There was great disappointment following the just released poverty figures for the year ended to June 2022. Whatever your take, we are not facing up to the real child poverty problems.
Some say the poverty figures show no significant change, some say there was a small improvement. Some say that the government’s policies are failing; others that they have done very well in difficult economic circumstances. Take your pick. Then the commentariat moves on.
This is all very superficial, characteristic of much public policy discussion. Little attention is paid to why it has been so difficult to get the figures down (let alone what has been the damage to those left behind).
The difficulty has been that much of the public disquiet has been driven by people of goodwill who have little understanding of the technical issues. ‘Just do it’ is not a policy.
Suppose you wanted to halve child poverty. A technician would begin by looking at the statistical record over the years back to 1984. (I did an earlier estimate for 1974 which is not really comparable with the official data but tells much the same story.)
What the data shows is that child poverty (measured by income deficiency) doubled in the early 1990s. Otherwise the level has not changed much before or since. (The flutters around these trends are from measurement noise – the data base is from smallish samples – or from the fluctuations in economic activity from the business cycle – which are hard to analyse because not every year was sampled.)
The reason for the gigantic leap is that Rogernomics had given substantial tax cuts to the rich – both cutting top income tax rates and also substantially reducing taxation on dividends. The incoming National Government – led, in this instance, by Ruth Richardson and Jenny Shipley – paid for the tax cuts by cutting the incomes of those lower in the income hierarchy. As a rule the lower in the hierarchy, the greater were the proportional cuts.
The poor were targeted in the name of ‘redesigning the welfare state’. The philosophy of the redesign was never articulated. The best I can explain is that they thought the liberal welfare state, set up by the First (Savage-Fraser) Labour Government (and formalised by the 1972 Royal Commission on Social Security) was too generous and that the minimalist American-style welfare state was more appropriate. Thus the substantial cut in state support for the poorest and the rise in child poverty.
The last few paragraphs are orthodox, based on the evidence and sentiments articulated at the time. Regrettably, those who implemented or supported the redesign have never given their account of what happened. They seem almost too embarrassed to provide a defence of their actions.
This has left New Zealand in an unresolved philosophical tension. Do we want a minimalist welfare state or a liberal one? The answer is ‘yes’ to the first option when we are thinking about tax levels, and ‘yes’ to the second when we think of government initiatives which require more tax. (Of course, social philosophy is rarely articulated by New Zealanders except in slogans and proposals for action, but you know what I mean.)
It is no secret that I am a supporter of the liberal welfare state with its objective of enabling everyone to be able to participate in and belong to their society. What is often overlooked is that assumes our sort of society is founded on the functioning family. Children in poorly functioning families are likely to become adults who are less healthy, more prone to crime, have poorer work productivity, and more likely to be parents in dysfunctional families themselves. There are many causes of dysfunctionality, but we may be confident that poverty is a contributor adding to the pressures and that improvements in income will often improve performance. Thus the Richardson-Shipley redesign undermined many families with ongoing consequences for the education and training, the healthcare and justice systems, and for the overall wellbeing of the community, their children and the future.
Noticeably in the recent public wrangle over the education curriculum no attention has been given to the central role of families in a child’s education. Rather, we once more looked for short-term bandages in the education system for long-term problems among families.
But even if we ignore such long-term social investment issues, there remains the ‘social justice’ issue of whether a society can tolerate the degree of child poverty that exists in ours. (Don’t all shout at once.)
The Ardern-led Labour Government said that we shouldn’t, and passed the Child Poverty Reduction Act in 2018, which was concerned about halving child poverty. In effect, it was proposing to reverse those changes to the tax and benefit structure implemented in the early 1990s. That would have been the biggest distributional change for three decades; that would be the most revolutionary (transformational) change since Rogernomics. Implementation would have made it a genuinely radical government.
I doubt that Labour understood this implication of what it was proposing. In the thirty years, the political economy has changed, with the rich using their financial power to shape the public conversation. The rich could not stop the aspirations of child poverty reduction being legislated, but they have limited the ability to really reduce child poverty because it would involve higher tax rates and their paying more tax.
So, while the government has been virtue signalling with low-cost policies which may (or may not) alleviate poverty at the margin, as the statistics show it has made little progress towards its aspiration of significantly reducing poverty. Are you surprised?
PS. As much as I would have liked to, I have not critiqued how we measure child poverty. It seems likely that a more rigorous approach to measuring it would not change levels or trends much, but it would lead to more rigorous thinking and better policy. For instance, some work I have done suggests that existing child support, particularly Working for Families, is very inefficient in that an alternative approach could take the same number of children out of poverty at markedly less cost to the taxpayer; alternatively, the existing funds could be redeployed to markedly reduce the number of children in poverty.