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}

Housing sudsidies thwart welfare reform

It was disappointing when Paula Bennett was moved from MSD to Housing. But below partially explains why. Housing reform is critical to the success of welfare reform. As critical as the availability of jobs.

The following information appears in an Aide Memoire: Meeting with Hon Bennett and Hon Heatley regarding financial support for Housing, 9 May, 2012

The relative generosity of HNZC housing can act as a disincentive for people to move into the private rental market – on average non-HNZC tenants receive around $100 less in housing subsidy than HNZC tenants. Around half of HNZC tenants have been in their house for more than 5 years.

It's much cheaper to live in a state house. A good part of the waiting list is probably made up of private renters who want to save money. Of course people stay in them.

But the problem doesn't end with state houses.

Financial assistance for housing may reduce geographic mobility and ability to take advantage of job opportunities - equivalent state housing in the high demand areas like Auckland may not be available and private rents may be unaffordable. In addition, housing affordability outcomes for non-HNZC tenants are better in remote rural areas, whilst those living in fast growing areas and cities are worse off.

Non-HNZC tenants are those receiving accommodation supplement to rent in the private sector (or board). MSD used to annually release data on who receive AS but ceased when the Statistical Report stopped. Here's the 2012 breakdown:

Most AS recipients also receive a benefit.

Getting a job often involves facing  extremely high EMTRS due to losing AS, and,
Affordable housing isn't where the jobs are.

While this reality remains many beneficiaries, particularly single parents, will continue to live in areas where there are few employment opportunities and their children grow up thinking living on a benefit is the norm. Exactly the mindset welfare reform seeks to break.

Elderly and the poverty line

This is a chart for the benefit of a commentor on the last post.

This shows that a majority of 65+ New Zealanders live below the median equivalised disposable household median income BHC (before housing costs) and a sizable chunk (29%) live below the 60% threshold or 'in poverty'( though their hardship is often alleviated by lower housing costs.)

Further from the Household Incomes Report:

Summary of findings regarding the sources of income for older New Zealanders

·         The great majority of older New Zealanders (aged 66+)  are very dependent on NZS and other government transfers for their income 

-     40% have virtually no other income source

-     the next 20% have on average around 80% of their income from NZS and other government transfers

-     this degree of dependence has not changed greatly in the last two decades

Only decile 5 households and above pay tax

Here's another useful graph (based on 2013 data)  from Treasury. While not news it's useful to see the numbers. The gross tax does not include excise on tobacco, alcohol and fuel but referring back to yesterday's table, that equates to an average of $788 in the lowest 4 deciles. Add it in and the statement remains true. The lowest 4 deciles (around 650,000 households) effectively pay no tax:

Interpretation Notes

Deciles are based on household equivalised disposable income minus  GST.

Income is equivalised using the Jensen 88 equivalisation scale

Disposable income is total income after (gross) tax and tax credits.

Gross income includes income from all sources including benefits and transfers but before taxes are removed.

Gross Tax includes personal income tax and GST (unless stated otherwise). It does not include excise or other taxes.

Net Tax is Gross Tax minus benefits (including NZ Super and Accommodation Supplement) and tax credits such as Working for Families

Decile 1 includes households with negative reported self-employment income and households living on savings 

GST is calculated based on household expenditure on goods and services that incur GST as reported in HES

Treasury releasing OIA request responses - all govt depts should follow suit

Announced yesterday:

The Treasury is trialling the publication of its responses to selected Official Information Act (OIA) requests.

Responses to selected OIA requests received by the Treasury are published here soon after the requestor has received their response from the Treasury. The reply letter from the Treasury to the requestor explains what information, if any, has been withheld under the OIA and under which grounds. The requestor's name and address have been removed.

This is a great idea. It is so good it should be compulsory for all departments.

Here is an example of a released request made in April 2015 for:

Any information or modelling regarding the burden of GST on households by income quintile; and • Any information or modelling regarding the burden of excise taxes on households by income quintile.

Interesting. The GST burden on the lowest decile is considerably higher (especially compared to the next two bands) than I'd have thought given their limited incomes. Their expenditure on tobacco must be a big factor. A breakdown between tobacco, alcohol and fuel duties would be even more interesting.

The richest decile pays 214% more in GST than the poorest, but only 55% more on tobacco, alcohol and fuel duties.

Many poverty scholars believe income is not the best way to measure it; that expenditure should also feature. David Green dedicated a lengthy section to this subject in "Poverty in New Zealand" writing

"It is widely known that the preferred measure of poverty throughout Europe is household expenditure not income. Initially it sounds odd that measures of expenditure and income would produce radically different results, but this has been the consistent finding of surveys conducted since the 1950s throughout Europe." Green finds that debt isn't the reason, but under-reporting of income is.

(My reflection) The lowest income decile may be significant players in the black market.

Green continues, "...in New Zealand, only 45.6% of households in the lowest income decile are also in the lowest expenditure decile, and that 10 percent of household's in NZ's lowest income decile are in the top three expenditure deciles," Quite believable based on the above table.

If poverty was measured by expenditure rather than income, the gaps would close up or even disappear. For instance the expenditure (before housing costs) of the third lowest income decile would make them the poorest.

Back to the point of the post. I wonder what the thinking is by Treasury. That by making request responses public they will generate fewer or more? Perhaps I should request any information relating to this decision:-)

Update: Eric Crampton has made further comments about the lowest decile incomes at his blog Offsetting Behaviour

Bob Jones makes my fantasy come half-true

When he had his notorious fracas with Air NZ I commented somewhere, might have been Whale Oil, that Sir Bob should buy his own private jet, and to rub salt into the wound, offer flights to other Air NZ passengers who'd prefer to fly hassle free. Well, he's done the first part.

Not much in the newspaper makes me feel happy these days but the photo of Bob's newly arrived Cessna Citation Mustang put a huge smile on my dial.

Imagine how lovely it would be to vent one's frustration in such a manner

Sir Bob Jones has taken delivery of his own jet, less than three months after being ejected from an Air New Zealand flight.

Jones' new Cessna Citation Mustang, which has an estimated price tag of between $2 million and $2.5million,  touched down in the capital last week, after a long-haul flight from the United States.

And it seems its arrival has come not a moment too soon.

ROBERT KITCHIN/ FAIRFAX NZ

Sir Bob Jones has bought himself a multimillion-dollar private jet, after being ejected from an Air NZ flight in May.

"I should have done this years ago," he wrote in his latest National Business Review column.

My suggestion for the first high profile passenger to poach - Sean Plunket, who regularly rants about queues and airport security on his radio show. And regularly flys between Wellington and Auckland.

Unfortunately the bureaucracy involved in operating his own 'airline' might just be too much for Bob. But he loves a scrap.

"The mindlessness of Donald Trump"

From Reason.com, an entertaining read this morning,

The Mindlessness of Donald Trump—and What It Reveals About the GOP

The candidate's lack of a traditional political agenda is key to his anti-political appeal.

"...the Trump crowd has thoroughly tired of conventional politics and conventional politicians. The draw of Trump’s candidacy is that he is so very obviously not bound by these conventions—that he is not a conventional politician, nor even really a politician at all. He doesn’t have policy ideas or governing plans to speak of? So what? Those are for politicians. Trump’s politics are a kind of anti-politics, and his lack of a traditional political agenda only adds to his anti-political appeal.... most of Trump’s supporters, rather like Trump himself, have put very little effort into imagining a Trump presidency, except to idly fantasize about all the ways that it would be different and awesome and better. He would be an exciting, deal-making, ass-kicker who would strike fear into the hearts of America’s enemies, and he would do this simply by virtue of being Donald Trump, in all his glorious, exciting Trumpiness.

What Trump offers is a fantasy of governance without negotiation, of economic success without policy detail, of a president who does not particularly feel the need to act presidential. It’s a fantasy of politics without politics, for people who just don’t want to think about it too much."

More

Minister's suggestion "inflammatory and misleading"

Thank God for that. Somebody with credentials has set the record straight over Anne Tolley's labeling of a proposed study treating children as if they were "lab rats".

He is professor Tim Dare who produced some earlier ethical analysis on predictive modelling for MSD.

His column, published today in the DomPost is totally scathing of the minister and the political process.

A minister sees a briefing paper with a proposal to test a computer model designed to identify children at risk of maltreatment.  She reacts strongly.

"Not on my watch!" she writes in the margin, "these children are not lab-rats". The study is shelved.

The media obtain the briefing paper, complete with the marginalia, and publicise it.

The Opposition seize on the lab-rats cry and use it in the House against the Minister of Social Development and the ministry.

Should we feel relieved? Have we averted another unfortunate experiment? No.

The minister's reaction, and the media and Opposition response to it should make us feel uneasy.

The problem is not the shelving of the study – though that was a mistake too – rather it is the chilling effect of the knee-jerk and political response to an attempt to produce evidence for important social policy.

Science collided with politics, and politics won.

More

My letter on the subject was also published on the opposite page. I had asked the DomPost to amend Cabinet paper to briefing paper shortly after submitting but it didn't happen.

"3 (wrong) attitudes towards ageing"

Here's an editorial from the Australian think tank, the Centre for Independent Studies. Not all of it fits into the NZ paradigm but it's useful in some respects:

3 (wrong) attitudes towards ageing

Our population is ageing. This will bring profound economic and fiscal challenges that will require significant changes in government spending. But it will also require us to change our attitudes towards ageing and the aged.

There are three specific attitudes that, if changed, would go far in combating the coming challenge.

Older workers are less valuable

A recent report found more than 50,000 people involuntarily retired in 2011 for job-related reasons. A 2015 survey showed a quarter of Australians over 50 reported experiencing age related discrimination, and one third of managers factored age into their decision making.

The government has responded by introducing incentive payments for hiring older Australians but government incentives aren't always effective in changing people's attitudes, only their behaviour.

It is in everyone's interest for older Australians to stay in the workforce longer. Someone aged 50 today could work for 20 more years, much longer than someone aged 25 is likely to stay in one job.

Retirees are poor, vulnerable and need protecting by government

The stereotypical image of a pensioner is someone struggling to get by in public housing who may occasionally have to eat pet food. However retirees are a very diverse cohort. Some are indeed struggling to get by, marginalised by high costs of living (especially rent) or health concerns.

But this is not all (or even most) pensioners. 75%-80% of pensioners own their home without a mortgage, while around 30% of single pensioners and 50% of couple pensioners have more than $900,000 in net worth.

It is condescending to think of older Australians as helpless. Just because someone has reached retirement age does not automatically mean they need government funding. If retirees can support themselves they should do so before asking for taxpayer help.

I've worked hard and saved, I deserve a pension

Perhaps one of the more pernicious myths in retirement income policy is that the pension is a reward for working hard and paying taxes or part of some grand intergenerational bargain.

It's not. The pension is a safety net for those who can't support themselves.

If taxpayers end up having to pay for your retirement anyway, they don't care if you were careful with your money while others blew theirs. The pension should not be a taxpayer-funded reward for looking after yourself.

Changing attitudes is every bit as important as fiscal reform in combating the challenges of an ageing population

  

Lies

This is why we have a mislead, resentment-fueled populace - or segment of. Lies.

From Paul Little in the HOS:

 ....as we have long known the tax burden falls disproportionately on those of limited means, who are also likelier to be poor, as the gap between richest and poorest widens, partly due to measures such as the TPP.

Many poor and even middle income people effectively pay no tax.

and the gap between rich and poor is not widening