Wednesday, September 02, 2009

Where is the Child Support review going?

A couple of weeks back there was some media reporting about the costs of raising children. The costs seemed over-inflated to me. As the research has been produced in advance of a review of the child support system a closer look is required.

The 21 page report, prepared by the IRD, uses a method used by Australia to estimate child costs as part of its child support reforms. The data comes from the Statistics NZ Household economic survey and comprises 930 households.

The actual formulas are hieroglyphics to me but here is what they produce;

The thing that is immediately obvious is the average low income is actually quite high when one considers that a majority of custodial parents are on a benefit. The lower the income, the higher the proportion the cost of raising a child becomes. If on an income of $450 a week the proportion rose to 24 percent the cost would be $108. But I am only guessing. Why didn't they model as low as that given the purpose of the research? Or wasn't their sample representative of typically low income custodial/liable parents? In which case, was it relevant?

Around half of the paying parents (approx 66,000) currently pay the minimum $14 per week (2007). The maximum level of child support payable (for the year ending 3/2010) is$577 per week, which just happens to be very close to the combined cost of two children (one in each age bracket) at an average income.

So beyond concluding that child support payments as they stand do not realistically meet the costs of raising children as modelled in this paper, it is very difficult to see where this review is going. You can't get blood out of a stone. Upping demands on higher income liable parents or upping state support?

The problematic child support system is anyway largely a side effect of the DPB. That's where attention needs to be focussed.

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