Conal Smith

TacklingPovertyNZ the nature of in

New Zealand and Historically high employment rates and unemployment rates that are low in terms of both international and historical comparison have failed to make a ways to address it significant dent in ’s poverty rates. The persistence of poverty despite Introduction a strong economy suggests that there is room to improve policy settings. In 2012 an Poverty in New Zealand is one of the foremost challenges expert advisory group on child poverty was we face as a country. Child poverty rates remain persistently established by the Office of the Children’s Commissioner to look at solutions to child above rates in many other developed countries and well poverty and a report outlining a wide range of proposed policy reforms was above the rates prevalent in New Zealand during the released in 2013 (Expert Advisory Group 1980s. Poverty is of particular concern in a number of on Solutions to Child Poverty, 2013). Although the proposed reforms achieved parts of provincial New Zealand, where it coincides with little traction immediately following their release, the Labour Party manifesto for high rates of drug dependency, poor outcomes – the 2017 election committed the party reaching Third World standards in some areas – high crime to introducing legislation to set a child target during its first and victimisation levels and multi-generational cycles of 100 days as a new government. With the disadvantage (Ministry of Social Development, 2010; New formation of a Labour-led government following the October 2017 election, it is Zealand Treasury, 2017a). timely to consider approaches to tackling poverty. Conal Smith is a -based economist with interests spanning the economics of well- In 2016 the McGuinness Institute being, social capital and trust, the behavioural drivers of economic outcomes, and social policy launched TacklingPovertyNZ, with a focus more generally. He led the development of the first international guidelines on the measurement of subjective well-being (2013) and trust (2017), as well as the OECD’s first well-being-themed country on identifying new approaches to report. addressing poverty that were grounded in

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Figure 1: Proportion of the population below 50% of median income, constant costs, however, have remained well above threshold and relative threshold, vs unemployment rate, 1986 - 2016 1980s levels, even using a constant value Poverty rate, 50% of median income, 2007 constant threshold after housing costs threshold. 25 It is not the intent of this article to review poverty trends in detail, but there 20 are several features of poverty in New Zealand that are worth highlighting here. 15 Figure 1 examines the relationship between 1990 poverty and unemployment. Despite a Poverty Rate (%) 10 2016 1986 1988 clearly expressed view from many 5 politicians of both the left and right that jobs are the best tool to bring down poverty 0 0 246810 12 rates, it is evident that there is only a weak Unemployment Rate (%) relationship between unemployment levels Poverty rate, 50% of median income, relative threshold, after housing costs and poverty as measured against a constant 16 value threshold, and there is essentially no 14 relationship between unemployment rates 12 and relative poverty. It can also be seen that 2016 10 the changes to the benefit system in 1991 8 resulted in a significant increase in poverty: 6 1988 1990 poverty rates for the years prior to the cuts Poverty Rate (%) 1986 4 (1986, 1988, 1990) are lower than for

2 subsequent years with equivalent unemployment rates. Note, however, that 0 0246810 12 the impact of the 1991 benefit reforms was Unemployment Rate (%) much larger when using a relative threshold Source: Household Incomes Report, Perry, (2017); Infoshare, Statistics New Zealand than when poverty is measured using a constant value threshold. community experience and that might not Group and the Child Poverty Action While a wide range of different have been identified through a process Group, which have focused more closely government programmes have an impact centred on Wellington. TacklingPovertyNZ on the tax–benefit system and particularly on both the prevalence and severity of brought together from a (in the case of the Expert Advisory Group) poverty, in the English-speaking world diverse range of backgrounds in six on child and family tax credits. anti-poverty policy has tended to focus on regional workshops aimed at gathering changes to the benefit system, tax credits, ideas on how to tackle the problem. Now, Poverty in New Zealand: what we know and often childcare. For example, tax more than ever, ideas such as these will be about low incomes and how to address them credits, benefit changes and childcare were important. The primary source of information on at the core of the Tony Blair Labour This article situates the trends and levels of poverty in ’s 1999 commitment to end TacklingPovertyNZ workshops in the is the regularly updated Household Incomes child poverty in Britain (Main and context of what is known about the level in New Zealand report published by the Bradshaw, 2015). The New Zealand and distribution of poverty in New Zealand Ministry of Social Development (Perry, government’s Working for Families and describes the main findings from the 2017), which provides information on package introduced in 2004 was centred on workshops. In particular, the article focuses income poverty trends using a number family tax credits to an even greater degree. on what the workshops reveal about how of different measures. Prior to the 1990s More recently, the Expert Advisory Group’s poverty is seen as a social issue outside poverty rates in New Zealand were main recommendations centred around a policy circles, and explores ideas for relatively low, ranging from 6% to 14% review of benefit rates, changes to the child addressing poverty that emerged from the depending on the measure used (ibid., tax credit and changes to housing policy. A workshops. In deciding which proposals to 2017). During the early 1990s poverty wide range of more targeted proposals focus on, a conscious decision has been rates increased dramatically, and then were also included, but the tax credit and made to highlight ideas that fall outside the stabilised to some degree over the last two benefit changes formed by far the most mainstream of policy discussion in New decades. It is over this time that the choice substantial part of the proposed Zealand, but which nonetheless retain of measure matters, with rates of relative programme, with an estimated cost of sufficient prima facie plausibility to poverty remaining high, while constant $1.5–2 billion (Expert Advisory Group on warrant a second look. In doing so, the value measures of poverty – particularly Solutions to Child Poverty, 2013). intent of the article is to complement the before housing costs – fall significantly.1 Both the tax–benefit system and policy work of groups such as the Expert Advisory Poverty rates after adjusting for housing changes aiming to encourage employment

Page 28 – Policy Quarterly – Volume 14, Issue 1 – February 2018 are sensible ways to target poverty. In contrast to this, it was evident that Acknowledging the multi-dimensional However, as with all policy programmes, most workshop participants saw poverty nature of poverty has several implications there is a law of diminishing returns. While in different terms. In particular, poverty when thinking about how to tackle poverty there is a strong case for improving aspects was viewed not simply as a state of low in New Zealand. First, there is not going to of the existing system (including increased income, but as an outcome of low income, be a single solution that can ‘fix’ poverty. benefit rates or levels of tax credits – see poor coping skills, and a ‘culture’ of poverty Multiple causes mean that what drives one ibid.), it remains the case that existing at the family level; of challenges grounded family into poverty may not be responsible levels of poverty in New Zealand will in poor regional infrastructure and for the situation of another family. Finding become increasingly hard to eliminate with opportunities; and of problems in resource a job for a family where the parents are tools that are already extensively used. It is allocation at the national level. Similarly, both unemployed may address poverty in against this background that the workshop participants saw poverty as a one instance, but is unlikely to help in a McGuinness Institute launched problem, not simply because low income different case where poverty is caused by TacklingPovertyNZ (see Box 1). is undesirable, but because low income is drug and alcohol dependency. Second and associated with other poor outcomes in the relatedly, it is crucial to think beyond Going beyond low incomes areas of health, housing, work, education incomes. No feasible transfer system – no In order to make sense of the proposals and social contact. In other words, where matter how generous – can entirely that emerged from TacklingPovertyNZ, poverty measurement has traditionally eliminate poverty. An adequate income is it is necessary to have a sense of what focused on incomes, the workshop clearly necessary to address poverty, but it the participants thought they were respondents saw poverty as fundamentally may not always be sufficient. Finally, it is developing solutions to. In preparing for multi-dimensional, and as best considered important to consider the interactions the TacklingPovertyNZ workshops, the in terms of the negative outcomes between the different consequences of McGuinness Institute considered both of associated with it. poverty. These are non-linear, meaning the main definitions of poverty found in Although there are good practical that disadvantage in multiple fields may the literature on poverty measurement: reasons for economists and others have a more severe impact than would be ‘absolute’ poverty, where income is interested in to use anticipated from the simple cumulation of insufficient for a person or family to meet precise and narrow definitions of the effects associated with each area of their basic needs; and ‘hardship’ poverty, concept, it is important to acknowledge disadvantage in isolation. where an individual or family is unable to that the intuitive view of poverty put achieve a ‘decent’ standard of living relative forward in the workshops is, in many Tackling poverty to New Zealand society (the 1972 Royal senses, the more relevant.2 We care about What can be done? TacklingPovertyNZ Commission on Social Security described families with low incomes because of the highlights some basic points that must this standard as ‘participation and effect of low incomes on other aspects of underlie any strategy to address poverty. belonging’). Both the absolute and hardship quality of life now, and because they First, there is a distinction between those definitions of poverty are income-focused, contribute to low quality lives in the future. factors that meet people’s basic needs and the main difference between them lies If low incomes did not cause hardship, in the short term, and those factors that in how the income threshold defining what poverty would not be a major social policy allow people to take control of their lives constitutes poverty is calculated. issue. in the longer term. The former ‘sustaining

Box 1: TacklingPovertyNZ TacklingPovertyNZ began as a three-day policy workshop run with the support of local councils and included both run in December 2015 by the McGuinness Institute, a non- local and national speakers, as well as participants from a partisan think tank based in Wellington, in collaboration diverse range of backgrounds. Each workshop focused on with the New Zealand Treasury. This workshop saw 36 New different issues self-selected by participants and related to Zealanders aged between 18 and 25 brought together to the nature of poverty in their area and how to address it. In discuss poverty in New Zealand and how it might be tackled. total, the TacklingPovertyNZ workshops identified 240 ideas A key suggestion from the workshop was that poverty is a or proposals for tackling poverty in New Zealand. These 240 complex issue and that a centrally driven approach might not ideas are described in the McGuinness Institute working paper lead to the best solution. Following up on this suggestion, TacklingPovertyNZ 2016 Tour: methodology, results and between March and September 2016 the McGuinness observations (McGuiness and Bunge, 2017). They include Institute organised a series of regional workshops. a wide range of suggestions focused at the individual, family, In total, six TacklingPovertyNZ workshops were held, community, regional and national levels, and addressing a in Queenstown, Manawatü, Rotorua, Gisborne, Kaitäia and number of causes and consequences of poverty. Kaikohe, involving 400 participants. Each workshop was

Policy Quarterly – Volume 14, Issue 1 – February 2018 – Page 29 TacklingPovertyNZ: the nature of poverty in New Zealand and ways to address it factors’ address the basic needs that must proactively make use of government 2. introduce special demarcation zones be met for subsistence before any thought support to achieve longer-term goals. in regions of high need; can be given to the longer term, while Finally, TacklingPovertyNZ empha- 3. revisit the role of the state as the latter ‘empowering factors’ cover the sised the range of possible responses to employer of last resort; capabilities required to exercise control poverty. Where current policy settings 4. apply a social investment approach to over one’s life (McGuinness and Bunge, represent a considered and evidence- investment in ‘hard’ regional 2017). Tackling poverty requires addressing based view of what is likely to be the most infrastructure; both sustaining and empowering factors. effective, given commonly accepted pa- 5. invest significantly in mental health; A second point is that the drivers of rameters for the nature and scope of anti- 6. target the behavioural drivers of poverty occur at different levels. Some poverty measures in New Zealand, the poverty; and things, such as human capital, are specific aim of TacklingPovertyNZ was explicitly 7. introduce asset-based assistance for to the individual or family. Others, such to widen the debate. Because of this, ide- high-risk children. as the local job market or transportation as widely discussed elsewhere – such as a infrastructure, are primarily regional in universal basic income and reforms to Simplify and standardise the benefit system nature, while some factors, such as the social housing – are not considered fur- The current system (1991 to the social assistance system, are national issues. ther in this article in favour of proposals present) is built around relatively low core welfare benefit rates and an extensive array of supplementary and discretionary Prior to 1991, New Zealand’s benefit assistance to meet the needs not covered by the core benefits. This has the advantage system was built around higher of targeting expenditure very closely core rates for the main benefits, on need while maintaining a relatively large gap between core benefit levels and accompanied by a much narrower wages. However, it also has disadvantages. Implementing the system is expensive, range of supplementary assistance and with Ministry of Social Development discretionary grants. (MSD) operating costs of approximately $1.5 billion per year. It is difficult for those in need of benefits to understand what they are entitled to, and obtaining Another important point highlighted that have been given less consideration, discretionary assistance can be a significant in TacklingPovertyNZ is the role of security and which are grounded in the Tackling- drain on beneficiary time and effort that as part of meeting basic needs. While there PovertyNZ workshops. could be better used elsewhere. Mani et al. are useful pieces of work looking at income (2013) argue that policy designers should security and poverty (see Easton, 2014), A wider range of policy options beware of imposing cognitive taxes on most analyses of poverty focus on the Not all of the 240 ideas generated through the poor and note that ‘filling out long status of an individual or family at a TacklingPovertyNZ are viable, and many forms, preparing for a lengthy interview, particular point in time, or, if they do of those that are viable are either highly deciphering new rules, or responding to consider longer periods of time, focus on specific to a particular set of circumstances complex incentives all consume cognitive the average situation of the family. or very general indeed. Nonetheless, within resources’. Equally importantly, the system However, for any given situation the level the wide range of options proposed it is is very badly designed from the point of of security experienced by people has possible to identify seven proposals that view of encouraging benefit recipients to important implications for their overall are worth highlighting. None of the seven manage independently. The existence of level of well-being (De Neve et al., 2015) ideas draws on just one comment from the extensive supplementary and discretionary and for their behaviour (Mani et al., 2013). workshops. Instead, they reflect themes or assistance is both directly contrary to an Civic literacy was also widely discussed. suggestions that were repeated more than ethos of self-reliance, and also requires The need for more education on the role once. Each of the proposals was selected both beneficiaries and MSD case workers of government, the purpose of taxation on the grounds that it has sufficient prima to devote extensive time to requesting and and the rights of people in New Zealand facie validity to be worthy of further processing additional assistance. were brought up many times in the development, although in all cases the value Prior to 1991, New Zealand’s benefit workshops. This was a crucial element of of the proposal would depend crucially on system was built around higher core rates the empowering factors identified in the precise details that emerged through for the main benefits, accompanied by a TacklingPovertyNZ. One of the key things the policy development process. The seven much narrower range of supplementary that distinguishes those trapped in a cycle proposals are to: assistance and discretionary grants. While of poverty as opposed to those able to 1. simplify and standardise the benefit the 1991 benefit cuts were intended to move to a better situation is an ability to system; improve work incentives by reducing

Page 30 – Policy Quarterly – Volume 14, Issue 1 – February 2018 benefits relative to wages, in fact the net TacklingPovertyNZ workshops highlighted would allow for experimentation at the amount received per beneficiary declined the uncoordinated nature of many programme level and more rapid roll-out by much less than the cut in core benefits regionally focused social services. This issue of programmes that worked locally. Finally, because of the increase in usage of is exacerbated by the mismatch between special demarcation zones would allow for supplementary and discretionary the regional boundaries used by different experimentation at the regional level with assistance. Rather than creating a strong government agencies (see McGuinness and different models of regional development work incentive, the most important effect Bunge, 2017 for examples). (see also the section below on applying a was to move the burden of managing One way to address this would be to social investment approach to investment additional costs from the benefit recipient create special demarcation zones in a in ‘hard’ regional infrastructure). The to the state. limited number of high-need areas. emphasis on experimentation here is Serious consideration should be given Regional demarcation zones would place a deliberate. It is likely that any significant to simplifying and standardising the sizeable proportion of the funds currently devolution of funds will involve a non- benefit system around a limited number of allocated to contracted social services by trivial risk of failures – particularly as the relatively higher core benefits but with central agencies (ministries of Health, proposed regional governance boards are reduced scope and eligibility for supplementary and particularly discretionary assistance. This would New Zealand’s existing policies aimed necessarily create both winners and losers within the benefit system. Nonetheless, a at addressing poverty are predicated on change of this nature would have several the view that the whole labour force is clear advantages. It would lower administrative costs for MSD, reducing the employable, and that benefits exist to government’s net fiscal burden even if the fall in supplementary and discretionary support people while they look for work. assistance is not quite as large as the increase in core benefits. A simpler system would reduce the cognitive burden on beneficiaries, resulting in a net gain in well- Social Development, Education, Justice likely to have less experience and being even without behavioural change. and Corrections and the Department of infrastructure to support social policy Finally, a simpler system with less Internal Affairs) in the hands of a regional decision making. However, devolving discretionary assistance would encourage body able to allocate funding within the spending power to the regions creates a culture of managing on a fixed income. zone. The zones would decentralise control opportunities to try out new things and Moving from a benefit into work would no by empowering a governance board of learn – both from success and from failure longer involve a distinct adjustment from people who reside in the area and are part – in a way that current structures have a need-based system to a fixed income. of the community to direct resources in a difficulty providing. way that addresses local needs and to Devolve resources for empowerment-related experiment with new models of service An employer of last resort programmes to the regions in special provision. The governance board would be New Zealand’s existing policies aimed demarcation zones put in place with a clear purpose, at addressing poverty are predicated on It is abundantly clear that much of New measurable goals and an agreed the view that the whole labour force is Zealand’s poverty is regional in nature. demarcation boundary. Supported by an employable, and that benefits exist to While differences between individuals external advisory board that includes support people while they look for work. and families undoubtedly explain a lot government officials, the local governance Exceptions to this state of affairs are viewed about poverty, there is strong evidence board would have the authority to both as the result of economic cycles rather than that region plays an important role. allocate resources, and possibly also set long-term historical trends. However, long- Northland, the East Cape and some aspects of local economic regulation in term trends do matter, and a proportion areas of the central North Island have order to achieve its targets. of New Zealand’s labour force may simply a long history of disadvantage spread Such zones would represent a be unemployable in the current context. across multiple different outcome areas significant break from the past, and would During the post-war period, wages for (Ministry of Social Development, 2010; carry significant policy risk. However, they unskilled labour were set domestically, New Zealand Treasury, 2017a). Despite would also have three key advantages. First, meaning that it was possible for someone this, comparatively little social assistance they would significantly reduce gaps in the with very low human capital to earn a is targeted specifically at a regional level, need–decision–provision cycle for social reasonable living in New Zealand through and the little existing regionally targeted services, and would contribute to more their own work. Globalisation has altered assistance is spread across multiple agencies targeted and responsive service provision. this, with wages for the low skilled in and allocated by central bureaucracy. The Beyond this, special demarcation zones developed countries converging with those

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First, it should focus on jobs that are labour intensive, low skilled, and which are Box 2: The changing global income currently not provided by the market. distribution Green jobs, including contributing to the government’s goal of making New Zealand Figure 2 shows the distribution of incomes at a global level between 1820 and predator free by 2030, are obvious 2000 (Van Zanden et al., 2014). Prior to the Second World War (1820, 1929), candidates. A second consideration is that the global income distribution had a single peak corresponding to working-class the employment would need to represent incomes in both the developed and developing world. However, in the years real jobs, not ‘work for the dole’. In other 1960, 1970 and 1980 the global income distribution evolved two peaks as words, the jobs would need to pay at least the incomes of blue-collar workers in the developed world pulled away from the minimum wage, and would have the those of the developing world working class. By 2000, however, the impact of standard leave and other benefits associated globalisation has pushed the distribution back to a single peak corresponding with any job. Not only will this increase the to the incomes of the working class in low- to middle-income countries such as likelihood of participation and more China.3 meaningfully contribute to reducing Figure 2: Global income distributions in selected years, 1820-2000. Thousands poverty; it will also have a direct impact on of people at given level of income in $US, 1990ppp well-being (Boarini et al., 2013). The

Thousands of people evidence suggests that the non-pecuniary 350,000 costs of unemployment are so high relative to the impact of income that providing a 300,000 job should be preferred to providing a 250,000 benefit, even if the benefit rate were at the same level as the income from the job. 200,000 Beyond the impact on the current well- being of the employed person and their 150,000 immediate family, being in work could 100,000 contribute to helping build a culture of work and provide a vehicle for human 50,000 capital development, contributing to better outcomes in the future. 100 1000 10,000 100,000 Gross income in 1990 GK$ 2000 198019701960 Apply a social investment approach to 1950 19291820 investment in ‘hard’ regional infrastructure4 Note: For an assessment of data quality, see Table 11.2. http://dx.doi.org/10.1787/888933096198 Source: Clio-Infra, www.clio-infra.eu Many countries – both developed and in the Source: How Was Life?, Van Zanden et al. (2014) developing world – have specific regional development plans. In contrast to this, New Zealand tends to take a relatively centralised in developing countries (see Box 2). government to provide employment approach. This is grounded in the small In large urban areas there may be directly (as it currently does with size of the New Zealand population sufficient demand for labour in local (non- approximately 47,000 civil servants and and centralised governmental structure. tradable) services to support a level of 300,000 people in the wider state sector). However, despite its small population size, unskilled employment at First World wage In fact, this was arguably part of the New New Zealand is a relatively large country levels, but this demand is missing in much Zealand government policy mix prior to geographically, with significant differences of regional New Zealand. Further, the the reforms of the 1980s when the Railways in infrastructure across the country. Poor demand for low-skill labour in the service Department functioned as a significant infrastructure coincides geographically with sector may not align well with the skills of buffer on the unemployment rate. In areas that are among the most disadvantaged the unemployed in the regions (e.g. a considering the role of the state as an in social and economic terms, including 50-year-old ex-freezing worker may not employer of last resort in the 21st century, Northland, the East Cape and parts of the adapt well to provision of elder care as a it is not envisaged that New Zealand should central North Island. It is certainly not career). In regional areas those without return to placing the burden of coincidental that these areas are the regions marketable skills may simply be employment on a key piece of the country’s where iwi were most successful at holding unemployable at any wage rate acceptable transportation infrastructure. Nor is it onto their land during the 19th century, within New Zealand society (Moretti, 2012). envisaged that the state should enter into and which are subsequently characterised While it is beyond the government’s competition with the private sector on a by high levels of Mäori land ownership power to rewind the global economy to the large scale. Instead, any direct employment and historically low levels of infrastructure post-war period, it is not unfeasible for the solution must meet three criteria. investment from central government.

Page 32 – Policy Quarterly – Volume 14, Issue 1 – February 2018 Direct investment in regional Figure 3: Risk of relapse after recovery from depression by treatment type. development, particularly through ‘hard’ 100 infrastructure such as roads and bridges, is one obvious way to address regional disadvantage. Strategic national infra- 80 structure decisions are currently made centrally on the basis of a cost-benefit 60 analysis that is heavily weighted towards areas with more people and higher levels of % depression-free 40 economic activity. A broader social investment approach to regional infrastructure would weight regional 20 economic development and the social gains from better regional infrastructure towards 0 0 20 40 60 80 deprived areas more heavily. Months after recovery Building the infrastructure would, Treatment by cognitive behaviour therapyOther itself, direct economic resources into the Risk of relapse after recovery from depression12 regions, with a strong tilt towards areas of Source: Layard, (2006). work that employ lower-skilled labour. Beyond this, there are two additional gains. medical outcomes (e.g. quality-adjusted poverty by increasing the mental resources Tourist numbers in New Zealand are life years; Layard, 2006) or individual well- and coping skills of those managing with currently high, placing significant pressure being (Layard, 2005). Cognitive behavioural limited incomes. on traditional tourist destinations (LGNZ, therapy,5 for example, has been shown to 2016). Investing in regional infrastructure work well in a British context, and would Target the behavioural drivers of poverty in places like the East Cape or rural likely have similar effectiveness here (Figure A common theme emerging from the Northland would increase tourist numbers 3). TacklingPovertyNZ workshops was the in these areas – providing an economic Increased investment in mental health impact of a ‘culture’ of poverty and the role boost – and assist in spreading the burden is already a priority within New Zealand’s of alcohol, gambling and loan sharks in of tourism more evenly across the country. social policy mix and it recently received trapping families in poverty. These issues In addition, improved infrastructure significant additional funding as part of revolve around human irrationality in would contribute to addressing another the 2017 Budget (New Zealand Treasury, behaviour and limits on decision-making key issue repeated across the 2017b). However, it was a consistent theme capability. The effort involved in coping TacklingPovertyNZ workshops – the across the TacklingPovertyNZ workshops with life on inadequate resources leaves difficulty of access to services in rural that this could be further strengthened and little energy for dealing with internal biases. areas. more proactively targeted towards those in Thinking rationally is tiring (Kahneman, need. A particular concern with mental 2011), and hard to do for a person who Invest significantly in mental health health service provision is that, like other needs to spend all their energy on simply Poor mental health is closely associated with forms of health services, it is most coping with life in the absence of adequate poverty. This is because poverty can cause effectively used by those with relatively resources (Mani et al., 2013). mental health issues (e.g. stress leading to high levels of human and economic One policy lever to address poverty is depression) and because mental health resources to draw on. In contrast, to make to focus on the environment in which issues can cause people to end up in poverty a difference to poverty, mental health people find themselves and help remove (e.g. substance abuse leading to job loss). In services will need to reach those who are the most obvious environmental pressures the 2012/13 New Zealand Health Survey, least able to reach out themselves. towards patterns of damaging behaviour. 17.1% of adults living in the most deprived The gains from increased investment in Loan sharks, for example, thrive areas had been diagnosed with a common mental health are clear. In addition to fundamentally on the irrationality and mental disorder at some time in their lives, being a major source of misery in and of short-term bias of their clients. Gambling a rate 1.6 times higher than among adults itself, poor mental health has a strong and alcohol are other industries that living in the least deprived areas (after negative impact on employment and is disproportionately target human adjusting for age, sex and ethnic differences). associated with higher levels of deprivation. vulnerabilities, and which particularly However, mental health remains the poor A concerted effort to address mental health affect the population at risk of poverty. cousin of physical health in the New Zealand – particularly in the more deprived areas Akerlof and Shiller (2016) characterise health system. The irony here is that there of the country – would combine a such industries as ‘phishing for phools’, but are mental health treatments that work, significant direct effect on poverty through the reality is that many participants in the and that such treatments show a very high increased employment and incomes with TacklingPovertyNZ workshops also return on investment whether in terms of a less direct, but important, effect on identified these sorts of issues.

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While crude bans on social ‘bads’ of in the future (Kim and Sherraden, 2011). strong resources. This is particularly the this sort have not historically been Simply topping up current incomes does case for those most at risk: wards of the particularly effective, it may be worth not automatically address the capital deficit state. Because this group is relatively small, investigating whether policy can be more associated with long-term poverty. it would be possible to implement an asset- effectively targeted at either eliminating One idea that focuses on the issue of based scheme focused on wards of the state some of the techniques by which negative assets and capital stocks is the concept of that both involved significant enough industries ‘phish’ for people (i.e. the ways asset-based social policy. This was levels of assets to make a difference to life in which systematic biases in people’s influential in the United States during the chances and was fiscally reasonable. behaviour are exploited for commercial late 1990s (Ackerman, 1999) and with the Similarly, the negative consequences of ends) or if there are effective ‘nudges’ that British government in the first decade of becoming a ward of the state are high can be deployed to discourage people from the new millennium (Emmerson and enough that there is comparatively little consuming social ‘bads’ excessively. The Wakefield, 2001; Dolphin, 2009). In New risk of inducing negative behavioural effectiveness of anti-tobacco campaigns is Zealand, asset-based welfare was influential change (i.e. people trying to make their worth considering here, even though this in establishing the KiwiSaver scheme. Most children wards of the state in order that model has been most effective in higher asset-based social policy initiatives focus they are eligible for assistance). socio-economic groups. on building up savings or even endowing The proposal is therefore to use wards of the state to test the impact of a relatively generous asset-based social policy scheme, Poverty is closely associated with a lack with an endowment in the tens of thousands of dollars. Clearly, like existing not just of current income, but of the savings schemes, the endowment would assets that underpin better outcomes in have limits on when the assets could be accessed and for what purposes. Education, the future ... starting a business and buying a house, for example, would all qualify. A scheme of this sort would have three positive effects. First, it would direct a significant asset to A policy focus on the behavioural people with a small quantity of savings as some of New Zealand’s most disadvantaged drivers of poverty would represent a an inducement to save. However, the core citizens at a crucial juncture in their lives, relatively low-cost approach to addressing idea behind asset-based welfare was never having a direct effect on their ability to poverty and, if well implemented, could limited to relatively small savings manage the post-school transition. Second, achieve significant results. Focusing on the incentives. In fact, proponents of asset- the mere fact of having an asset would have behavioural drivers of poverty also allows based social policy have often argued that a positive impact on how people evaluate for nuance in policy. For example, it a desirable goal would be to endow all their options during secondary school. suggests recognising that whether a school leavers with a significant asset that Knowing that the cost of tertiary education behaviour such as drinking is destructive could then be used to fund further can be managed or that the capital exists depends heavily on context. This education, a business idea or housing, or to start a small business can affect the recognition might, for example, suggest simply form the basis of lifetime savings perceived pay-offs of staying in school and targeting bottle store locations but (Ackerman, 1999). Although interesting putting the effort in to achieve there. continuing to allow pubs or other conceptually, none of the asset-based Finally, the proposal would provide a institutions that serve a socially useful programmes actually implemented have strong test as to whether asset-based social purpose (Dunbar et al., 2016). ever involved large sums, simply because policy actually works at a relatively limited of the fiscal cost of instituting such a cost. Introduce asset-based assistance for high- programme for all school leavers. risk children In fact, asset-based social policy would Conclusion One of the key determinants of the life be an inefficient use of government funds The explicit aim of TacklingPovertyNZ was chances of children is the asset base with if targeted widely. As mentioned above, to give a jolt to the New Zealand policy which they enter adulthood. Children from most young adults leave home with strong discourse with respect to addressing poverty most New Zealand families will finish their human capital and the support of parents and to try and shift the range of options schooling with a strong base level of human who – even if they cannot provide them that are given serious consideration. It is capital and the support of their parents in with a large lump sum of money – often the case that credible policy options implicitly underwriting the risks involved nonetheless do form a sort of safety net in are simply considered out of scope for in starting a business or undertaking the face of life’s risks. However, those reasons of perceived political feasibility, further study. Poverty is closely associated children most at risk of future poverty lack of profile or degree of difference with a lack not just of current income, but often lack both high levels of human from the status quo. Politics, in its normal of the assets that underpin better outcomes capital and the support of a family with mode, is incremental. In fact, it is possible

Page 34 – Policy Quarterly – Volume 14, Issue 1 – February 2018 to imagine that policies to address any of proposals to address poverty. policy proposals are not. Moving from idea issue fall into three main groups: (a) Maintaining a broad base of support for to policy proposal to experiment is an area policies that won’t work; (b) policies that measures to eradicate poverty is difficult where collaboration between communities, work and are politically feasible; and (c) when the policies in question are seen to social entrepreneurs and local government policies that might work but that are benefit only a narrow slice of society might be fruitful, particularly if this is not politically feasible for one reason (Korpi and Palme, 1998). In contrast, a supported by significant data and analytical or another. Policies in category (a) are suite of different measures has a better expertise from central government. undesirable, and it can be assumed that chance of engaging support from different However, it is not immediately clear how most policies falling into category (b) parts of society. best to catalyse such action. are either already implemented or under More generally, the increasing 1 With a constant value poverty threshold, poverty is defined consideration. TacklingPovertyNZ, and the availability of data on social outcomes and as having an income below a threshold set relative to median ideas presented in this article, are focused ability to analyse it suggests moving from income in a given year and adjusted to remain constant in real terms thereafter. A relative threshold defines poverty as on trying to identify policies in category an ex ante evaluation strategy for policy having an income below a threshold set relative to median income in each year. (c). (where options are considered upfront and 2 Distinct from narrow definitions of income poverty, a multi- A traditional policy response to the resources channelled to the preferred dimensional view of poverty actually has strong empirical and conceptual foundations. Sabina Alkire, for example range of options identified through choice) to an ex post evaluation strategy (Alkire, 2008), grounds a multi-dimensional conception of TacklingPovertyNZ would be to consider that is more experimental in nature and poverty in Amartya Sen’s capabilities approach to measuring welfare (Sen, 1998). Here, poverty is seen as deprivation in the relative merits of each and arrive at a places an emphasis on trying many things the capabilities required for a person to pursue the sort of life they have reason to value. recommendation as to the preferred course and evaluating what works. To be 3 Note that, from a global perspective, this shift in incomes of action. No such attempt to identify a successful, however, such an approach represents a significant welfare gain to the large numbers of people moved out of absolute poverty in places such as ‘best’ option is made here. There are two requires, not only data on social outcomes, China and India. 4 Social investment involves investing resources upfront to reasons for this. The first reason is that but also a relatively high tolerance for enable people to thrive in the longer term, with a particular poverty is multi-dimensional, both in its failure, and places a high premium on focus on using data to identify people’s needs and to help understand the impact of government expenditure on the causes and in its consequences. This variety. It is in this context that the range government’s future fiscal position. In this context, it involves suggests that anti-poverty policy also needs of options identified in TacklingPovertyNZ recognising that hard physical infrastructure has social as well as economic benefits that should be taken into account. to be multi-dimensional. A suite of are of greatest interest. Four of the options 5 Cognitive behavioural therapy is a type of psychotherapy which focuses on helping a patient to develop personal different approaches to addressing poverty in particular – 2, 3, 5 and 7 – would lend coping strategies that target current problems and on is likely to be more effective than placing themselves strongly to an experimental changing unhelpful beliefs or attitudes. It is one of the most widely used and best supported empirically mental health too much weight on a relatively narrow set approach. However, this also highlights the treatments for anxiety and depressive disorders. of policy levers. This is true both from the limitations of a community-driven perspective of the net impact on poverty, consultation such as TacklingPovertyNZ. and also in terms of the political viability While ideas are generated, fully developed

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Kahneman, D. (2011) Thinking, Fast and Slow, New York: Farrar, Strauss Ministry of Social Development (2010) The Social Report 2010: regional and Giroux indicators, Wellington: Ministry of Social Development, http:// Kim, Y. and M. Sherraden (2011) ‘Do parental assets matter for children’s socialreport.msd.govt.nz/2010/regional educational attainment? Evidence from mediation tests’, Children and Moretti, E. (2012) The New Geography of Jobs, Boston: Houghton Mifflin Youth Services Review, 33 (6), pp.969-79 Harcourt Korpi, W. and J. Palme (1998) ‘The paradox of redistribution and New Zealand Treasury (2017a) Insights, https://insights.apps.treasury.govt. strategies of equality: welfare state institutions, inequality, and poverty nz/ in the Western countries’, American Sociological Review, 63 (5), New Zealand Treasury (2017b) Budget at a Glance 2017, Wellington: New pp.661-87, retrieved from http://www.jstor.org/stable/2657333 Zealand Government Layard, R. (2005) Mental Health: Britain’s biggest social problem?, Perry, B. (2017) Household Incomes in New Zealand: trends in indicators London: London School of Economics of inequality and hardship 1982 to 2016, Wellington: Ministry of Social Layard, R. (2006) ‘The case for psychological treatment centres’, BMJ, Development 332 (7548), pp.1030-2 Royal Commission on Social Security (1972) Social Security in New LGNZ (2016) Addressing New Zealand’s Most Pressing Local Tourism Zealand: report of the Royal Commission of Inquiry, Wellington: Infrastructure Needs: tourism infrastructure study, Wellington: LGNZ Government Printer Main, G. and J. Bradshaw (2015) ‘Child Poverty in the UK: measures, Sen, A. (1998) Development as Freedom, Oxford University Press prevalence and intra-household sharing’, Critical Social Policy, 36 (1), Sen, A., J. Stiglitz and J.P. Fitoussi (1999) Report by the Commission on pp.38-61 the Measurement of Economic Performance and Social Progress Mani, A., S. Mullainathan, E. Shafir and J. Zhao (2013) ‘Poverty impedes St John, S. (2013) ‘Preventing, mitigating, or solving child income cognitive function’, Science, 341, pp.976-980, DOI: 10.1126/ poverty’, Policy Quarterly, 9 (2), pp.47-55 science.1238041 Van Zanden, J.L. et al. (eds) (2014) How Was Life? Global well-being since McGuinness, W. and A. Bunge (2017) TacklingPovertyNZ 206 Tour: 1820, Paris: OECD Publishing methodology, results and observations, working paper 2017/01, Victoria Institute of Strategic Economic Studies (2016) The Economic Cost Wellington: McGuiness Institute of Serious Mental Illness and Comorbidities in Australia and New McKernan, S.M. and M.W. Sherraden (eds) (2008) Asset Building and Zealand, Melbourne: Victoria Institute of Strategic Economic Studies for Low-income Families, Washington: Urban Institute the Royal Australian and New Zealand College of Psychiatrists and the Mental Health Foundation (2014) Quick Facts and Stats 2014, : Australian Health Policy Collaboration Mental Health Foundation

New Publication from Palgrave Bargaining Power: Health Policymaking from England and New Zealand By Verna Smith

This monograph applies analysis, recommendations are Kingdon’s Multiple Streams made for its refinement. Framework to two policymaking The monograph also episodes of implementing offers striking lessons for pay for performance in policymakers about how to general practice, conducted negotiate successfully with in England and New Zealand. general practitioners. The Framework’s explanatory power for policymaking in This publication is available Westminster majoritarian now from Palgrave jurisdictions is tested and, www.palgrave.com based on rigorous comparative

Page 36 – Policy Quarterly – Volume 14, Issue 1 – February 2018