The poverty indicators are coming down but, oh, so slowly.

We now have data for the first two years of the government’s program to reduce child poverty. The rates benchmarked against income are coming down but very slowly.* Indeed one could argue that the reductions are statistical noise (the sampling errors that accompany the Statistics New Zealand estimates accommodate this interpretation) or cyclical rather than the result of anything the government has done. (The latest data is for the year to June 2020, so it does not really cover the impact of covid. There is a belief that the situation of the poor has deteriorated – their poverty rates have gone up; we shall have to wait to see whether the facts confirm the opinions.)

But even an optimistic interpretation would acknowledge that the measured reductions are small. That should not surprise us because the policy changes have been small, if trumpeted loudly. Therein lies the challenge.

The assumption seems to have been that small incremental policy measures can eliminate child poverty. But they will give only small incremental gains. You can see this by going back to basics. But we don’t.

A nice example was the 2012 ‘Expert’ Advisory Group on child poverty. (Were they ‘experts’; they listed between them but two marginal articles of child poverty?) They quite rightly identified child poverty as a problem; we’ve known that for almost fifty years, but officialdom takes its time.

The EAG rightly identified that the cost of this poverty was not just the wellbeing of children and social injustice. We are underinvesting in children for our future. Poorer health, poorer education and poorer living conditions while they are young, means that when they are adults there is increased pressure on government services – such as for health and justice – and reduced productivity. We have been happy to talk about increasing investment on roads but we ignore investing in people. We have a commission to investigate productivity but it hardly thinks about the quality of our labour force. Remind me, who is the Minister of Children?

The EAG recommended various incremental measures to address, but they did not try to explain why child poverty happens, which means that their policy recommendations will not really address the challenge.

Had they tracked the data back far enough,  they would have found that levels of child poverty rose sharply in the early 1990s. There was plenty of anecdotal evidence at the time, but it is also clear in the statistics.

To simplify, the neoliberals gave substantial tax breaks to the rich, the effect of which was to raise their effective income by about a quarter. One consequence was that those at the top were quite unaware how much the rest of the population suffered.

Because the tax cuts on the rich had to be funded by the rest of the population, the poorest thirty percent of the population experienced income stagnation for more than two decades. There was no team of five million; the game was rigged against 90 percent. Since children and their parents were over half of the poorest, they suffered the most. Not just Maori but all of them; the data shows very clearly that there are more Pakeha suffering poverty than Maori. (Asians and Pasifika are also among the poor.)

It is easy to say ‘this was all thirty years ago; why bother about history?’ But we can learn from history (or we are doomed to repeat it). What we might learn is that the big rise in child poverty involved a big change in our tax and benefit system. In effect the government’s Child Poverty Reduction Act is a direction to change the income distribution to (roughly) the level of the early 1980s. Which means, not incidentally, that it is proposing to reverse the increase in income inequality that the neoliberal policy changes of the 1980s and 1990s caused.

Can it be done incrementally? I am sceptical unless the increments are larger and more focused than what has occurred so far. The statute says where we are to end up, but it does not provide a path to get there. So we are gingerly navigating our way; there is no map.

There is a 2019 report of a Welfare Expert Advisory Group? Is that not the map? Not really. It is incremental – more forward looking than the government but that is no great achievement. It says something about the direction we might move to the goal but it goes only a little way down the path.

I am not sure it is even the best direction. For instance, the recently available research shows that raising the minimum wage does not reduce poverty much. The evidence is that those on low wages are scattered through the distribution and not clustered among the poorest. It is too easy to think the current structure – based on the Richardson-Shipley changes in 1990 – is a good foundation for progress.

Currently the closest we have to a comprehensive insight is from those events thirty years ago. A serious government might commission some real experts to provide a map to the desired destination. My guess is that its recommendations would be so radical that it would be howled down by the winners from the neoliberal policies.

The fact is that the Child Poverty Reduction Act is in principle a very radical proposal – the most radical distributional measure since the ‘Redesigning of the Welfare State’ in 1990. But without careful analysis and design its is not going to be effectively implemented.

(* Note that the decline in the rates benchmarked against material circumstances is more convincing but they had been showing a decline back before this government came into power. The conceptual underpinning of the material circumstances measure is absolute poverty, rather the relative poverty which the income measures track. Unfortunately the SNZ material measures only go back to the June 2013 year, so we don’t have as much experience in interpreting the data; the income measures go back four decades.)