The poverty trap

By Brian Easton In Economy

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13th October, 2012 2 comments
The poverty trap

photo Stephen Parker

Around 40 years ago, social scientists estimated that well over half of New Zealand’s poor were children and their parents, and pointed out the lack of sufficient income would stifle the development of these children. To this day, children and their parents remain our largest group of poor. Over the past four decades, a huge pile of reports on child poverty has built up. As is characteristic of New Zealand studies, they are strong on measuring and describing the phenomenon, strong at urging policies of various degrees of effectiveness, and lamentably weak at analysing why the poverty exists – which may be the reason so little has been done to address it. We have just had another outbreak of such reports, which have generated another round of tut-tutting. But will they do any better?

Children consume about $20 billion a year, about a sixth of the total private consumption. This excludes the cost of public education and health, and also the labour cost of parents caring for their children – for some parents this means lower or even zero incomes. Only about $5 billion of that consumption is funded by the New Zealand Government in social security and tax transfers. The rest comes from parental contributions, averaging about $300 a week for each child. Although poverty is caused by insufficient income, one of the more foolish responses is to try to solve child poverty with higher wages. Many wage earners do not have children, and many parents do not have paid jobs. If we want to eliminate poverty, it is going to have to be by transfers from the state. But do we want to?

Two broad models shed light on this. One is that children are like pets – something that enhances parental welfare – and therefore the parents should pay for them. No one argues that social security should be extended to cats and dogs. (Because livestock are treated as a cost of production for tax purposes, the Government treats cows and sheep better than children; even the costs of a livestock manager’s efforts are tax deductible – parents’ are not.) The second model is that children are an investment in our future. When we retire, we depend on them to produce the goods and services (and pay the taxes for New Zealand Superannuation). If families under-invest in their children – and when their income is seriously constrained, that is inevitable – the children will suffer. But so will society as a whole. Not only will the retired suffer when it becomes the younger generation’s turn to fund them, but the under-invested-in children will cause more government spending, such as on law and order and healthcare, and other government spending – on education – will be inefficient. If we under-invest in our children, we will all suffer. Claims New Zealand is a great country to raise children in are not borne out by our health statistics.

There is a third approach that usually gets overlooked: the perspective of the child. The neglect is nicely illustrated by the bill before Parliament that would empower the Government to cut the benefit payments of households that do not look after their children. Children who are already victims will suffer further. The practice in some countries of punishing rape victims is barbaric; this bill is equally barbaric, as are those who promote it. A child-focused approach observes that children do not choose to come into this world; when they do, we are responsible for giving them a decent opportunity to establish themselves. It certainly says we should not victimise them. Michael Joseph Savage famously said the first call upon the state should be the young, the sick and the elderly. Nowadays when a child calls the state, it does not bother to reply.

Forty years ago, there were kids in poverty who just never had a chance. They became parents, and today some are even grandparents; many of their grandchildren are still in poverty. The sins of the community are still being visited on the children.

13th October, 2012 2 comments

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2 Responses to “The poverty trap”

  1. whio Nov 1 2012, 10:28am

    This is a relief to read after reading Colin Craig the other day saying that we should not give a rats about the kids, certainly not feed them. Never mind it costs a fraction of the cost of what we pay in prison costs and benefit to adults, and giving kids a leg up at a young age can only reduce those other costs in future. (I won't get started on all the potential tax we lose supporting him and his wealthy mates ...)
    I was beginning to worry that NZ had lost all sense of community and reason - nice to see that's the not the case.
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  2. David Hall Oct 25 2012, 3:40am

    Great piece and I completely agree that policy should be organized in the way you suggest. How to do achieve this is another question. In particular, can we expect the state to care for children, let alone take their perspective?

    You mention both the obligations of the state and 'the sins of the community' so perhaps there is room for a sharper distinction here, between society/community and the state. Maybe it shouldn't be surprising that state logic tends toward the first two models you mention, which treat children as present property or future profit, because the state tends to depersonalize people, treating citizens as numbers. This could even be a necessary feature of the state, because its calculations are centralized, aggregating, equalizing, and often only distantly connected to policy consequences (although, to be sure, some states are probably less depersonalizing than others).

    Society is better positioned to take the view of the child, because only people embedded in their real lives are in the position to assume the empathetic perspective, to take the human view where we see people not as labels but as conscious beings with intentions and purposes (perhaps imminently in the case of children). By contrast, the state and the market are uncaring entities due to their thin conception of people, as a statistical mass or as rational utility-maximizing individuals.

    Perhaps we shouldn't expect too much from the state or the market, but find ways to reclaim our agency as a society, and treat the state and market as tools that can be put to use either better or worse. The state purse must join the party (as noted), but perhaps the centres of organization need explicitly to be elsewhere, in the community, where the child's perspective is more attainable and where the sting of our 'sins' are more properly motivating...
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