Child Poverty in New Zealand: Why it matters and how it can be reduced

Abstract

A combination of policy changes and wider socio-economic trends led to a dramatic increase in child poverty in New Zealand during the late 1980s and early 1990s. Higher rates of child poverty have now become embedded in the system and show little sign of resolving themselves. For a country which once took pride in being comparatively egalitarian and, more particularly, a great place to bring up children, the tolerance of much greater child poverty is surprising. It is also concerning. Child poverty imposes many costs. This is especially the case, according to the available evidence, when poverty occurs during early childhood and when it is severe and/or persistent. These costs afflict not only the children directly exposed to poverty (e.g. in the form of lower educational achievement, reduced lifetime earnings and poorer health outcomes), but also the whole society. This article briefly explores the available evidence concerning the nature, magnitude, causes and consequences of child poverty in New Zealand and considers why substantial rates of child poverty have been tolerated for an extended period. Drawing on the lessons of anti-poverty approaches in other OECD countries, it then outlines a strategy for securing substantial and durable reductions in child poverty rates in New Zealand. Finally, it considers the prospects of such a strategy being implemented and suggests ways of enhancing the focus of the political system on child-related social issues.

Keywords:

• poverty measurement
• material deprivation
• child poverty
• social values
• anti-poverty strategies
• policy evaluation

Notes

1. This article is based on a paper prepared for the ‘Children in Crisis Conference’, organized by the Wilf Malcolm Institute of Educational Research, Waikato University, and held at the Kingsgate Hotel, Hamilton, 7–9 October 2013. I would like to thank Jane Carpenter, Simon Chapple, Susan St John and Tom Stuart for their helpful comments on earlier versions of this article.

2. Since this article was completed in November 2013, Statistics New Zealand and the Treasury found an error in the datasets used for calculating trends in household income and poverty. The revised data show that child poverty in New Zealand was higher during 2010–12 than previously estimated (i.e. as measured on an income basis, but not on a deprivation basis) (see Perry, 2014). Figures 1, 2 and 3 have not been adjusted to reflect these revisions, partly because all the relevant data are not yet available.

3. For further details, see the various Working Papers and Reports produced by the Expert Advisory Group on Solutions to Child Poverty: http://www.occ.org.nz/publications/child_poverty, especially Working Paper No 8, ‘The Case for an Investment Approach to Reducing Child Poverty’.

4. Note that beneficiaries with children were eligible for the increased assistance delivered via the FTCs during 2005–7, but not the IWTC. However, core benefit rates were reduced, thus leaving beneficiary households only marginally better off in net terms.

5. There are a few exceptions to this generalization, the most obvious being large, universal subsidies for post-compulsory education (which are regressive).

6. Note that around 37% of children are in families with three or more children, so the greater risk of such families being poor is not large.

7. The threshold is being reduced at the rate of $450 each time the rates of the FTC are increased by inflation. These adjustments occur whenever the cumulative increase in the (adjusted) CPI reaches 5% from the previous adjustment.

8. Given the recent changes to the FTC (as discussed earlier in the article), any reform package would need to consider (and adjust) the abatement threshold, the abatement rate and the indexation regime, as well as the rate structure and levels of assistance.