Gareth Kiernan says says Labour's Best Start policy is poorly thought through, poorly targeted, and unlikely to effectively solve the perceived problems

Gareth Kiernan says says Labour's Best Start policy is poorly thought through, poorly targeted, and unlikely to effectively solve the perceived problems

By Gareth Kiernan*

Child poverty is an emotive issue, and one that Labour has seized on in its new policy announcements in the last week.

Quotes from David Cunliffe like “one in four of our kids is growing up below the poverty line, and one in five don’t even have two pairs of shoes to wear to school” successfully attract media and voter attention because equality of opportunity is a principle that everyone can buy into.

And so, along with increased free early childhood education hours, Labour is flashing the cash with its Best Start policy, offering more than $3,100 to people when they have a baby.

Oh, not all people – the small amount of households having babies and earning over $150,000 will miss out.

Data from the Household Economic Survey suggests that less than 10% of households with children in them are earning over $150,000.

It is also likely that the bulk of this 10% of households are not the ones in their baby-bearing years, given that people on high incomes are likely to be those with more work experience and thus relatively older, and/or are likely to be two-income households.

Labour’s figures estimate that just 5% of children aged under one will not be covered by the scheme.

Firstly, let’s be clear that there are problems with defining exactly where the “poverty line” is.

There are a lot of children around the world who would be happy with one pair of shoes or the opportunity to attend school. And in New Zealand, what we think of as poverty today is very different to what would have been seen as poverty 100 years ago.

On this basis, poverty in an absolute sense has been largely conquered – even globally when compared with 40 years ago.

Much of the poverty talked about today, especially in a New Zealand context, is relative poverty, which is much harder to define and, in some people’s thinking, less important.

Importantly, though, Nobel-winning economist Amartya Sen argues that “absolute deprivation in terms of a person’s capabilities relates to relative deprivation in terms of commodities, incomes and resources.”  In other words, in a wealthier society, the goods and services we require to “fit in” and be part of the community are greater.

As a result, when defining a poverty line we need to ask what bundle of goods defines a fair minimum in our society for a given household type. For example, access to the internet is arguably a necessity for integration in modern New Zealand society, even though it didn’t exist 20 years ago and is not necessary for basic human survival. 

But wherever you want to draw the poverty line, either in absolute or relative terms, it is clear that line should not be drawn at a household income of $150,000.

Yet Labour’s $60/week policy is virtually a universal hand-out to new parents, because it seems that even if you’re earning $149,000 a year, having another child makes you part of David Cunliffe’s group of “Kiwi families [who] are working ever harder but just can’t get ahead.”

Let’s get real.

Best Start is less about improving the lot of the most disadvantaged in society than it is about trying to capture critical votes from the middle of the political spectrum.

The introduction and expansion of Working for Families last decade showed that if a party structures the tax and welfare system so that enough voters are at least partly dependent on government benefits, those people will feel compelled to vote for that party to protect their financial position.

And for people whose ballots aren’t bought directly by the policy, Labour is hoping that it will appeal to voters who are concerned about poverty and believe we need to “think of the children”.

Best Start is a typical case of a policy solution being developed to an inadequately defined problem, mixed up with a dose of admirable sentiments and a sizable helping of realpolitik.

We don’t have a robust definition of poverty, and for children who are not being adequately provided for, it is difficult to arrive at a fair apportionment of responsibility between the family and society.

So there are some hard-up families and their kids for whom Best Start would make a genuine difference – covering the cost of nappies and baby food.

But there are other people for whom the extra $60/week represents an opportunity to feather their own nest a little more – the type of parents who don’t sacrifice stuff for their kids, but rather the other way round.

Solutions such as parenting education, more targeted assistance, and direct government intervention all come with their own issues and side-effects.  But a combination of these approaches could potentially be a better, or more cost-effective, method of improving the lot of children in these situations than simply throwing another $60 cash per week at the problem.

And then there’s the incentive that more than $3,100 provides to have a baby. Eric Crampton provides a good write-up of the effects of a similar policy in Canada, where fertility rates increased for those on middle incomes for whom the extra cash tipped the balance in favour of being able to afford another kid.

Fertility rates in Australia also rose last decade in response to the “baby bonus” introduced in 2004.

This outcome is an unmeasured and unintended consequence, which would make the scheme more expensive than basic costings would suggest.

An increased fertility rate due to the Best Start policy would seem ironic given the likely reliance of Labour on the Green Party as its major coalition partner, as the Greens are “concerned with the growing global population”.

Having another child on the basis of an extra $3,100 from the government (or $9,300 over three years if your household income is low enough) may be a short-sighted decision.

Bringing up a child will cost you a lot more than that amount by the time it leaves home.

But for some people the short-term lure of cash will outweigh the longer-term consequences and responsibilities.  As with almost all areas of government intervention, this policy looks likely to have unintended consequences – instead of just helping out children that are already in society, the policy will also add to the number of children whose families are at least partly reliant on government assistance.

And in this case, Labour’s policy seems poorly thought through, poorly targeted, and unlikely to effectively solve the perceived problems that Labour is trying to address.

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Gareth Kiernan is the managing director at Infometrics, an economic consultancy and forecasting service, and he manages the forecasting team. You can contact him here »

Disclosure: He has his fourth child on the way, but isn’t bitter that he hasn’t received government hand-outs for any of them.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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I tend to agree with the writer, most probably Labour would agree as well. The writer must know that these sorts of policies in an election year are designed to meet a number of political objectives such as,
1. Getting media oxygen, eg Nationals "lets debate the Flag"
2. Signal to your base eg lower tax rates , National lowered higher rates of tax, A policy that fits perfectly the writers 'poorly thought through' notion.
3. Put a line in the sand , make a statement that brands who you are and what you stand for. The baby Bonus is along those lines, if combined over time with a number of other policies - you can see it helping to define who they are to voters.

... Cunny reckons one in five kiddies don't have two pairs of shoes to wear to school ....
 
Well why would they , they're human children ... 2 feet , not four ..... Geez youse Labour lot surely have lost track with reality .... either that or  you've gotten some pretty bizarre kids running around on all 4's in your Labour  homes ...

Case
 when Count(Existing_kids) > 3
 and Count(Parents_in_work) = 0
 and Sum(Parent_work_readiness) > An_arbitrary_but_useful_WINZ_metric
 and sum(Parent_Income_excluding_Transfer_Payments) = 0
 Then 'Spay appointment has been made, no cash'
 
when Count(Existing_kids) between 1 and 3
 and Count(Parents_in_work) = 0
 and Sum(work_readiness) = 0
 and sum(Parent_Income_excluding_Transfer_Payments) < 1000
 Then 'Training appointment has been made, no cash, use protection please'
 
 when Count(Existing_kids) between 1 and 2
 and Count(Parents_in_work) >= 1
 and sum(Parent_Income_excluding_Transfer_Payments) between 1000 and 150000 
 Then 'Here is yer cash'
 
when Count(Parents_in_work) >= 1
 and sum(Parent_Income_excluding_Transfer_Payments) > 150000 
 Then 'No cash yer rich pricks pay for them kids yerselves'
 
 else 'You fall outside current guidelines. 
       Please call David Cunliffe. 
       He has not invented policy as yet. 
       But he needs to buy Your vote too, so please call NOW.'
end
 

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Times change dont they?
I never wore shoes to school a day in my life until I got to intermediate school
The calloused soles of my feet were 4 mm thick - like boot leather
 
Looking back at my primary-school photos, the girls had shoes on, only one boy had shoes 

Not only is poverty not defined but nobody wants to ask why does this "poverty" exist?
 
WFF was nothing short of a bribe that the masses fell for.  Accepting a bribe is just as criminal as offering one.  Politicians, business leaders and the masses don't want to ask let alone deal with "why is the cost of living increasing and why is it becoming more prohibitive to many families"?
 
A "society" that believes that the answer to issues/problems is simply more money is ultimately on a road to nowhere.
 
 

I'm always amazed at how keen supposedly enviromental groups (i.e. the Greens) are to pay people to have more children. Surely it's the last thing we should be doing??

The very point I raise with them, frequently, I get no reply.  They are also just as quiet on peak oil....
Its all about growing their voter numbers to get elected to govn....so really they are selling their integrity....pork barrel politics at its finest.
regards

NZD18 is hardly 'paying people to have more children'...

https://www.greens.org.nz/policysummary/childrens-policy-summary

Hmmm, yes and no.
regards

Education is key to all this.
Educate those that can least afford it to wait with having children until they are financially in a better position, educate on what is really necessary in life to spend money on and what is not. Etc.
If people can't afford contraception they definitely can not afford children. Don't encourage people to have more children then they can afford, no matter what the income, it will only lead to more children, and their parents, living in poverty.
Problem with education is that once you get people interested in that it tends to lead to better incomes and choice making decisions for those who persevere and at that point the left starts to lose them as a voter. Better to make sure that they don't go down that path and pay them to stay "poor". This is based on the KVS principal, Keep Voters Simple. 
The same as working 60 to 70hours a week while young and energetic to get ahead in life and to make sure that in the future you can afford children (if that is what you want). Labour is not in favour of that either as they will loose those people as voters too, 40 hours is all you need to work and we will top up the income to support your lifestyle, stay dependent on the state please, we need your vote.
 
Despite all the changes in society that have taken place there is one thing that has not:
If you want to earn more you work either harder or smarter, and if you really want to earn more then 150K per annum you need to do both. State support will never get you there and takes away the incentive to do so.
60 bucks a week for one year, which will need to be spent on nappies, is not going to get you there. After that one year they cost a minimum of $125 each per week until independent.
 
People, think with the big head before going down that path.