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Executive summary and summary of proposals for action

“Variation in government policy appears to account for most of the variation in child poverty levels between OECD countries.” (UNICEF)

Children have the right to a decent standard of living; a standard of living that allows them to live healthy lives free of hardship, to achieve their full potential and to participate fully in society. Poverty limits children’s daily lives and their opportunities and exposes them to the risks of illness, social and emotional damage, and poor educational attainment. Poverty experienced in the early years or for long periods casts a shadow over the future and can lead to long-term health problems, decreased potential for gainful employment and lower adult earnings. Children who grow up poor also have a higher chance that their own children will grow up poor.

Child poverty affects us all. In money terms, there are extra health, welfare, education and other costs. In social terms, it drives a wedge between those growing up with plenty and those who regularly experience hardship and social exclusion. In the future, the ongoing costs are high for society, with greater social costs, lower productivity growth and poorer economic performance.

New Zealand is not alone in facing these issues. Across much of the developed world child poverty has become a policy priority in recent years as countries respond to the consequences for children, their families and society as a whole in the short and long terms.

Child poverty rates rose sharply in the late 1980s and the early 1990s. During this period, inequality rose more in New Zealand than in any of the 20 Organisation for Economic Cooperation and Development (OECD) countries for which comparable data is available. The key drivers were low wage growth for many working families, high unemployment and reductions in welfare payments.

Since then, a strong economy, higher rates of employment and wage growth, and the Working for Families package have reduced the numbers of children in poverty in New Zealand on both relative and absolute measures. Working for Families has been significant. Before its introduction, New Zealand was among the least generous countries in the OECD in its financial support for children. Now approximately three-quarters of all families with dependent children receive some assistance. However, according to the most up-to-date data available, in 2006/07, 235,000 or 22 percent of all children were living in households with incomes below the 60-percent-of-median income poverty line, after taking account of housing costs. This figure included 171,000 children (16 percent) below the more restrictive 50-percent-of-median income threshold. These figures do not reflect the full impact of the last parts of the Working for Families package, so there may have been some improvement since then. However, recent rises in many basic living costs will have offset some of these gains.

Of particular concern is the fact that child poverty is unevenly distributed across society. For children living in sole-parent families, the rate of poverty is five times as high as that for children in couple households. Poverty rates are also significantly higher among Maori and Pacifica children than Pakeha children.

Being in a household dependent on a work and income benefit greatly increases the risk of a child being in poverty. The poverty rate for children in households where there is no full-time worker is six times higher than for those where at least one adult is in full-time work. The most recent figures show that almost two-thirds of children in poverty are in households without paid employment or with only part-time work; many of them will be in families receiving a work and income benefit. There is clear evidence that the value of the main benefits and supplementary assistance is currently too low to provide an adequate safety net for many children.

As more parents who are in a position to work have found jobs, families on benefits are more likely to be those with greater caring responsibilities, for young children or for ill or disabled family members. Two out of every five children whose disability is sufficiently severe for their carers to receive the child disability allowance are living in families dependent on a core benefit.

The well-documented short- and long-term consequences of child poverty make it imperative that children do not continue to miss out on the basics. Ending child poverty means ensuring children have access to enough food, clothing, adequate shelter, and health care and the learning experiences and opportunities to develop to their full potential. While parents and caregivers have a primary responsibility, they need financial and other support to equip them to provide these essentials for their children. We all benefit from the healthy development of New Zealand children. Similarly, we will all pay the price for getting it wrong.

Lasting solutions to child poverty require action on many fronts, including economic management, taxation, labour market, education, health, welfare and housing policies, as well as support to help families facing particular difficulties. A great deal has already been done, or is under way; but to make further and substantial progress, more is needed.

Giving children a good start

Developmental science substantiates the wisdom of tilting public expenditure towards the early years of life. Government services need to ensure adequate income support and access to health care to safeguard the health of babies and children. Ensuring children are enrolled with Wellchild and a general medical practitioner (GP) from birth, and that they have free access to after-hours medical attention and GP services away from home, are vital to improving health outcomes for poorer children. The proposals for action also suggest tilting increases in expenditure through tax credits towards young children.

Damp, cold housing and overcrowding are a common experience of children living in poverty, and contribute to ill-health, poorer learning environments and family stress. Around half of Pacifica children and over a quarter of Maori children live in overcrowded housing. Expanding social housing sufficiently to house all families with children meeting the Housing Corporation’s ‘severe’ and ‘significant’ housing-need criteria, increasing the maximum value of the accommodation supplement, and providing incentives for insulating houses, will improve housing for children in low-income families. The government’s initiative to insulate all state houses within five years is also welcome, as it will improve the quality of their environment, and their warmth and health.

When children are very young they benefit from one-on-one care. Paid parental leave has benefited babies, employees and employers greatly since it was introduced in 2002. However, the maximum payments are too low, and the 14-week period of paid leave needs to be increased to 12 months.

Access to good quality free or low-cost early childhood care and education is vital for supporting parents who are in paid employment. It can also promote children’s cognitive and social development, with lasting effects on subsequent educational attainment. Even after the welcome introduction of the ‘20-hours free early childhood education’ policy for three- and four-year-olds and the increase in the childcare subsidy, there are still not enough affordable, high-quality early childhood care and education services to accommodate the needs of children and enable many parents to work, or to work the hours they want. This problem appears to be most acute in low-income communities. Therefore, increasing the supply of quality early childhood care and education services in low-income areas, and ensuring they meet the needs of Maori and Pacifica children, must be high priorities.

Supporting parents to work

Supporting parents in work, and ensuring they gain financially from their employment, is critical to reducing child poverty.

The paid parental leave and early childhood care and education proposals above are important ways of making it easier for families to combine work and parenting. Better access to out-of-school care services is also needed.

In the long term, the best way to increase parents’ earnings is to improve their qualifications and skills to enhance their opportunities in the labour market. For the next generation, this means ensuring all children have quality early childhood care and education and they are supported so that they achieve good results at school. As many poor parents today did not have these advantages, learning and skills development at work is all the more important to increase their productivity, so that they and their children can thrive in an economy that rewards knowledge-based skills.

Better part-time jobs are another part of the story. More than 40 percent of children of sole parents who have part-time work live in poverty, so increasing the range and skill level of jobs that can be part-time is likely to reduce child poverty. Many others who are not working could improve their family’s income with part-time work.

Such improvements help to create a ‘virtuous circle’, where young people feel more hopeful and positive about gaining qualifications and choosing a career, knowing that in the future they will be better able to balance their working lives with their family aspirations.

Supporting families with children financially

Working for Families significantly increased the value of family tax credits and the number of families receiving them. Approximately three-quarters of all families with children now get some money from Working for Families.

Before Working for Families, New Zealand’s expenditure on financial support for children was among the lowest in the OECD. These changes tilted support in favour of families with employment relative to those receiving a benefit. This change and strong employment growth have enabled some parents to move into employment and out of poverty. However, child poverty remains high among families living on benefits. Core benefit rates are too low for many families, and their buying power remains less than it was before the 1991 benefit cuts. Most children in families dependent on benefits are poor and, once housing costs are taken into account, some of these children are living in severe hardship. This has an immediate, and often lasting, effect on such children.

Regarding benefit rates, the example of New Zealand Superannuation is instructive. New Zealand has achieved an internationally low level of poverty among the elderly by providing old age pensions at an adequate level and adjusting them annually using a combination of price and wage changes. A similar approach to adjusting working-age benefits would better maintain benefit levels over time and could help reduce child poverty.

Currently, family tax credits pay more for older children. This is at odds with the reality that younger children need more parental care, and family incomes are likely to be lower when children are younger. Increasing the overall level of support to young children would help reduce child poverty, and target a time in children’s lives when empirical evidence shows that poverty has a foundational effect on their development.

Similarly, further improving access to low-cost or free early childcare and education services and out-of-school services would probably be more effective in helping parents to take up work and in reducing child poverty than the in-work tax credit, most of which is paid to better-off families.

Making the child support system work better for children and parents would reduce poverty among many children in sole-parent or separated families. At present child support payments paid to custodial parents on benefits are retained by the government to offset the cost of the benefit. Passing on these payments to the custodial parent, and treating the income the same as beneficiaries’ other earnings, could reduce poverty for many children whose parents do not live together. In Australia, a similar policy reduced the poverty rate in sole-parent families by six percent.

Targets and action plans

Targets focus our efforts. As well as setting targets for the alleviation of income poverty, it is important to track children’s access to services and life opportunities, to set targets for Maori and Pacifica children, and to track the outcomes of other vulnerable children. High-level commitment and a strong cross-agency agenda for the progressive elimination of child poverty are more likely to be achieved with broad-based buy-in, and work with relevant community organisations. Ultimate oversight should rest with a minister and department that does not also have responsibility for one of the specific areas concerned. Making Statistics New Zealand responsible for reporting against the targets would provide the means for independent monitoring across government.

This report canvasses a number of wide-ranging options that will contribute to a fairer distribution of resources among all New Zealand children. Achieving good outcomes for New Zealand children will depend upon the investment we are willing to make as a society in their interests. We cannot afford them to fail in significant numbers just because they happen to be born to parents who are themselves poor, or who encounter adverse events such as death, separation or illness, leaving them impoverished.

These proposals for action are offered as advice to the Children’s Commissioner and Barnardos, as a means of reducing child poverty in New Zealand. Some of them are broad, long-term preventative measures, while others are specific and short term, but each can contribute to reducing child poverty in New Zealand. To be successful a package of actions is needed across many fronts.

Two things are clear: firstly, the government can impact directly on child poverty and has done so; the choices governments make do make a difference. Secondly, we all have a stake in making sure that children have the best possible start by ensuring that those who care for them, and they themselves, have the essentials expected for living in modern New Zealand, and the chance to develop as healthy citizens. We have a choice to make. Let us ensure it is a fair and dignified choice.

Proposals for action

The proposals for action discussed in this report are set out in the table below. They are grouped under the four key themes discussed above. The page number indicates where they are discussed in the report.

Some proposals are given a higher priority than others. Choosing priorities for expenditure is rightly a matter for public and political debate. That said, in our opinion, the most urgent next step to reducing child poverty is to address core benefit rates, because they are plainly inadequate. The children living in benefit-dependent families are those living in the most significant hardship. The second priority would be to tilt tax credits towards an earlier stage in the life cycle while extending remuneration and the duration of paid parental leave, increasing the availability of free or low-cost child care and education in low-income communities, and allowing child support payments to be passed on to custodial parents on benefits.