Saturday, January 03, 2015

"Voluntary vs Mandatory Charity"

Nicely laid out argument from the Future of Freedom Foundation president who says that mandatory charity makes us all poorer and, as a result, there is less wealth available to help others:

As everyone knows, one of the major differences between statists and libertarians is over the issue of charity. Libertarians believe that charity should be voluntary. Statists believe it should be mandatory.
In analyzing this fundamental difference in perspective, there is one indisputable fact: The more wealth there is in a society, the greater the amount of charity that can be provided to others.
Now, I know what a statist would immediately say: “Jacob, people are just no darned good — well, except for me of course. They have to be forced to give their money to others.”

Tuesday, December 30, 2014

Council of Trade Unions economist wrong on many counts

Council of Trade Unions economist had this piece published in the DomPost, December 27 (not on-line):

Rosenberg claims that recent OECD research  "...affirmed that higher welfare benefits and more progressive taxation were part of the solution..."  to tackling poverty. He should search the term "higher welfare benefits" in the paper. It can't be found. That is because the paper specifically promoted better in-work benefits. The NZ example would be the In Work Tax Credit.

To reduce inequality the author, Federico Cingano, recommended, " labour market policies, childcare supports and in-work benefits".

Then Rosenberg writes, "According to the Ministry of Social Development's Household Incomes Report, half of the children in hardship are in working families."

What the report actually says:

Poverty rates for children in working families are on average much lower than for those in beneficiary families (11% and 75% respectively), but 2 out of 5 poor children come from families where at least one adult is in full-time work or is self-employed.

The percentage is 40, not half. But the important distinction is that children in poor families with work tend to be in temporary poverty whereas those in families on benefits tend to experience chronic poverty. The latter is more damaging.

Next he writes "Benefits have been adjusted only by inflation..." which ignores that add-ons or second tier benefits like the accommodation supplement and family tax credits have increased by more than the inflation rate.

The claim that, "A single parent with two children in New Zealand receives 54 percent of the average wage according to OECD data..." is also suspect. The OECD will be working with basic benefits rates which are only part of what a beneficiary receives

According to Paula Bennett last year,

An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.
The average income from wages or salary in 2013 was $962 (June quarter). That makes the DPB income 67 percent of average wage. (The median earned income was $834 in 2013 but we must compare apples with apples.)

Rosenberg's over-arching view that, "Being born into a family reliant on a benefit is close to a guarantee of poverty" is correct based on the official poverty measure (at or below 60 percent of the median equivalised household income).

Unfortunately every year around one in five babies born will be benefit-dependent at birth or shortly after.

This is the behavioural pattern that is causing the poverty problem. It's the pattern that has to change. If Mr Rosenberg's solution of higher welfare benefits is adopted, those trend lines will go up.

Monday, December 29, 2014

Treasury reiterates support for welfare reform

 The Treasury's Briefing to the Minister of Finance post 2014 election contained the following:

While New Zealand's overall employment rates are high, some groups are still under-represented in employment. These include those with no or low qualifications, Māori, the disabled and solo parents. New Zealand is particularly unusual in terms of the high proportion of our children in sole parent households and our low employment rates for solo mothers. In many OECD countries solo mothers have similar or higher employment rates than partnered mothers. However, solo mothers have significantly lower employment rates than partnered mothers in New Zealand (see Figure 16). 

These employment patterns matter because paid work is an important route out of poverty and low incomes. Unsurprisingly, around two in three (63%) of the children in low income households are in households where the main source of income is a welfare payment (Perry, 2014). These families often face multiple barriers to moving into work, including low parental education, health and housing issues. However, overcoming these barriers can bring wider personal and social benefits to the parents, their children and the community. These include the long-term economic, social and fiscal costs from the related impacts of joblessness, like crime or anti-social behaviour, and poor housing, health, and educational achievement.

As the pace of economic change continues to intensify, there will be even more pressure on the state sector to support people to cope with change. This will be particularly the case as the combining forces of globalisation and technology continue to increase the pace of change in our economy. There is a debate about the degree to which employment protection, minimum wages and support for some industries and sectors are levers that should be used to try and insulate people from these changes. However, given that employment opportunities will continue to evolve in an increasingly dynamic economy, our focus is more on supporting people to be adaptable, flexible and resilient.

Therefore, the Treasury supports the increasing focus of the welfare system towards investing in those people who, without support, are most likely to be on benefits long-term. Policies that assist people to move out of long-term dependence on welfare and participate in the labour market are likely to improve outcomes for the most disadvantaged, including the most disadvantaged children, as well as enhance economic growth (The Treasury, 2013c and The Treasury, 2013e).
Figure 16: Employment rates for different groups of mothers   .