Tuesday, December 30, 2014

Council of Trade Unions economist wrong on many counts

Council of Trade Unions economist had this piece published in the DomPost, December 27 (not on-line):

Rosenberg claims that recent OECD research  "...affirmed that higher welfare benefits and more progressive taxation were part of the solution..."  to tackling poverty. He should search the term "higher welfare benefits" in the paper. It can't be found. That is because the paper specifically promoted better in-work benefits. The NZ example would be the In Work Tax Credit.

To reduce inequality the author, Federico Cingano, recommended, "...active labour market policies, childcare supports and in-work benefits".

Then Rosenberg writes, "According to the Ministry of Social Development's Household Incomes Report, half of the children in hardship are in working families."

What the report actually says:

Poverty rates for children in working families are on average much lower than for those in beneficiary families (11% and 75% respectively), but 2 out of 5 poor children come from families where at least one adult is in full-time work or is self-employed.

The percentage is 40, not half. But the important distinction is that children in poor families with work tend to be in temporary poverty whereas those in families on benefits tend to experience chronic poverty. The latter is more damaging.

Next he writes "Benefits have been adjusted only by inflation..." which ignores that add-ons or second tier benefits like the accommodation supplement and family tax credits have increased by more than the inflation rate.

The claim that, "A single parent with two children in New Zealand receives 54 percent of the average wage according to OECD data..." is also suspect. The OECD will be working with basic benefits rates which are only part of what a beneficiary receives

According to Paula Bennett last year,

An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.
The average income from wages or salary in 2013 was $962 (June quarter). That makes the DPB income 67 percent of average wage. (The median earned income was $834 in 2013 but we must compare apples with apples.)

Rosenberg's over-arching view that, "Being born into a family reliant on a benefit is close to a guarantee of poverty" is correct based on the official poverty measure (at or below 60 percent of the median equivalised household income).

Unfortunately every year around one in five babies born will be benefit-dependent at birth or shortly after.

This is the behavioural pattern that is causing the poverty problem. It's the pattern that has to change. If Mr Rosenberg's solution of higher welfare benefits is adopted, those trend lines will go up.


Anonymous said...

About the working poor, I think there are two things I would like to know:
1. How many of these come from the self-employed group given it syas they are included, and how many of these self-employed are actually doing realliy well but hiding their income from the tax man
2. How many of the full-time wage workers are people who decided it was smart to leave school at 16 with no qualifications, and then do no further training. These days the average person on the average wage has at least some skills - and anyone without them is always going to look poor --- but that was the life they chose when they were 16...

JC said...

About every month the Poverty Industry produces the same tired set of skewed facts and fallacies and every month the average reader sighs and moves on because he's also read the sob stories that tend to accompany these "facts".. stories and photos which show sad sack mum and her six kids with a 50inch TV in the corner, a computer, games thingies and cell phones.. all the things the average reader worked for many months to provide for his small family. Sometimes I think that punter looks at the photo and sees not only his taxes at work there but also his potential savings account that could have been used closer to home.


Jigsaw said...

I think that the thing that annoys me most is the incomplete story where we see a woman and her 6 children and are told that they are in poverty but we are unable to have any questions that naturally arise answered because of the privacy issue. JC mentioned some but there are often so many more questions that lead one to think that a series of very suspect decisions have been made. Such reports are simply trying to manipulate us.

Anonymous said...

If you've actually read the article, it proposed cutting as much "welfare" as possible - not just benefits but the state health and education "spending".

That's the only sensible approach - the biggest shame of the Key "government" is that it hasn't cut anything, and shows no sign of starting now.

Compared with David Osbourne, Tony Abbot, even the USA after the sequester - NZ is just pathetic.

A 25% across the board cut in government spending isn't just good policy - it's absolutely essential!