Thursday, March 06, 2014

What the Left want you to think

In a column ironically written to highlight some truths about poverty and inequality, Brian Fallow quotes leftist economist Brian Easton:

The majority of the poor are parents with jobs and their children (although they may have had only one or two), living in their own home albeit usually with a mortgage.

I think that's wrong.

From the Household Incomes Report, p147

Figure H.5

Proportion of poor children who live in ‘workless’ households (AHC 60%, fixed line)

 (The top line is workless/part-time, the bottom line is workless. Reproduction has changed the line appearance.)

 Then from p138,

47% of poor children lived with their families in private rental accommodation, and another 21% in HNZC homes

How do these two pieces of information square with Easton's claim that "The majority of the poor are parents with jobs and their children (although they may have had only one or two), living in their own home albeit usually with a mortgage" ?

(I realise he is talking 'parents' whereas I am talking 'children' but there can't be much in the difference statistically.)

Child poverty and parental choice

Yesterday I referred to the mistake made by Statistics NZ/Treasury in relation to estimated household incomes. Accommodation supplement ($1.2 billion across 300,000 homes) was double-counted. That resulted in the poorest incomes being over-stated. It didn't materially change anything for people in those homes. But as I use the graphs from the Household Incomes Report quite frequently here are two of the revised.

The first shows perhaps the most commonly used measure of inequality - the Gini coefficient. Flat or "vaguely" (as Bill English puts it) downwards over the past ten years.

Figure D.17  REVISED

Inequality in New Zealand: the Gini coefficient

The next shows proportion of children living in households that fall below 60 or 50  percent of the median equivalised income After Housing Costs. The relative line shows the proportion according to that years median. The constant value line shows proportion according to the median at a fixed year. (The original graph is below the revised).

Figure F.4

Proportion of children below selected thresholds (AHC):  REVISED
fixed line (CV) and moving line (REL) approaches compared

The picture is not as rosy. The revised graph clearly shows the impact of the recession and increased unemployment. However the incline is nowhere near as steep as that prior to the early nineties recession and the blue and red lines seemed to have arrested.

That red line on the revised chart tells it own story though. These are mainly children in DPB homes. The proportion hovers around 20% through the 1990s and early 2000s. When we had the lowest unemployment in the OECD and what was considered an 'economic boom', the percentage only dropped to 16-17 percent. There's your 'child poverty'. The new 'normal' is one in five children born onto a benefit directly or becoming dependent shortly afterwards. That's largely a parental choice.

MSD research:
 Throughout most of the 1990s around 25% were included in a benefit on the date of their birth or very soon after. Since 2000 this proportion has declined to 20% of children born in 2005 and 2006, and 18% of children born in 2007.
Figure 2  Estimated percentage of children included in a main benefit at birth, by birth cohort11

Figure 2  Estimated percentage of children included in a main benefit at birth, by birth cohort

My research updated the numbers as follows:

2008 21%
2009 23%
2010 23%
2100 22%
2012 21%

The isn't a new subject for me. But it seems it needs repeating frequently. Having kids on welfare is the major driver behind child poverty.

Wednesday, March 05, 2014

English - more social spending is not the answer

Labour was trying to score a hit against Bill English yesterday in Parliament, over the matter of a significant data error involving Treasury and Statistics NZ. The PM's response to the latest Salvation Army State of the Nation report was raised. Here's the comeback:

Hon Kate Wilkinson: What issues affecting households with low disposable incomes were inherited by this Government in 2008?

Hon BILL ENGLISH: We inherited rising social spending and declining social outcomes. Shortly before the change of Government in 2008 the Salvation Army produced the same report as the one it produced earlier this year. Its findings were that more children appeared to be at risk of harm, more youths were engaged in crime, violent crime was up, more people were in jail, and Child, Youth and Family referrals were rising. The Salvation Army said at the time that it was disappointed that despite significant increases in Government spending the social problems were getting worse. So we listened to its advice. We have not increased spending, and a number of these social problems are now improving.

Indeed. Regarding the Salvation Army's most recent offering

 The report acknowledges creditable progress in some areas of social wellbeing...The Salvation Army gives the thumbs up to an improvement in Maori participation in early childhood education, a drop in infant mortality, reducing teenage pregnancy rates, a reduction in overall criminal offending, a drop in unemployment and a reduction in the per capita spend on gambling.

 Whereas the 2008 Report said:

The social outcomes which we as New Zealanders have achieved over the past five years are somewhat mixed and in some areas quite disappointing.More of  our children appear to be at risk of harm, more of  our young people are engaged in petty crime, there is more violent crime and more people in our jails. None of these trends can be seen as progress. While more New Zealanders are working than ever before and many New Zealanders have benefited from the recent housing market boom, our incomes have risen only modestly, we are chronically indebted and home ownership rates have fallen. This is mixed progress at best.
What is perhaps most disappointing about these results is that as a country we have invested hugely in the core areas of social spending over the past five years. Ten years ago, the New Zealand Government spent $23 billion on social welfare, health and education. Five years ago, this figure had risen to $28 billion. During this financial year the Government is budgeting to spend over $39 billion on these areas, of which $11 billion is to be spent in health and $10 billion in education.Of the $18 billion being spent in social welfare $7.3 billion is to fund New Zealand superannuation while$3.7 billion is for means–tested benefits such as the unemployment benefit, DPB and sickness and invalid benefits.