Listener 27 November, 1993.
Keywords Distributional Economics; Social Policy;
Some months ago I was invited to speak to a seminar on ‘Family Issues’ – I willingly accepted (the seminar, held last month, was a joint effort by Barnardo’ s and Birthright,reflecting the increasing co-operation between the two organisations concerned about different aspects of child needs). Although there has been a lot of amateurish work on quantitative aspects of family poverty in recent years, there are important things to be said, When I prepared my paper I found that the conclusions I had reached warranted my triple-checking the double check. Two of them were spectacular.
The numbers in poverty increased from 360,000 in the March year 1990 to 510,000 in the March year 1992 – an increase of about 40 percent. In New Zealand most of the poor are in families with children. I used the 1972 Royal Commission on Social Security poverty line here, but any reasonable definition of poverty would still generate an increase of around 40 percent.
In my paper I consider the reasons for the increase, and isolate two main factors. The first was the increase in unemployment ( using the official figures) from 7.1 percent to 10.6 percent over the two years, which hit family market incomes. Additionally, benefit levels were cut in April 1991, often by more than 10 percent in real terms.
The Household Income and Expenditure Survey confirms that the incomes of households with children fell substantially over the two years, especially for the poorest. For instance, the household one-fifth from the bottom of all those with dependent children had experienced a 11.9 percent fall in real terms, while those one-fifth from the top had a 4.7 percent fall.
The poverty data finishes with the March 1992 year, so I turned to assessing the changes since, using the recently published Treasury economic and fiscal forecasts. Out of that rose the second spectacular finding. Even if those forecasts are achieved, the inequality generated since 1990 will not be reversed in the next three years: unemployment is expected to remain high, in the 9-to-10-percent range; wage rates of the low skilled are not expected to rise much in real terms; the real level of welfare benefits is not being increased; other assistance, such as housing and accident compensation, is being cut; the nominal level of family support is not rising; user pays will increase because real spending on education and health is being cut; many families face powerful poverty traps, including near-100-percent effective marginal tax rates, that discourage them from taking initiatives to better themselves.
Because Treasury projects modest growth, and because the pattern of growth favours the rich, the outcome is that poverty (on the standard measure) would still claim nearly half a million people, and perhaps more, in three years time. There is no significant trickle-down effect. If we want to reduce poverty we have to take specific action to redistribute some of the increase in national production towards poor families.
On the day I presented my paper, a Unicef study, Child Neglect in Rich Nations, was released. New Zealanders have a special interest in the United Nations Children’s Fund. The efforts of a New Zealander, Bill Sutch, were a major factor in preventing the fund’s closure in 1950. Dr Sutch came back to a distinguished career in New Zealand, and his 1971 essay ‘Our Children, Our Future’ has been seminal in social policy thinking..
The Unicef report argues that there are two family-policy strategies among rich countries: the Anglo-American approach of neglect by the state, and the European one of support. There is but one paragraph on New Zealand:
“The small country of New Zealand offers a cautionary tale. Its recent history provides sobering evidence of the American mode1’s ability to wreak havoc in both the economic and social spheres. Long regarded as one of the world’s most enlightened social democracies, New Zealand has, since 1984, demolished a cradle-to-grave social welfare system in the name of economic efficiency. Nevertheless, untrammelled markets have not produced vigorous growth. On the contrary, eight years of stringent monetarist policies have produced massive unemployment, rising crime rates, a widening gap between the rich and the poor, and a declining GDP. Between 1985 and 1990, New Zealand’s GNP fell by 0,7 percent, the worst record of any industrialised country, while unemployment more than doubled. The deterioration in living standards has been particularly severe among families with children, with predictable results. New Zealand now has the highest youth suicide rate among industrialised countries, and reported cases of child abuse have doubled since 1985.”
There are some obvious misconceptions here, but the basic message is sound.
After I received my seminar invitation, the Prime Minister set the election date – for seven days after the seminar. I gave the paper as if the election was months away, remarking, ‘I propose to treat politicians in the same way they treat families: they are very important, but we ignore their interests for all practical purposes.’
Child poverty was not on the election agenda. Children do not vote, and their parents are far too busy to be politically active. Our politicians hardly care about the issue. (The last to do so, I recall, was Anne Hercus.)
They do not care because the public does not care. except for a small minority, including organisations such as Barnardo’s and Birthright. What happens to the children next door, or in the next suburb, or the next town, because of economic pressures on the family is not a major preoccupation, But we are concerned ahout the country’s lack of skills and the incidences of unemployment, ill health, suicide, marriage breakup, crime and violence, all of which can be reduced by giving those involved a better deal when they are children. Funny that.