Both Labour and National are now politically committed to major reductions in child poverty rates. Moreover, their ambitions are bold and explicit:
- National is promising to reduce child poverty by two thirds—at least on one specific income-based measure—by the end of the next parliament.
- Labour has committed to ending child poverty and enacting legislation containing multiple official poverty measures and related targets.
- Several other parties, notably the Greens and the Māori party, support broadly similar initiatives.
These political commitments are of historic significance. They mark the first serious cross-party consensus in New Zealand on the need to tackle child poverty in several generations—perhaps ever. Whatever the composition of the next government in New Zealand, the outcome is destined to be positive for many of our country’s poorest families. This is great news.
Not only will reducing poverty alleviate family hardship and suffering, but can also be expected to generate better long-term social and economic outcomes: improved health status, better educational results and lower unemployment.
Yet any effort to reduce child poverty on a durable basis must proceed carefully. First, there is no universally agreed way of measuring poverty and no one correct poverty threshold. As most people recognise, poverty is a multi-dimensional phenomena. It has many aspects, as well as many causes and consequences.
Ideally, therefore, a range of measures is required. These should include measures using various income thresholds as well as those assessing the level of material deprivation or hardship based on how many specific necessities people lack. Additionally, there should be explicit measures of poverty severity and persistence.
A comprehensive measurement and reporting framework along these lines was proposed by the Expert Advisory on Solutions to Child Poverty in 2012, based partly on the British Child Poverty Act 2010 and partly on advice from leading international poverty researchers. Under this approach, explicit medium-term and long-term targets would be set for several selected poverty measures.
Second, any official poverty measures and targets must be buttressed by relevant child poverty-related indicators. The Expert Advisory Group recommended five types of indicators covering outcomes in the domains of health, education, social inclusion, disability and child quality of life.
How is child poverty measured?
As it stands, the Prime Minister has committed National to reducing child poverty using one specific measure, namely the number of children living in households receiving less than 50% of the median household disposable income, before housing costs are deducted.
This is a 'relative' poverty measure, adjusted annually rather than being anchored to a particular date. It is used by the OECD, but any international comparisons must be handled with care because the economic circumstances of countries vary.
Based on the Prime Minister’s chosen measure, there were about 140,000 children living in poverty in New Zealand during 2015-16 or about 13% of all children. Since 2004, the number has fluctuated between around 125,000 and 150,000. By comparison, using a slightly less demanding income threshold, namely 60% of the median income before housing costs are deducted, there were about 215,000 children in poverty during 2015-16.
Importantly, however, in New Zealand housing costs take a large proportion of the incomes of many poor families. Hence, there is a good case for using poverty measures that deduct housing costs. For instance, based on an income threshold set at 60% of the median after housing costs are deducted, there were around 290,000 children in poverty in 2015-16—or close to 27% of all children.
According to the Treasury, the family incomes package announced in the 2017 Budget is likely, if implemented, to reduce the number of children living in poverty, based on 50% of the median before housing costs are deducted, by about 50,000—or roughly a third. The Prime Minister has now committed National to cutting the number by a further 50,000 if re-elected.
While such a goal is commendable, a substantial proportion of families with household incomes exceeding 50% of the median experience significant material hardship. Hence, it would be unwise to place undue weight on the Prime Minister’s preferred poverty measure.
Indeed, there is a strong case, as Labour acknowledges, for also including material deprivation measures and related targets in any well-designed anti-poverty strategy.
However poverty—including child poverty—is measured and whatever targets are set, other important policy questions also arise. These include how best to alleviate poverty and how to ensure that poverty reductions are durable. In short, we need proper public debate about both goals and means.
And regarding means, New Zealand desperately needs a principled system of indexation for all forms of family assistance, including tax credits, and all types of housing assistance.
Thus far, no government in our history has committed to such an approach. It is about time they did. After all, without proper indexation, efforts to reduce child poverty will inevitably be half-hearted and temporary.
Jonathan Boston is Professor of Public Policy at Victoria University of Wellington. He co-chaired the Expert Advisory Group on Solutions to Child Poverty for the Children's Commissioner in 2012-13.
This opinion piece originally appeared in the Dominion Post, 6 September 2017.