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Tacklingpovertynz: the Nature of Poverty in New Zealand and Ways to Address It

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Tacklingpovertynz: the Nature of Poverty in New Zealand and Ways to Address It Conal Smith TacklingPovertyNZ the nature of poverty 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 New Zealand’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 health outcomes – the 2017 election committed the party reaching Third World standards in some areas – high crime to introducing legislation to set a child poverty reduction 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 Wellington-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 Policy Quarterly – Volume 14, Issue 1 – February 2018 – Page 27 TacklingPovertyNZ: the nature of poverty in New Zealand and ways to address it 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 New Zealanders 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 New Zealand government’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
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