1. What is government doing to assist low income families? QUALITY PUBLIC EDUCATION COALITION (QPEC) March 19 th 2005 Dr Susan St John Department of Economics University Auckland s.stjohn@auckland.ac.nz

2. 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

3. Economic growth is not the answer MSD 2003 (MSD, 2004)

4. Doubling since 1996 Doubling since 1996, huge increase2003-2004

5. Children below the unofficial poverty line* (MSD, The Social Report 2004) *Based on 60% of equivalised median income after housing costs, MSD

6. UNICEF report 2005 50% poverty line

7. Whose done something about it?

8. 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

9. [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

10. 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

11. 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

12. Working for families - low lights Opportunistic behaviour Other agendas

13. 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??

15. Figure 2: Maximum per week real family assistance (1-child family) 1986-2008 ($2004) Loss of Special Benefit may leave some families on benefits “no worse off” Substantial real gains for “in work” families from 2006

16. 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

17. 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

18. 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

19. The irony of this budget

20. 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

21. 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.