Tuesday, April 13, 2010

When DPB pays more than the average female worker's income

From the Future Focus fact sheets we learned;

A sole parent, with two dependent children, renting in Auckland on DPB could receive approximately $580 per week including Accommodation Supplement and other allowances. A sole parent, with two dependent children, renting in the South Island on DPB could receive approximately $500 per week including Accommodation Supplement and other allowances

Using Statistics NZ Average Weekly Earnings (Employees) by Industry (ANZSIC06) and Sex (Qrtly-Mar/Jun/Sep/Dec) I produced a chart showing how these payments compare.

The point of this chart is to illustrate that choosing motherhood over work is entirely economically rational.

Comments and provisos

- tax applied 21c in the dollar
- a single mother (or other low income workers) employed in a low paying job may qualify for family tax credits, accommodation supplement etc
- the average earnings take no account of region whereas the DPB payments do
- If the DPB recipient has fewer than 2 children the weekly payment is lower; if she has more it is higher

(Inspired by Dynamic Benefits, produced by the UK Centre for Social Justice, undoubtedly the source of this piece by Fraser Nelson;

If an unemployed Pole gets a job as a barista in Starbucks, even for 15 hours a week, his situation improves dramatically. A young man in Britain would be just £10 a week better off than if he stayed at home on benefits. Why break your back for an extra tenner?

The situation is even more pernicious for young women who leave school with low qualifications, because the alternative to low-paid work is pregnancy. A woman with one child and on benefits has, on average, more disposable income than a hairdresser or teaching assistant. With two children, it's more than a receptionist or library assistant. With three, it's a lab technician, typist or bookkeeper. So there should be no mystery about why Britain came to have so many children in workless households (one in five, the highest in Europe). The young mothers, and the young men on benefits, are walking down a road to dependency paved for them by the state.

This is a peculiar definition of compassion. What Beveridge denounced as the "giant evil" of idleness is now being incubated on a mass scale by the very welfare state designed to eradicate it. As Britain positions itself for a recovery, this raises an ominous question for a prospective Conservative government: will it do any better? If the economy is to recover, might it simply suck in more of these industrious, hard-working immigrants while leaving between five and six million British people on out-of-work benefits?

Hat-tip also to The Welfare State We Are In)


Swimming said...

In order to compare the two, you`d have to take into account that this person on a low income would get an accommodation supplement, in work payment, and other allowances too, and deduct those from the $580 in comparing incomes.

Lindsay Mitchell said...

So let's look at another way. The basic DPB rate is $278, pretty much the same as the lowest paying work. But by having a child or children and living 'independently' a female can boost that amount by $300. The big part of the boost comes with the children. Are you saying that wouldn't be a factor in making life choices?

Anonymous said...

Does the DPB vary in amount according to geographic location? Because your stats link says that awi certainly does.

Nor am I sure that raising two children equates to "idleness", and nor am I sure that procreation is an economic decision.


Lindsay Mitchell said...

A. I have added the DPB payment for same scenario living in SI. So the graph now features the lowest and highest compared to the average incomes earned in the various sectors. Average weekly incomes vary by region but I cannot build a table that combines industry, sex and region.

If you are not sure that economic factors influence decisions about child bearing so be it. I disagree.

Anonymous said...

Semantics -
"not an economic decision" =/= "economic factors have no influence".

The difference is the weight with which economic factors influence the decision to the exclusion of other factors, which has bearing on the relevance and persuasiveness of some pretty stretched data.


Unknown said...

Remember, too, that many welfare recipients with children are in state housing, the 'rents' of which are usually below market value and wouldn't reflect the real cost of property maintenance etc (and there's no use in anyone saying there's no mortgage to service, what about overseas government debt!?").

Do you have any information on the economic viability of state housing, as I'd be interested to see it.

The Baron said...

Of course, this is ridiculous. It all comes down to incentives, and these incentives are being completely removed.

A big change I have noted is the focus on "child poverty" as a justification for ever increasing the size of benefits such as the DPB. In my mind, the idea that child poverty is the responsibility of the state is a fallacy - and a fallacy that drives outcomes such as the real size of the DPB.

If a parent cannot afford a child, or cannot afford to keep that child out of poverty, then surely that is the parent's decision to place a child in that circumstance. Why should the state have to take responsibility for that decision?

Anonymous said...

Whether on a benefit or not those incomes are pitiful. If people are incentivized to have children it is because at the bottom end of your far from free market real wages have declined significantly in the last 20 years. Try living in Auckland on $580 a week with two kids.
Someone needs to tell the middle-classes that jumping up and down on the poor bastards at the bottom isn’t going to raise them up any higher, and that they’re only a misstep away from being trampled in capitalism’s mosh pit themselves.
The end game of all this beneficiary bashing is lower wages with the added benefit of shoring up the redneck vote.
Thinking back to the early to mid 90s the going cash rate for labouring was $10/hr. I’m getting leaflets in my letter box every other week from the desperate offering their services for similar rates. Even using the flawed bundle that is the CPI (the weightings in no sense represent what the average low-income earner spends – housing 23%??) goods & services costing $10 in Q4 2009 would have cost you only $6.94 in Q4 1993.

Anonymous said...

↑ what he said ↑

Anonymous said...

I would also be thinking about the Child Disability Allowance (CDA).

Whilst I have no objection to this payment in the circumstances it was probably designed for, the cat is out of the bag on this one and anecdotally it is common for a DPB receiver to have 4-5 kids, all with "disabilities" such as asthma.

It is also fairly well known in the community which doctors to go to in order to be suitably "disabled".

This perk - times 4 or 5 - can make a significant difference.

And yes, I do realise that working people can also have lots of "disabled" children too. However, it is one of the best legal ways a DPB receiver can increase their income, and boy do they know and talk about it.

Anonymous said...

When you said "If you are not sure that economic factors influence decisions about child bearing so be it. I disagree.", you are being too rigid.

Possibly some folks do that but I reckon many are just NOT making any decision at all - they are just having SEX and not thinking about it because they are so poorly informed. Incredibly dumb and stupid if you like.

Anonymous said...

Have a look at this link showing the massive ammount paint out in accomodation supplement for market rent

Most beneficiaries rent
Over time mortgages are repaid and the oweners need less for housing costs
not so with rent
this increases over time
Trapping peopel in poverty - lining landlords pockets
and massivly increasing benefit payments

As a single parent I cannot work 40 hours and cover my rent costs of over $300p/w

Anonymous said...

I question if you have young children today Lindsay, or if you have your finger on the pulse of how much it costs to have children today? How about the sweat and tears that go into raising children- do you know it? Besides the fact that children are incredibly hard work, they are also very expensive to feed, cloth, entertain etc. As a mother of two very active young boys, I can assure you Motherhood is most definately not a walk in the park and I fail to believe that anyone would make the decision to have this full time commitment and financial burden- for the next 18 years- because of the DPB payment and an alternative to a 9-5er, 5 day a week, weekends off job.