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Child poverty stats

The ODT’s Eileen Goodwin asked me for comment on the latest findings from the Child Poverty Monitor. Her story is here; she has comment from me and the CTU’s Bill Rosenberg. The piece accurately represents what I’d said; I’ve copied below the full comments I’d sent her.

“Because of capital investment and productivity improvements over the past several decades, workers get a slightly smaller fraction of a much larger national income. And incomes have increased across the deciles. For every dollar earned by a household at the second decile in 1982 (80% of households earn more than them), households at the second decile now earn, in real terms, about $1.20. Households at the eight decile (20% of households earn more) earned $1.30 in 2013 for every dollar earned in 1982. It is better to have a smaller fraction of higher total output than a larger fraction of lower output.”

“Bryan Perry’s work for the Ministry of Social Development helps us distinguish changes in relative income poverty from changes in real poverty. The Children’s Commission focuses on relative measures of poverty. But on those figures, a doubling of every person’s income would have no effect on child poverty rates, because the same number of children would still be in households that are at or below 60% of median income. Perry also shows changes in the number of children in poorer households relative to a more fixed standard. He shows that, in 1982, 18% of children lived in households below a fixed poverty threshold. That figure rose substantially through the early 1990s, up to 36% in 1994. But it dropped substantially through the 2000s and sat at 10% in 2014, the most recent year reported. But that figure is before housing costs. If we take an after-housing-cost figure, the proportion of children below that fixed poverty threshold increased from 12% in 1982 to 17% in 2014. What causes the massive divergence between those figures? Housing costs. Because we have made it very difficult to build new housing, through very constraining zoning rules, we have made housing very expensive. And the costs of that fall most heavily on the poor, and particularly on poor children in overcrowded, poor-quality housing.”

(or, shorter version of the above): “If we look at the proportions of children below fixed poverty thresholds, rather than the relative income measures highlighted in the report, the proportion of children in poverty dropped from 18% in 1982 to 10% in 2014 – if we measure things before housing costs. After housing costs, the proportion rose from 12% to 17%. What causes the substantial divergence between those figures? Housing costs. Because we have made it very difficult to build new housing, through very constraining zoning rules, we have made housing very expensive. And the costs of that fall most heavily on the poor, and particularly on poor children in overcrowded, poor-quality housing.”

The Productivity Commission’s report on changing labour income share is here.

My report with Jenesa, which included the by-decile income growth figures, is here.

And Bryan Perry’s Household Income Report is here; I referred above to tables F.6 and F.7.

Watch for the NZ Initiative’s report on poverty, by Bryce and Jenesa, to be released in March next year.

About Eric Crampton (87 Articles)
I'm Head of Research with the New Zealand Initiative.

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