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Poor Economics

Several important books that focus on poverty and wealth inequality in Aotearoa New Zealand have been published in recent months, at least partly in an effort to push these issues onto the political agenda in an election year. Scoop Review of Books is continuing its coverage with the following review of and excerpt from Jonathan Boston and Simon Chapple’s Child Poverty in New Zealand (Wellington: Bridget Williams Books)

Review by Marlene Ware of
Closing the Gap

Child_Poverty_CoverBoston and Chapple have based this book on material garnered from  their involvement in the Expert Advisory Group on Solutions to Child Poverty, established by the Children’s Commissioner in 2012. It draws on the latest evidence which is thoroughly documented in the accompanying notes.

The book is structured around three themes relating to child poverty: why it matters, how to best to reduce it and mitigating its impacts. The stated aims are to make the case for child poverty, its nature and measurement, the causes and consequences, and the myths. Any responses need to be based on logic, ethics and evidence. The authors suggest that there has been inadequate political attention to the increases in child poverty following the reforms of the 1990’s. Currently, the fiscal deficit, but not the social deficit, is under control. There is a moral imperative to address this social deficit which will bring long term social and economic dividends. However, there is a fiscal cost.  They propose various options to reduce child poverty and to mitigate its consequences, suggesting New Zealand has the necessary resources required. It depends on political will to accomplish it.

Integrated and complementary policies are critical,  focusing chiefly on parental employment and income support. These are critiqued and analysed from both centre-right and centre-left stand-points, with the probable policy emphases  from each political stance  outlined.

There are range of options proposed to fund the policies, with critiques of  four complementary strategies.

• Fiscal headroom arising from the projected fall in cost of welfare over the medium term

• Collectively borrowing against future productivity that investment in today’s children will bring

• Rebalancing government expenditure –  i.e. in education, housing and income. The  focus is on  the early childhood years, where, in the authors’ view, change would be the most effective. In addressing welfare benefits, comparison is given to the disparity in universal benefits for superannuitants regardless of their financial situation and the differing indexing, compared to income support in early childhood.

• Tax policy changes such as  progressive tax rates, and capital gains tax.

Acknowledgement is given to the governmental strategies on a variety of child well-being issues that have recently  been instituted.  However, disturbing figures of children living in poverty remain. (Click on figure to enlarge.)

Child Poverty in New Zealand, Figure 1.5, p.42

What are these children experiencing? Is it about parenting not poverty? Are there societal consequences? Can we/should we as a nation attend to child poverty? These questions are discussed in  thorough, thoughtful and impartial ways.

With this being an election year, this is a timely publication for those of us interested in social policy. It provides  well-grounded information facilitating meaningful engagement  with our politicians and political parties. One would be hard pressed to find better social policy analysis.

Below, an excerpt from Chapter 12 ‘Conclusion: Investing for the Future.’ pp.239–40. Child Poverty in New Zealand, by Jonathan Boston & Simon Chapple. (Thanks to Bridget Williams Books for permission.)

REDUCING CHILD POVERTY

New Zealand’s goal should be to reduce the rate of child poverty to low levels by OECD standards. As in the sporting arena, we should have the ambition to be amongst the best, not a mediocre performer, let alone a laggard. Achieving this goal will require a wide variety of initiatives, but two policies are critical: firstly, measures to encourage parental employment; and secondly, measures to increase the level of income support for families with children. We acknowledge that governments of the centre-left and centre-right are likely to differ in their preferred mix of such policies. Parties on the centre-right will generally place more emphasis on encouraging parental employment, while those on the centre-left will give greater weight to income support. Governments of the centre-right and centre-left are also bound to differ over the precise design of active employment initiatives and income-support measures.

Nevertheless, there is good evidence that policies addressing both employment and income support will be needed if child poverty is to be reduced effectively and significantly. Policies that focus solely on employment or exclusively on income support are unlikely to be as effective. Both blades of the scissors need to be working to cut our way through this knotty problem. We hope that we have persuaded our readers of this critical point.

Moreover, while strategies to address both employment and income support are needed over a child’s life-course, a strong case can be made for altering the relative balance of these two strategies depending on the age of the child. In general, providing direct income support is more important and efficacious for removing younger children from child poverty; finding jobs for parents becomes more important as children get older. The key policy issue here is the point during childhood where this relative switch should occur, and how strong the switch in emphasis should be. We acknowledge that this remains a matter of some controversy and that the relevant literature does not provide a definitive answer. Hence, a value judgement is unavoidable. The crucial point, however, is that both the nature and timing of interventions matter. The available evidence suggests that the early years of a child’s life are particularly important, and that ensuring income adequacy during these crucial years has a significant bearing on subsequent adult outcomes. It is also during these years that employment options for parents tend to be more constrained because of the particular needs of young children.

Designing a strategy to reduce child poverty must necessarily take into account the distinctive features of New Zealand’s cultural landscape and policy environment. This includes issues of ethnicity and geography, our relatively high rate of sole parenthood and the related complexity of family structures, the legacy of previous policies for what is considered possible and what is not, and the relative prices of particular goods and services of importance to families.

Housing costs and housing quality figure prominently in such considerations. The relatively high cost of housing in New Zealand, especially in major population centres like Auckland, is a large contributor to child poverty. (Click on figure to enlarge.)

Child Poverty in New Zealand, Figure 1.3, p.39

Efforts to lower these costs, and thus enhance housing affordability and quality, must be an integral part of any coherent poverty-reduction strategy. There are no simple or quick solutions. But there is a good case for a multi-pronged approach designed to boost the supply of social housing, ease house-price inflation, and adjust the parameters of the Accommodation Supplement so that greater financial assistance is available to families – especially for those with three or more children and those living in areas with high housing costs.

New Zealand’s relatively high rate of sole parenthood is another relevant policy consideration, as is the fact that children in such families are currently exposed to a much higher incidence of poverty than those in two-parent families. Such factors have a significant bearing on the mix of policies needed to reduce child poverty, including benefit rates, child support, childcare, early childhood education (ECE) and employment incentives. Three policy matters deserve particular emphasis here. Firstly, benefit rates have not been adjusted to any significant extent in real terms since the early 1990s. Until adjustments are made, a high proportion of children in families that are wholly or largely dependent on welfare benefits are likely to experience income poverty. Secondly, there are a number of relatively simple and comparatively inexpensive changes that could be made to current child-support arrangements and could have an immediate positive impact on the well-being of many children. Thirdly, policies relating to parental leave, childcare and ECE need to be adequately targeted to families with the greatest need. Currently, they are not.

See also: Alison McCulloch’s review of Max Rashbrooke’s Inequality: A New Zealand Crisis (Wellington: Bridget Williams Books)

Please let us know in comments of other newly published books on these issues that you think we should take a look at.

Useful Links:

Equality Network
Closing the Gap
Inequality