According to the latest Government figures, one in five New Zealand children live in poverty. Shocking, isn't it? This article looks at how New Zealand measures poverty, why that's important for what we do about it, and the dramatic social changes which would be necessary to make a real difference.

Measuring Poverty

According to Statistics NZ, in the year ended June 2019 one in five children were living in households with less than 50% of the median equivalised disposable household income after housing costs have been deducted. This poverty benchmark of half the median (middle) income is widely used worldwide, because it is easy to calculate comparable figures across multiple nations. It is definitely not the most accurate approach for counting national poverty, but it is useful to measure improvement or deterioration over time.

Statistics NZ also reports on children living in households with less than 50% of the median total income (i.e. before housing costs are deducted). Of these two income measures, poverty after housing costs is the internationally recommended approach. Measuring poverty based on total income is simply not accurate - the differences between housing costs for owners and renters and the wide variation in market rents mean many households who don't have enough to live on after paying for housing will not counted as in poverty.

These are headline figures from a total of nine measures. Anyone without a statistics degree would naturally wonder why there are so many measures. That's because each has its limitations - for example, income measures use current income, so count people who may be in quite short-term hardship, for example in a break between jobs. Nevertheless, income poverty remains the most sensitive measure to changes, since it accurately reflects the impact of typical Government responses like benefit and tax changes, as well as movements in employment and pay rates.

So, our starting point is one in five children today living in poverty – that's 235,400 children. But that half-median after-housing benchmark for poverty is still conservative, much lower than the estimates of the Government's own Welfare Expert Advisory Group (WEAG) in its report of 2019. There is another omission in Statistics NZ's approach. The half-median headline indicator is calculated using survey data, which means that regional poverty levels are not reliable.

A much more accurate result could be calculated using the Government's own administrative data on benefits, rents, income and taxes for those most at risk of poverty, households in private rental. Using administrative data, the link between who is in poverty, low benefit rates and rapid curtailing of benefits when beneficiaries get a job is accurately measured, which would make much-needed policy development simulations more accurate.

Current And Proposed Policies To Reduce Poverty

The WEAG produced a comprehensive report in May 2019 called "Whakamana Tāngata: Restoring Dignity to Social Security in New Zealand" which recommended 42 headline changes under the following headings:

- Comprehensive reform to emphasise positive values
- Delivering for Māori
- Providing adequate income
- Making housing affordable
- Improving access to employment and labour market support
- A fairer deal for people with health conditions or disabilities and carers
- Strengthening community organisations and volunteering
- A cross-Government response

This report is available online, very well written and recommended reading. Their estimates of minimum healthy living incomes were calculated for a range of households using carefully constructed budgets and reality tested with community focus groups. They also reflect best practice in recent years, acknowledging that healthy lives include some level of social and recreational participation, not just food, clothing and shelter.

Table 1: Welfare Expert Advisory Group Estimates Of Adequate Weekly Income 2019

Scenario				Single Person		Single Person	1 Parent 1 Child		1 Parent 1 Child	1 Parent 3 Children		Couple 2 Children
		Age of Children		n/a		n/a	2		2	2,5,8		10,15
		Accommodation		Private		Private (sharing)	Private		Private (sharing)	Private		Private
		Benefit/Employment		Benefit	40hrs	Benefit	Benefit	40hrs	Benefit	Benefit	40hrs	Benefit	40+20hrs
Rent				290	290	180	390	390	250	470	470	470	470
Total core expenditure (includes rent)				550	615	407	743	820	565	1035	1149	1100	1268
Total participation,contingency				39	39	39	62	62	62	114	114	126	126
Childcare gross costs				0	0	0	0	270	0	0	416	0	0
Childcare Subsidies				0	0	0	0	205	0	0	384	0	0
Total healthy living expenditure (after childcare)				588	653	445	802	945	624	1149	1294	1225	1393

The Government's response to poverty so far, outlined below, begins to address only two of the WEAG's 42 key recommendations:

- Families Package lifted incomes by $65 a week on average
- Winter Energy Payment of up to $31 a week
- Free healthy lunches in schools to 21,000 students over the next year
- Dropped sanctions if women don't name the father of a child
- Indexing main benefits to wage growth, not inflation
- Set child poverty targets into law, to hold Governments now and in the future to account
- More staff at Work & Income to help beneficiaries into jobs

These are good changes, a great improvement on the previous Government, but fall far short of what's needed to significantly reduce long term poverty. Benefit levels are simply too low, as shown below.

Table 2: Comparison Of Benefit Income With Welfare Expert Advisory Group Estimates Of Adequate Income

Scenario		Single Person	Single Person	Sole Parent 1 Child	Sole Parent 1 Child	Sole Parent 3 Children	Couple 2 Children
	Age of Children	n/a	n/a	2	2	2,5,8	10,15
	Accommodation	Private	Private (sharing)	Private	Private (sharing)	Private	Private
	Benefit/Employment	Benefit	Benefit	Benefit	Benefit	Benefit	Benefit
Rent		290	180	390	250	470	470
WEAG estimated weekly expenditure		588	445	802	624	1149	1225
Benefit		423	313	690	558	894	870
Shortfall		164	132	112	66	255	356
Shortfall %		28%	30%	14%	11%	22%	29%

The Child Poverty Action Group summarised the priority recommendations still outstanding as:

1) Every adult and child need adequate income
2) Transitioning from a benefit to a job should be encouraged by increasing the abatement threshold (unbelievably, you can only earn $80 a week before your benefit reduces, a level set in 1986)
3) Remove the system of sanctions which reduce incomes even further below the poverty line
4) Change the rules for new relationships by allowing more time to establish a new partnership, and align the couples' benefit to be closer to the income of two singles.
5) Raise the cash asset level to give households a buffer against adversity and ensure they receive accommodation supplement, essential to affording today's high rents.
6) Provide a more compassionate service, enabling rather than impoverishing.

Creating A More Egalitarian New Zealand

The fragile coalition with New Zealand First is clearly one reason for the Government's limited policy response so far, but not the only reason. We need more people standing up for social equity if we are to create wider public understanding and support for a stronger Government response. This is not an easy task. Imagine for a minute a different New Zealand today, where poverty wasn't part of life for one in five children. What sort of past could have taken us to a more egalitarian nation today? Obviously the incoming 1984 Labour Government would have needed a coherent alternative to Roger Douglas's neo-liberal economic agenda, which kick-started business-before-people economic policies in New Zealand.

But to develop that alternative, the 1980s' Labour Party would have needed to be quite different, with a larger more diverse membership and open policy debates. The voting public, unions and campaigning NGOs would also have had to be better informed and more active in pursuit of alternative policies. Having lived through the 1980s, it's hard to imagine all these differences coming together back then to a degree where New Zealand chose a different path and ignored the global economic orthodoxy of neoliberalism.

But if taking a different path was hard then, it is much harder today. In the 1980s all we needed to do was make gradual changes while recognising the strengths of existing Government regulation and a degree of national economic protection. Today, the cat's well and truly out of the bag. Lowered tax rates created astronomical executive salaries, shareholders demand maximum short term profits, global corporations dominate ever more markets, political parties respond to business ahead of public opinion, tangata whenua and even their own members, journalism has been sucked dry by Internet advertising, and a sizable proportion of the population earned as much from migration-fuelled housing profits as jobs.

Working families face longer hours, but incomes after inflation have barely risen for most of our population. Meanwhile, in the United States the share of total annual income received by the top 1% has more than doubled from 9% in 1976 to 20% in 2011, an extreme not seen since the excesses of 1927. The power of global corporations to keep taking more has never been greater. And critically, the governments which have propped up business and banks through bailouts and low interest have been progressively downsized, required to sell assets and shed expertise while hiring more message managers to fend off populist criticism.

It Will Get Worse Before It Gets Better

Government regulation, stronger unions and public advocacy are the three foundations for egalitarian change - and sadly, none are in great shape. And we've dug this hole for ourselves, here at the end of the longest boom in modern economic history - so it will get worse before it gets better. All of which means we need a much bigger and bolder vision for redistribution, to have any chance of creating a more equitable future for our children.

For an inspiring example, see my review of Thomas Piketty's new book, "Capital and Ideology" elsewhere in this issue, which proposes empowering employees through a radical reform of corporate governance, a massive redistribution of wealth and income through an overhaul of the tax system (rates up to 90% for the very rich, universal trust funds of €120,000 at age 25), and some form of transnational federal government. To reduce poverty in New Zealand will need more than voting in the best party on offer. It requires us to build a new political and economic landscape.