lacks, using 9 item EU index (%), 2007 Children 0-17Aged 65+Total Population New Zealand18313 UK15510 Ireland14411 Germany137 Sweden736 Netherlands636 Spain911 Italy1814 Czech201720

24. Why are many family incomes low? 1.Parental unemployment or under-employment: – Overall labour market conditions – Mismatches of supply and demand – relative lack of jobs for those with limited skills or qualifications – Family structure and functioning – ‘chaotic’, dysfunctional families – Social hazards – gambling, substance abuse, etc. 2.Low wages: – Most low-skill jobs are relatively poorly paid 3.The design of government policies: – The structure, level and complexity of family assistance – Low take-up rates for some child-related benefits – Child support arrangements – Employment and training policies – Childcare, ECE, OSCAR and related policies The causes of child poverty in NZ

25. 1.Child poverty is primarily an ethical and political issue – there is much relevant empirical evidence, but weighing up this evidence and deciding what to do depends on our values 2.There are many grounds for saying that child poverty matters: principles of social justice and notions of rights minimization of harm economic considerations 3.Child poverty imposes greater costs/harms when it is severe and/or persistent Evidence suggests that hardship tends to increase the longer a family is on a low income 4.Child poverty imposes greater costs/harms when it occurs in early childhood Child poverty: reasons for concern

26. A large and growing body of research highlights: A. The negative impacts of family poverty on children, including: 1.Greater likelihood of death in childhood 2.3x higher incidence of ill-health, including 2x greater likelihood of hospital admission for acute infectious diseases 3.5-6x higher incidence of hospitalisation from assault 4.Lower participation in ECE and higher school absenteeism 5.Negative impact on cognitive development and educational attainment 6.Higher residential mobility, poor housing and homelessness 7.Lower family resilience – higher parental stress and separation rates B. The negative impacts of childhood poverty on the wider society, including: 1.Higher unemployment and lower productivity growth 2.Higher fiscal costs: health care, benefit payments, criminal justice system, etc. 3.Significant overall economic and social costs Reasons for concern

27. 1.The Children’s Commissioner, Dr Russell Wills, established the EAG in early 2012 (13 members; range of backgrounds) 2.EAG’s Terms of Reference – advice on how to reduce child poverty and mitigate its effects 3.Issues and Options paper (late August), 24 Working Papers and 4 Background Papers – Consultation process for 7 weeks – 23 public meetings around the country – 100 web-based survey responses – 233 formal submissions (many substantial) – 300 children consulted 4.Final Report published on 11 December 2012 5.The Government’s response on 28 May 2013 The Expert Advisory Group

28. 1.Acknowledge policy complexity, trade-offs and tensions 2.Build on current government policy initiatives to enhance employment opportunities, improve the quality of childcare/ECE, encourage beneficiaries into the workforce, set targets, etc. 3.Draw on the best available international evidence regarding what works and what is cost-effective 4.Draw on a range of ethical principles and considerations to guide policy development 5.Focus on both reducing child poverty and mitigating its effects 6.Emphasize the need for both additional cash and in-kind assistance 7.Focus on both an employment strategy and a complementary social assistance strategy to boost incomes 8.78 recommendations covering many areas of public policy The Approach of the Expert Advisory Group

29. Core messages 1.Child poverty can, and should, be reduced 2.New Zealand needs a strategic policy framework based on multi-party agreement (as for National Superannuation) – with official poverty measures, specific reduction targets, and a proper monitoring and reporting framework (including child poverty-related indicators); consistent with the Government’s targets under ‘Better Public Services’ 3.The EAG recommended reducing child poverty rates by at least 30-40% and severe and persistent poverty by well over 50%, with the aim of achieving child poverty rates that are comparable to the best performing OECD countries – Implies raising the disposable incomes of many low-income families by at least $100 per week (e.g. taking those on 50% of the median household disposable income to 60%)

30. Core messages How to achieve such targets? 1.Need a mix of policy measures; no single magic bullet 2.Boost the incomes of low-income families: – Focus on assisting younger children and larger families via changes to Family Tax Credits – Reform child support – Reform housing assistance – Encourage and support child-age appropriate employment by parents (especially sole parents) 3.Provide additional in-kind support, e.g. – Improve the quality of rental housing stock – Free child health care from birth to 18 years – Develop a national strategy for food in schools (especially for year 1- 8 students in low-decile schools) – Establish multi-service hubs in low-decile schools

31. The Government’s Response 1.The Government has responded positively to almost a quarter of the EAG’s 78 recommendations (i.e. seriously considering or implementing them), but not those relating to income support or a comprehensive child poverty reduction strategy (including official measures and targets) 2.New initiatives to mitigate the worst consequences of poverty have been announced (e.g. an extension to the food in schools programme); some other proposals are under active consideration (e.g. social lending) 3.Hopefully some of the EAG’s proposals relating to income support will be taken up in future budgets; otherwise child poverty and material deprivation rates are unlikely to fall much over the medium term

32. Reflections on policy-making on child poverty 1.Political economy: children don’t vote; ethnic dimensions; framing issues 2.Limited leadership from major parties on child poverty issues 3.We need to change public attitudes, values and priorities: – Many New Zealanders appear ready to tolerate significant child poverty (and some appear not to care about the welfare of poor children) – Survey evidence points to a loss of public support over recent decades for progressive taxation and income redistribution 4.How might public attitudes be changed? – Aristotle: logos, ethos and pathos – Reason (evidence, logic); ethical arguments; emotional appeal (based on suffering and shame)

33. Conclusions 1.Child poverty is a serious issue in NZ, with significant long-term economic and social implications 2.The level of child poverty is partly a matter of policy choice 3.NZ has tolerated much higher rates of poverty (and especially child poverty) since the early 1990s than previously 4.Fundamentally, we need to increase the incomes of low-income households (especially families) – this requires a combination of measures: increased employment, more generous child assistance, changes to child support, increased subsidies for childcare and training, etc. 5.But we must also address some deeper issues: economic performance, the level of income and wealth inequality, family functioning (how to reduce the incidence of sole parenthood?), social values (what kind of society do we want to live in?)

34. Supplementary slides 1.Policy principles 2.Poverty measurement 3.Specific proposals 4.The global picture 5.Some common claims 6.Acknowledgements

35. Principles for policy design for addressing child poverty The following principles and considerations should guide policies: 1.The rights enunciated in the UN Convention on the Rights of the Child 2.The best interests of the child, including the child’s developmental needs 3.The provisions and principles of the Treaty of Waitangi 4.A ‘social contract’ that recognizes:  The mutual responsibilities of parents, the community and the wider society for the care and wellbeing of children  The requirement to provide social assistance to those unable to work or secure paid employment sufficient to meet the basic needs of children  The importance of parental employment in reducing child poverty, but in a context where the developmental needs of children are protected (e.g. through accessible, affordable, high-quality childcare, ECE, etc.)  The vital role of housing, high-quality education, and equitable access to health care 5.The desirability of a strong future focus, and hence an investment approach 6.The desirability of selecting policy measures that are simply, effective, efficient and fair 7.The need for fiscal responsibility

36. Need a range of poverty measures (should be official/authoritative). The EAG proposed: a.Moving line – 60% of median equivalized household disposable income, annually adjusted, AHC and BHC b.Fixed line/constant value – 60% of median equivalized household disposable income, adjusted every 10 years, AHC and BHC c.Material deprivation – material wellbeing index score in levels 1 or 2 out of 7 d.Severe poverty – mix of (a) and (c); and poverty gap (distance of median income of the poor from the moving-line measure) e.Persistent poverty – at least 3 of 4 years, using both (a) and (c) Supplementary measures: inter-generational transmission, life-cycle, and geographic Measuring Poverty

37. Specific Proposals: Income and Employment Short- term proposals: 1.Improve tax/welfare system:  Rebalance Family Tax Credits to favour young children and larger families o Lift all payments to rate of eldest child aged 16+ ($101.98 per week); implies an increase of about $10 per week for eldest child under 16, and close to $40 per week for additional children under 13 o Subsequently, raise rates incrementally for children aged 0-6  Index all child-related benefits annually  Monitor and publish annual take-up rates  Establish performance incentives to encourage high take-up rates  Appoint a person to the Work and Income Board with child well- being and development expertise

38. Specific Proposals: Income and Employment Short- term proposals: 2. Amend the Child Support Act to require:  Pass on a proportion of payments to custodial parents who receive a sole-parent benefit  Government underwriting of payments o These changes would benefit over 130,000 children, close to 90,000 of whom live in poverty o $159m was withheld from these children in 2011 by IRD; if all this were passed on, the average per child benefit would be $1,200 per annum or $23 per week o The proposed changes would have many other benefits

39. Specific proposals: Income and Employment Longer-term policy framework : 1.Focus on children’s developmental needs, tilt assistance to young children, and incentivize paid employment that is appropriate to age of child 2.Establish a Child Payment – universal for the first 6 years, targeted thereafter; higher rate during infancy and declining gradually in steps 3.Undertake an independent review of all child-related benefits, including In-Work Tax Credit 4.EAG doing further work on income support regime for our Final Report

40. Specific proposals: Income and Employment Rationale for universal element to the proposed child payment: 1.Need a pragmatic approach to the debate over universality versus targeting; various criteria need consideration 2.There is a good case for universal funding under certain conditions 3.NZ has universal funding of ECE, compulsory education, aspects of tertiary education, most of health care, old age pension, etc. 4.21 of 34 OECD countries have a universal child payment as part of their child assistance policies

41. Specific proposals: Income and Employment Rationale for universal element to the proposed child payment: 1.Reduces labour market disincentives (by reducing EMTRs) 2.Recognizes the wider social benefits of raising children and the high costs of younger children 3.Recognizes the complexity of contemporary families 4.Simpler and more transparent, with lower transaction & compliance costs 5.Ensures high take-up rates 6.Potentially provides an alternative to more extensive paid parental leave, and would be fairer than current paid parent leave arrangements 7.Supports a parent to stay at home during infancy (with positive child development impacts) 8.Provides a population database (for use by health and social service agencies) 9.Provides a symmetry with the universal nature of National Superannuation 10.Enhances political commitment for, and long-term stability of, the policy (political economy reasons)

42. Specific proposals: Income and Employment Employment policies: 1.Weak case for raising the minimum wage 2.Little scope for further reduction in employment regulation 3.Job subsidy schemes may have merit, but only under strict conditions 4.Need to ensure adequate incentives for paid employment and support for parents of younger children via subsidies, accessible and good quality child care, ECE, OSCAR, holiday programmes etc. 5.Need appropriate support for training/up-skilling/tertiary education for parents, especially beneficiaries 6.Need to encourage child-friendly workplaces 7.Need strong incentives for welfare agencies to place parents with children into sustainable, child-appropriate forms of employment

43. Specific Proposals: Housing Improve the quality and quantity of housing o Prioritize housing in the National Infrastructure Plan o Establish a Warrant of Fitness for all rental accommodation o Extend subsidies for insulation and heating Enhance the supply of social housing Re-focus the Accommodation Supplement and Income- Related Rent subsidies Enhance opportunities for home ownership

44. Specific Proposals: Health Short-term: Support free primary health care for all children from 0-6 years especially after hours Establish a common assessment framework and pathway for all children from before birth to identify and respond to needs, shared by all health practitioners Apply principle of ‘proportionate universalism’ Longer-term: Expand free primary health care progressively to all children (0-17) Improve information systems via a unified enrolment system Develop a national plan to improve child nutrition Establish youth-friendly health and social services in all low-decile secondary schools

45. Specific Proposals: Education Continue to implement ECE work programme Develop a national strategy for food in schools Incentivize schools and ECE centres in disadvantaged areas to become ‘full service schools’ or ‘community hubs’ Improve access to after-school care and holiday programmes Expand the Teen Parent Units

46. Specific Proposals: Pasifika Develop measures and indicators using Pasifika understandings of identity and success Focus on making progress in Auckland especially – Overcrowding – Employment – Education – Health promotion – Justice Ensure government services have effective links with Pasifika community and church groups Encourage high-quality research to drive innovation & responsiveness in public services for Pasifika children

47. Specific Proposals: Māori Develop measures of Māori well-being and set targets to eliminate the disparities in rates of poverty for Māori children Better outcomes in education, health, employment & justice Develop a strategy to prevent Māori homelessness Better integrated health & social services for Māori children, including parenting programmes Support trusted workers and develop integrated service hubs

48. Specific Proposals: Other Other specific proposals cover: Community & local initiatives Debt Substance abuse Gambling Research needs

49. 5.White Paper for Vulnerable Children 1.‘Vulnerable Kids Information System’ – to enable greater cross-sectoral collaboration and information sharing; identify, assess and respond 2.‘Child Protect’ telephone line 3.Better training for professional involved with child protection 4.Children’s teams 5.Regional Children’s Directors – to enhance accountability 6.More social workers in CYF and schools 7.Public awareness campaign 8.Children’s Action Plan Issues: 1.Limited to child abuse and neglect; does not address domestic violence 2.Does not address wider social issues including deprivation and poverty 3.Adequacy of resources 4.Privacy risks EAG and Context

50. 1.Around 1 billion people (around 15% of the world’s population of 7 billion+) experience regular hunger 2.Many millions die of poverty-related causes each year 3.By NZ standards, most people in the world are poor – about half live on less then US$2.50 per day 4.In relative terms, things are improving globally, but many future risks, including the impact of climate change and political instability The Global Picture

52. Australian data -- Are Identified Essentials Robust? (unweighted percentages)

53. Australian data -- Are Children’s Needs Universal? (unweighted percentages)

54. There are many myths, misconceptions and half- truths about poverty, both here in NZ and elsewhere. Let me briefly consider 9 claims: Claim 1: There is no real poverty in NZ; no one misses out on anything really important; no child goes hungry Response: 1.There may be little abject poverty (i.e. starvation), but there is evidence that many children (20,000+) go to school hungry and/or have no lunch on a regular basis; and large numbers miss out on many other ‘essential’ items and opportunities 2.The negative consequences of low incomes/material deprivation on children are many and varied (see later slides) Some common claims

55. Claim 2: People are in poverty because they are lazy and don’t want to work; they deserve to be poor; and/or Claim 3: People are in poverty because they are addicted to drink or drugs; they deserve to be poor; and/or Claim 4: People are in poverty because they don’t know how to manage their money properly; they are incompetent Response: 1.Why did child poverty rates rise 2-3 times during the late 1980s and early 1990s? Was it because of an outbreak of parental laziness, and/or financial incompetency, and/or substance abuse? There are rather better explanations … 2.Should children be expected to suffer for the inadequacies of their parents? Should we simply say: ‘bad luck, you should have chosen your parents better?’ Some common claims

56. Claim 5: People are in poverty because they have too many children (‘the more they breed, the more we [taxpayers] bleed’) Response: 1.This is partly true, but what is the appropriate policy response? How much paternalism and/or coercion is justified? What are the relevant moral principles? – Should we sterilize poor people so they cannot ‘breed’? – Should we tell the poor that they should not have children – this is only a privilege for the better off? Or – Should we try to ensure that all children get the best possible start in life? Some common claims

57. Claim 6: The problem is poor parenting not poverty Response: 1.There is evidence of both poor parenting (neglect, abuse, etc.) and poverty 2.There is evidence that poor parenting is at least partly the product of poverty (which causes parental anxiety, stress, poor health, etc.) 3.We need to address both poverty and poor parenting; it is not one or the other; both are important and amenable to policy action Some common claims

58. Claim 7: Helping those in poverty just makes the situation worse Response: 1.There is little empirical evidence to support this claim. 2.If the claim were true, then several millennia of Christian charity and 100+ years of a welfare state has been a waste of time 3.The way help is provided obviously matters – need cost- effective assistance and interventions that build capability, extend opportunities and reduce undesirable dependency Some common claims

59. Claim 8: Giving the poor money does not help; they will simply misuse it Response: 1.Some people find it hard to manage money well; but this is not limited to the poor. The poor have less margin for error. 2.Why do we think that the rich benefit from tax cuts, but the poor do not benefit from having more income? 3.There is much evidence that income matters, and that providing additional income to poor families generates positive outcomes 4.But income is not the only thing that matters; in-kind assistance is often appropriate and desirable (e.g. free education, free health care, social housing, etc.) Some common claims

60. Claim 9: We cannot afford to reduce child poverty Response: 1.We could equally say that we cannot afford NOT to reduce child poverty. Why? Because child poverty imposes significant costs (see next slide); investing well in children produces positive returns (and saves on future fiscal costs) 2.Child poverty can be reduced; we have much lower rates of poverty and material deprivation amongst those 65+ in NZ. 3.The scale and severity of child poverty/deprivation is a partly matter of societal choice. Fundamental issues: What do we regard as an adequate social ‘safety net’? Do we expect most of those on welfare assistance to live in poverty? Since the early 1990s we have chosen to tolerate child poverty of significant levels and duration; reducing child poverty has not been a high policy priority. Why? Some common claims

61. Acknowledgements Expert Advisory Group, Solutions to Child Poverty in New Zealand: Issues and Options Paper for Consultation, August 2012 Expert Advisory Group, Solutions to Child Poverty in New Zealand: Evidence for Action, December 2012 Bryan Perry, Household Incomes in New Zealand: Trends in indicators of inequality and hardship, 1982 to 2012, Wellington, Ministry of Social Development, 2013) Peter Saunders, Presentation for IGPS Workshops, 19 and 21 September 2012 The NZ Treasury, Improving outcomes for children – Initial Views on Medium-term Policy Directions (2013)