Can the Greens be expected to acknowledge this?

Child hardship is easing albeit slowly.

Material hardship is assessed by what people are doing without. The more items forgone, the worse the hardship. The EU method is used to provide comparability across countries. From a companion report to the incomes report released yesterday:

Table G.3

Material hardship rates (%) and numbers for children

HES year	EU ‘standard’ threshold		EU ‘severe’ threshold
	rate (%)	numbers	rate (%)	numbers
2007	14	145,000	6	65,000
2009	16	170,000	9	95,000
2010	20	210,000	9	90,000
2011	21	220,000	10	105,000
2012	17	180,000	9	90,000
2013	15	165,000	9	100,000
2014	14	145,000	8	80,000

The graphs in Figure G.1 below use the 9-item DEP-COMMON to create a time series from 2006/07 to 2013/14. There are two particular features of the trends that stand out:

·         for the less stringent threshold (top lines), the clear rise of hardship rates through the GFC and the strong fall in the recovery phase

·         for the more stringent threshold (bottom lines),

o    for the population as a whole - neither the rise nor the fall is very strong

o    for children the rise and fall are clearer

o    though in both cases rates in 2013-14 are the same as in 2008-09 as the GFC began to impact.

Without a doubt there are children in this country who are doing it very tough. But every social policy attempt to address the problem has fish hooks. More welfare - the Green's favoured approach - is extremely risky. The available evidence should convince against it.

The report makes some notable observations:

·         Whatever else poverty is understood to be, it is in its essence an unacceptable state-of-affairs – it carries with it the implication that something should be done about it. How best to address poverty, especially child poverty, is a vigorously contested area where empirical evidence, social norms, personal values, views on inter-generational equity, political philosophy and pragmatic compromise all play legitimate parts. Different judgements on these matters lead to different “solutions”.
 ·         Yet, just as with the question of where to set low-income or material hardship thresholds, there is in practice a fairly limited range of options for governments when it comes to seeking to reduce child poverty. All MEDCs have adopted a multi-pronged approach, reflecting the range of causes of poverty. The difference from one government to another and one state to another reflects to a large degree the different understandings of the relative size of the impact of different causes, decisions on trade-offs with other priorities, and the consequent different weightings given to the different interventions.

The current govt's approach is a mix of welfare reform, education reform, targeted cash assistance, support for private initiatives, etc but with the long-term view foremost. That matters.

 

Greens court their 'child poverty' constituency

Green MP Jan Logie said in Parliament today that "...there are now an additional 45,000 NZ children  living in poverty." Having watched the exchange I can say she was smug.

She says the source for this claim is the latest Household Economic Survey. Here is the relevant table:

How many poor children are there in New Zealand?
(ie  How many children live in households with incomes below selected thresholds?)

Table F.5

Numbers of poor children in New Zealand

(ie  the number of children in households with incomes below the selected thresholds)

	BHC		AHC
	BHC ‘moving line’		AHC ‘moving line’			AHC ‘anchored line (2007)’
HES year	50%	60%	40%	50%	60%	60% (07 ref)
2001	120,000	250,000	115,000	215,000	310,000	380,000
2004	150,000	265,000	115,000	200,000	285,000	320,000
2007	135,000	210,000	115,000	175,000	240,000	240,000
2009	125,000	230,000	140,000	210,000	280,000	255,000
2010	150,000	250,000	120,000	210,000	315,000	275,000
2011	145,000	235,000	130,000	210,000	290,000	270,000
2012	130,000	225,000	135,000	215,000	285,000	255,000
2013	120,000	215,000	135,000	205,000	260,000	235,000
2014	-	250,000	-	220,000	305,000	245,000

Logie found the best figure she could. It  features in the After Housing Costs 'moving line' 60% threshold. Any other number from the table would have been smaller.

So let's look at what the 'moving line' represents:

‘moving line’:        

o    this is the fully relative line that moves when the median moves (eg if median rises, the poverty line rises and reported poverty rates increase even if low incomes stay the same)

Now, let's look at what has happened to the median:

• median household income has risen at 3% pa above inflation in the post-GFC recovery phase

From HES 2013 to HES 2014 median household income rose 5% in real terms (5% above the CPI inflation rate). This is a large change compared with changes in incomes nearby – P40 was up 3% and P60 and P70 only 1% – and its size is likely to be a year on year statistical blip. While caution is needed about the precise size of the changes year on year, there is clear evidence of a steady rise in median household income in the post-GFC recovery, of the order of 3% pa in real terms.

Combine this with:

On the AHC moving line measures, child poverty rates in HES 2014 are around the same as their peak after the GFC. A good amount of the rise from HES 2013 to HES 2014 is due to the large rise in the BHC median, as noted above, rather than a change in the numbers in low income per se.

Oh Greens. Why are you so desperate to talk up child poverty? 

Here's another "key finding" which would be politically un-useful to the Greens.

In HES 2014, the child poverty rate using the AHC anchored line measure was 3 percentage points lower than the peak rate immediately after the GFC (26% down to 23%), and 8 percentage points down on 2004 (31% down to 23%).  This does not mean that New Zealand’s child poverty rate is a definitive 23% – rather the finding is that using this measure, the child poverty rate is falling, albeit  slowly.

  The material hardship measure shows a falling child material hardship rate using a threshold equivalent to the ‘standard’ EU level, down from a peak of 21% immediately after the GFC to 14% in 2014. Using the more severe threshold, there was a slight rise through the GFC to 10% and a small fall to 8%, the level it was at before the GFC. 

This subject is so technical that most people's eyes glaze over.

But the Greens should be called out on their constant refusal to acknowledge improving indicators.

CTU says trend "clear"- MSD says it isn't

MSD released the 2015 Household Incomes Report today. This is the source of official poverty and inequality statistics. The responses will be interesting because the findings are  mainly positive. 

But here's the Council of Trade Unions:

Time to recognise inequality is on the rise again
“While one year cannot be taken in isolation, the trend is clear,” says Rosenberg.

According to  the report's  Key Findings:

 Income inequality

• there was a large and rapid rise in household income inequality from late 1980s to early 1990s

• there is no conclusive evidence yet of a rising or falling long-run trend since the mid 1990s ….

• … but another survey with a Gini score at or above the level in the 2014 HES will provide evidence of a rise since the mid 2000s

It must be hugely frustrating when the statistics relied on to plead the cause don't co-operate.

MSD: "Housing subsidies capitalised into higher rents"

Time does not allow me to read these reports presently but MSD have just released a literature review into the effect of housing subsidies. The results and recommendation are unsurprising. To quote from the rationale for the investigation and  summarised findings:

The review provides a systematic review of New Zealand and international empirical research literature – specifically regarding the extent to which housing allowances are ‘captured’ by landlords through rising rents.
The question of whether, and the extent to which, demand side housing subsidies such as the Accommodation Supplement are capitalised into rents as opposed to achieving other objectives, is a key question for how and how much support is provided to low income people to assist with the costs of housing.

Targeted, means-tested housing subsidies are intended to reduce the living costs of the low income - both employed and benefit-dependent. But like family tax credits, which can and do subsidise employers, AS subsidises landlords.

A key finding of this review is that there is relatively scare literature available on this issue, so strong conclusions cannot be drawn from it.

That's their typo but quite a funny one.  The conclusions from what they did find are quite scary from a social policy viewpoint.

However, based on the evidence available, AHURI conclude that:

• The literature review found evidence to support the contention that a proportion of demand-side housing subsidies is capitalised into higher rents in the private rental market.

• All studies noted that the responsiveness of housing supply is the key factor that impacts on the degree of landlord capture and that, at least in the short run, housing supply is relatively fixed.

• Estimates of the magnitude of landlord capture vary from 30 per cent to 78 per cent of the increase in subsidy. AHURI advise that their view is that New Zealand is likely to be toward the lower end of these estimates, but also advise that the estimates need to be treated with caution as all papers make a large number of assumptions and in many cases the method and modelling used are able to explain only a small part of the overall variation in rents.

So certainly 'some' evidence. But the 'some' is very uncertain in terms of extent.

This review suggests that based on the evidence available, it is correct to be concerned about the impact that any increases in Accommodation Supplement could have on rent levels. 

So the government is really no further advanced with respect to the best way to deal with high housing costs for the 'poor' especially in Auckland.

If AS increases aren't a goer, what else?

Rent regulation? A claw-back on landlords through the tax system? Any move that makes being a landlord less attractive could exacerbate housing supply, driving up rents.

What a pickle welfare has us in.

The Economist on capitalism: "Advancing, not retreating"

The following piece from the Economist blog (arrived by e-mail) held my attention to the end so it might do the same for you:

________________________________________________________

BIG crises can lead to big political upheavals. Think of the Depression and the subsequent rise of fascism in Europe and the New Deal in America. What is remarkable about the financial crisis of 2008 is the limited nature of the reaction.

Protest parties of the left and right have gained ground, but only in Greece have they gained power. The biggest policy change has been the introduction of quantitative easing, a technical shift that arouses few passions on the street.

This lack of action is a source of frustration on the left, for whom 2008 seemed to herald capitalism’s collapse. Some, including Paul Mason, the author of a new book called “Postcapitalism”, still hold out that hope. They view the “sharing economy”, in which outright ownership of goods is less important (think car clubs and “freecycled” furniture), as a sign of capitalism’s impending demise. Jeremy Rifkin, in his book “The Zero Marginal Cost Society”, talks about “the internet of things, the collaborative commons and the eclipse of capitalism”.

However, if you define capitalism as the interaction of individuals with a market economy, the system is advancing, not retreating. New-economy websites such as Airbnb and Etsy allow people to earn money in new ways—renting out their homes while they are on holiday, or selling arts and crafts. In the past, homeowners might have struggled to find renters and hobbyists to find buyers; aggregator websites make the task much easier.

It is true that some of these new websites undermine existing business models, just as file-sharing wrecked music-publishing companies. But investors expect most of these companies to be profitable eventually, judging by the valuations they attract. Google started as a free internet-search business but has found a way to monetise its reach. The move from an economy based on physical goods to one based on software and intellectual property seems to be allowing higher returns on capital than before. The internet has been in wide use for 20 years or so, and corporate profits are close to a post-war high as a proportion of American GDP.

By reducing the cost of information, the internet kills some business models. But not all. New models will appear and people will always be willing to pay for products that convey status, whether luxury watches or fast cars or branded clothing. They can stream music for nothing, but people will spend vast sums to hear rock bands play live.

Another new-economy effect is that the old idea of lifetime employment is fading. More people will follow “portfolio careers”, switching from one employer, or even industry, to another as the economy changes. This will require them not just to learn new skills as they age, but to monitor the economy for new opportunities.

Many more people are likely to be self-employed, offering services to a wide range of customers. In a sense, they will be artisans, not employees. Activities such as sales, marketing and accounting—matters that salaried employees leave in the hands of specialist colleagues—will become the responsibility of the individual. Such workers will have to be more, not less, sensitive to the market economy than the typical office drone.

And then there are pensions. Two decades ago, many workers could rely on a paternalistic system under which companies provided a retirement income linked to their final salary. New private-sector workers merely build up a savings pot, which they must use to see them through their retirement years as best they can.

In Britain this pot used to be converted into an annuity, a guaranteed income for life, another paternalistic solution. Instead, Britons must now guess at their likely longevity, calculate their spending over two decades or more while allowing for the effect of inflation, decide on the asset allocation for their funds, assess the merits of rival providers and adjust for the impact of their fees. These are decisions that might defeat the brightest hedge-fund manager. Again, people will have to be more sensitive to the minutiae of the markets than in the past.

It could be that this process will turn workers in a left-wing direction; they will demand more government protection from the economic cycle. But things may shift the other way. New-economy pioneers may be socially liberal, but their economic views tend to the libertarian right. The individuals who sell stuff on eBay, or run bed and breakfasts, are capitalists too, even though they may not think of themselves that way. And they tend not to like more government regulation, or higher taxes on their earnings.

^{Economist.com/blogs/buttonwood}