CPAG replies to Beneficiary Basher

This week, The Dominion Post published an opinion piece entitled "Documentary misses the mark on NZ child poverty" which was not only highly critical of the Inside New Zealand: child poverty documentary but also included much anti-beneficiary rhetoric.   

CPAG's economics spokesperson, Susan St John thoughtfully comments on his piece using the real life example of "Polly".   St John's article below was published in the Dominion Post the following day.

The future of our children is a moral and ethical issue.

KARL DU FRESNE dismisses the Bryan Bruce TV3 Inside New Zealand documentary on child poverty as emotive yet in fact all it revealed was the sad truth about New Zealand’s increasing betrayal of its reputation as a good place to raise children. 

Twenty years ago Ruth Richardson made the same criticism that ‘the welfare state is now part of the problem’.  Her radical cuts of welfare benefits produced very high rates of child poverty, unheard-of reliance on foodbanks, household overcrowding, and third world diseases.  Welfare reform did not work then and Du Fresne’s 2011 exhortations to grind down the poor won’t work either.

Du Fresne says “the documentary ignored the risk that more spending on benefits and state housing would serve to make a welfare-based lifestyle look more attractive and end up trapping even more people.”

But he is not critical of the much more attractive welfare state for those aged 65+ where even millionaires can expect a tax-funded payment higher than the unemployment benefit. Instead Du Fresne lauds the low benefit numbers of nearly 40 years ago. He ignores the facts that 1972 was a golden age of almost full employment. Families had more time together, women were encouraged to stay home to raise their children, and the state played a vital role in making housing affordable. Today the reality is fractured families, high rents and mortgages, GST on everything, recessions and earthquakes, and the highest level of unemployment since the late 1990s.

Of course child poverty is complex. But the value of Bruce's thesis was that blaming parents (including for not opening the windows for goodness sake!) for the intolerable poverty and deprivation of their children does not reduce this suffering and waste.

The documentary aided an emerging understanding that the key ingredients to a better future for our children are adequate weekly family assistance, good housing, affordable healthcare, and making sure children are well-nourished so they can learn. Providing these things for children does not make sole parenthood more likely. Nor does it suddenly make parents chose to be unemployed or become invalided or sick.

Post-election, National must see the need for a cross party agreement for immediate action on child poverty. As Bruce said: ‘it is an ethical and moral issue, not a political one’.

The documentary showed that housing is the number one priority if we want to improve our sorry record on third world diseases.  But let’s not forget that family money is important. The fact that some beneficiary families are dysfunctional does not justify a policy of income inadequacy for all beneficiary families. The vast majority of low income families want more than anything else to do the best by their children. They are just as deserving as superannuitants of decent support.

Working for Families had as its major objective a substantial reduction in child poverty. But the policy design ensured that poverty would be reduced only for a subset of poor children who were ‘deserving’ of assistance because their parents were not on benefits.

It is this kind of ineffective welfare system that should concern Du Fresne. He might also consider how difficult we have made it for sole parents to help themselves.

Let’s take Polly with 3 young children who can work at the very most 15 hours a week at $15 an hour. She has a student loan and has to pay for child-care. The gross $225 is taxed at 19.5% including ACC, her benefit is abated, and there is a 10% student loan repayment.  Of the first $100 she earns, she keeps $80.50, the second $100 yields a net $40.50 and the last $25 leaves her with a few cents only so she may as well not have worked those final 2 hours. Of course working 15 hours means her children do not benefit from the In-Work Tax Credit of  $60 a week which requires sole parents to have a minimum of 20 hours in paid employment and be off-benefit.

National thinks that is OK because she should really be working fulltime. While this is unrealistic until the children are older, let’s say she actually gets a 20 hour a week job and comes off the benefit. Let’s imagine she finds an employer happy to provide this work and flexible enough to allow time off for sick children and school holidays.

She now has a net income of $260 a week and even with the In-Work Tax Credit only gets by with the aid of another top-up tax credit: the Minimum Family Tax Credit.  This is worth $167 a week but reduces dollar for dollar if she earns any extra, providing an even worse disincentive than being on a part-benefit.

If, as is likely, Polly is unable to sustain a consistent 20 hours of work a week, she loses the tax credits for her children and has to claw her way back on a benefit.

Curiously, the cost to the tax-payer when she worked part time on a benefit was less than the cost to the taxpayer of her being ‘in work’.

Rather than indulging in tired anti-beneficiary rhetoric, Du Fresne could support alternative mechanisms like lower tax, higher minimum wage and lower abatement rates for benefits as effective reforms to promote work experience that  may lead in the future to full time employment.