Friday, November 07, 2014

Two contrasting letters

Two contrasting letters in the DomPost this morning responding to an editorial about child poverty:

Wednesday, November 05, 2014

NZ Herald sends wrong message

The NZ Herald has a headline  

More childless couples in NZ

The photo accompanying it is of a young couple drinking champagne and laughing, implying more young couples are choosing to be child-free.

The photo should have been something like this:

The reason there are proportionately more couples without dependent children is the ageing population.

The clue is here:

 Marlborough was the only region where over half (53.2 per cent) of the families were couples without children, which reflected the older age structure of people in these families in this region, Mr Meech said.

Fertility rates are slightly lower than in 2006 but the total fertility rate is still 2 births per woman. High by developed world standards.

"Reduce poverty with capitalism" - true story

From the NCPA today:

Countries Boost Incomes, Reduce Poverty with Capitalism

November 4, 2014
From 1990 to 2011, the percent of the world's population living in extreme poverty fell from 36 percent down to 15 percent. Why? Douglas Irwin, economics professor at Dartmouth College, says the answer is simple: capitalism.
The drop in poverty over the last quarter-century is the greatest drop in poverty in world history, writes Irwin, and it is due to the fact that developing countries implemented business-friendly economic policies. He offers a few examples:
  • China took major steps in 1978 when it allowed private businesses and private agricultural plots while putting an end to the state's monopoly over foreign trade. Today, Chinese workers have much higher wages, and fewer of them are living in poverty.
  • India began doing away with its government licensing system in 1991. The country had required state approval not only for people to start new businesses but to expand existing ones and purchase foreign goods and parts. Like China, the state has seen a resulting drop in poverty and a boost in wages.
  • Tanzania has seen major growth after it did away with price controls and other socialist policies in the 1980s.
Capitalism, says Irwin, was given a bad reputation by Marxists who equated capitalism with the exploitation of workers. But Irwin says Adam Smith had the better description of capitalism -- a "commercial society" in which all men could participate in markets. The growth of that commercial society has brought great improvements across the globe -- while 811 million workers earned less than $1.25 per day in 1991, that number had dropped to 375 million in 2013.
Source: Douglas A. Irwin, "The Ultimate Global Antipoverty Program," Wall Street Journal, November 3, 2014.

We went up to China earlier this year and saw the truth of this for ourselves.

Those who persist with Marxism do poor people no favours.

Monday, November 03, 2014

Unintelligent DomPost editorial

Today's DomPost editorial is typical of their unintelligent position on child poverty. The editorial is italicised with my points interspersed:

The government must act on poverty

Unicef's latest report on child poverty in rich countries in the years after 2007 includes a special criticism of New Zealand.
"Australia's increase in spending on families had a more positive impact than the ambitious tax cuts implemented in New Zealand, where poverty and inequality stagnated."
The last part, at least, is blunt but fair - whichever way you dice it, poverty levels in New Zealand are flat.
Perhaps, one might argue, that is still an achievement after years of recession. The National Government has not cut such social spending as the Working for Families tax credits, a help to many low-income families during the past 10 years. But Australia's success begs the question: why are we not doing more? Prime Minister John Key says it's all about the economy - Australia famously bucked the global slump after 2007.
"A strong economy is the No 1 way to lift youngsters out of poverty," he says.
This is at least an incomplete view. It must be relevant that the Australian government launched what one group of academics calls a "massive policy response" to the financial crisis, putting "billions of dollars into the pockets of low and middle income families".

Other sources conflict with this. According to the OECD's Society at a Glance 2014:

Relative poverty in Australia (14.4% of the population) is higher than the OECD average (11.3%). Even if they still are high, poverty rates for youth and particularly those over the age of 65 declined, while child poverty increased...

The strong increase in real public social spending between 2007/08 and 2012 is mainly explained by pensions, leaving many families with children behind.


Some will argue that New Zealand cannot afford such spending. 

According to the above graph, NZ almost did.

They will also say that policies to seriously dent child poverty rates are not worth it because they end up discouraging parents from finding work. 

An evidence-based argument. But not only is work discouraged by higher benefits,  the rate of single parenthood is encouraged.

Yet those arguments get something truly wrong. What New Zealand cannot afford is to keep leaving so many of its youngest people flailing.
The statistics are complex, but it is fair to say about one in five Kiwi kids is growing up in a house with resources so meagre that they are held back from meaningful participation in society. 

No it isn't fair to say "one in five" when the claim is based solely on relative poverty numbers. Many children in low income families are not experiencing hardship.

Why not use real data?

Describing hardship for children
Material hardship means going without goods, services, and experiences that people can reasonably be expected to have. Statistics New Zealand, with the advice of the Ministry of Social Development, has provided an analysis of what this means using the New Zealand General Social Survey data. They identified eleven key indicators of vulnerability such as:
having a smoker or a victim of crime living in the house (both about 20%)
living in a high deprivation area (22%)
living in an overcrowded house (13%)
having a low socioeconomic rating on the ELSI scale
having more than one housing problem like damp, cost, cold, or inadequate
heating (10%)
having limited access to facilities like shops, schools, libraries and medical
facilities (9%).

They assessed the six percent of children with five or more of these indicators as being at high risk of being in deprivation.

Is it any wonder that we keep seeing such figures across all the social indicators? There is a "long tail" of underachievement in our schools. A quarter of people face housing costs so high they are in financial stress. A quarter does not turn out to vote.
Does anyone doubt some connection here? These problems suggest a group cut adrift from the rest of the country. 

And voter turn out in Australia (despite compulsory registration) is falling too. As defined by the percentage of the voting age population that actually voted it has been falling steadily to reach 79.67% in 2013. So much for that theory.

It is not enough to insist that only a stronger economy can solve these problems. New Zealand's economy today is stronger than it was in the 1980s - the median household income has grown by half. 

Not according to the Household Incomes Report:

More like a quarter. Much of the increased median is due to households increasingly featuring more than one earner.

Yet the number of children in poverty has roughly doubled in that time.

Only when after-housing-cost household incomes are used.

 If their parents are earning, their real pay increases have been all but eroded by spiking housing costs.

And the government is addressing the housing affordability problem on a number of fronts not least of which is trying to reduce costly local government bureaucracy and land supply issues.

If they are not, their benefits have been cut. 

I recently calculated a benefit 'package' for a sole parent and two children comparing pre-cuts 1989 with today ( in $2014). They are not terribly dissimilar. Yes, the basic rate is considerably lower, but the add-ons are higher. It isn't that benefit cuts have eroded income support payments so much as the rising median household income means more beneficiaries and their children fall below the 60 percent threshold. That's why the poverty rate for beneficiary children is so much higher than for working families.

Meanwhile, what it means to participate in New Zealand has changed - now it's an internet connection as well as bread on the table and a pair of shoes.
This is about priorities. To hold off spending more on children because it discourages work, or might slow growth, is to have them backwards. 

To not prioritise encouraging work is economic insanity.  NZ research has proved that poor children in working homes do better than poor children in benefit-dependent homes.

Everyone agrees it is unacceptable for New Zealand kids to grow up in deprivation. That must be the starting point here - it cannot be qualified away.
If the Government won't transfer more money to those in poverty, it needs to explain how else it will answer this profound problem.
- The Dominion Post

If the writer had his or her eyes open it would be clear what the government has been doing to address the problem. Welfare reform.

Plus many other practical developments over the past few years. Insulation of over 200,000 homes; increased access to GPs; an intensive campaign to reduce rheumatic fever; boosted budgeting advisory services; low cost procurement of household essentials like washing machines; low interest loans to combat loan sharks; partnering with charities providing food and clothing to poor children; home visitation programmes like Early Start; extended income-related rents to non-government social housing; and Whanau Ora, to mention some.