What is government doing to assist low income families?

QUALITY PUBLIC EDUCATION COALITION (QPEC)

March 19th 2005

Dr Susan St JohnDepartment of EconomicsUniversity Aucklands.stjohn@auckland.ac.nz

Why the poorest families struggle in the education sector

• The benefits cuts of 1991

• Tax cuts of 1996

• Introduction of the Child Tax Credit,

• Lack of indexation of Family Support

• The explosion in housing costs

• Student loans and other debt

• Casualisation of low wage employment

• Social hazards such as drugs and gambling

• Time-fractured nature of family living.

• Invisibility of children in policy making

Economic growth is not the answerPercentage change in average household equivalent

disposable income by decile, 1982 - 2001

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

1

Deciles

Percentage change

MSD 2003(MSD, 2004)

Doubling since 1996

Figure 1 Food parcels 1996-2004Auckland City Mission

0

1000

2000

3000

4000

1996 1998 2000 2001 2002 2003 2004

Doubling since 1996, huge increase2003-2004

Children below the unofficial poverty line* (MSD, The Social Report 2004)

0 10 20 30 40 50 60 70

Children in sole parent families

Children in two- parent families

Total dependent children

Per

cen

tag

e (%

)

1987/88 1992/93 1997/98 2000/01

*Based on 60% of equivalised median income after housing costs, MSD

UNICEF report 2005

50% poverty line

Whose done something about it?

Is it all the fault of “9 long years under National”

• UNICEF 16.3% 2000

• MSD 14.7% 2005

What has the government done?

• income related rents

• Minimum wages

• Working for families

• [Working for families] is the biggest offensive in the war against child poverty in decades– Helen Clark

• Using a poverty value measure of 60 per cent of median household income there is expected to be a 30 per cent reduction in child poverty by 2007/08.

Budget 2004

The poorest of poor children are those in benefit families- MSD

• 250,000 children on benefits– MSD The social report 2004

• 300,000 children in poverty

– 176,000 with parents on benefits

– 122,000 with parents in work

Working for Families- highlights

• 2005: Increases in Family Support $25/$15

• 2006: In Work Payment, threshold for Family Support increases

• 2007: Extra $10 Family Support

Working for families - low lights

Opportunistic behaviourOther agendas

Neglect of family assistance

From Post war security

• 1986 Family Support/ Family benefit

• 1991 Family Support

• 1996 Family Support and the Child Tax Credit

• 2005 Working for Families??

Figure 2: Maximum per week real family assistance(1-child family) 1986-2008 ($2004)

30

50

70

90

110

130

150

Years ended March

Family Support withCTC or IWP

Family Support

After core benefitloss

Loss of Special Benefit may leave some families on benefits “no worse off”

Substantial real gains for “in work” families from 2006

Problem with the “In work Payment”

• Replaces the Child Tax Credit– Families get at least $15 more week

• Only applies where there are children• Complex

– Hours worked required• Discriminatory

– Sole parents– Maori and PI

• Families “in work” get complex benefit top-ups from the state

• Hurts children when jobs are lost – Or hours worked are not met

Why does WFF do very little for the poorest children?

Primacy of work incentives over immediacy of ending child poverty

• Beliefs around whose work incentives are the most important– Middle income parents– Parents on benefits

• Multiple goals– Core benefit restructuring– Cuts to hardship provisions

Why should child poverty be the focus?

• Child poverty damages now– Public health approach– Investment approach– Rights approach

Implications• Reducing child poverty requires increasing

income by real redistribution now– then focus on dysfunction– work follows does not lead– accept some parents cant work

• Creating work incentives can’t justify keeping families on benefits in poverty

The irony of this budget

High effective tax rates long income ranges

• A 4-child family on over $38,000

Earns another $1000

tax 330.0

Loss of Family support 300.0

ACC 12.2

Student loan 100.0

Retains only $257.8

Conclusion• WFF delivers a significant real redistribution

to working families by 2006/8

• Restructuring benefits in 2005 has muddied the waters

• Those who fail to qualify for the IWP in 2006 are left further behind

• WFF is too little and too late to make significant impact on the poorest children.