Has NZ child poverty doubled as @MaxRashbrooke said?

Lindsay Mitchell put me onto a quote by veteran grumbler Max Rashbrooke that the child poverty rate doubled in New Zealand:

In a system where income goes disproportionately to the already well-off, ordinary workers are missing out on the rewards of their efforts, to the tune of billions of dollars a year. Welfare benefits, cut by a quarter in 1991 and increased just 8 per cent in the last budget, are far too low to meet people’s basic needs.

The result is a doubling of child poverty and the return of childhood diseases unknown in most developed countries – a national embarrassment, as one researcher described it.

Poverty, income and inequality data is collected in loving detail by Brian Perry every year for the Ministry of Social Development.

Figure 1: % child poverty in New Zealand (before and after housing costs), 60% 1998 median constant value, 1982 – 2013

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Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), Tables F.6 and F.7.

The only thing noticeable in the downward trend in child poverty in New Zealand since its doubling with the sharp recession in 1990 with double-digit unemployment rates is child poverty stop falling shortly after in-work family tax credits were introduced in the form of Working for Families in 2005.

There was a break in trend in the long decline in child poverty as soon as in-work family tax credits were introduced in New Zealand. I’m sure this is a coincidence because, as Brian Perry said when discussing the introduction of Working for Families in 2005:

The 2004 to 2007 period was the only one in the 25 years to 2007 in which the incomes of low- to middle-income households grew more quickly than those of households above the median.

The real killer in New Zealand in terms of poverty and inequality are housing costs. Housing costs are wholly under the control of government through its control of the supply of land, which is restricted at the behest of the parties of the left.

Figure 2: real equivalised household incomes (before and after housing costs): changes at the top of lowest income decile, New Zealand, 1982 to 2013

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Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 and D.4.

Figure 2 shows that real equivalised household income after housing costs has not grown and in fact has fallen for the bottom 10% of the income distribution in New Zealand.

It is the left-wing parties who oppose measures to reduce housing costs and and increase the supply of land through reforms to the Resource Management Act and the relaxation of the Auckland metropolitan urban limit.

Labour and the Greens are in effect keeping the poor poor to win middle-class votes.

Figure 3: real equivalised household incomes (before and after housing costs): changes at the top of the top, middle and lowest lowest income deciles, New Zealand, 1982 to 2013

image

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 in D.4.

Figure 3 shows that those in the middle and higher deciles, a political territory rich in swinging voters, are still doing well after housing costs. The parties of the left are collaborating with a middle-class home owning voter while betraying the working class and its aspirations from home ownership and quite simply affordable housing costs when they rent.

The increases for all groups may be understated by the inability of living standards measures to adequately account for new goods, product upgrades and rising life expectancies.

Can millionaires buy their way into Parliament? Lessons from the recent New Zealand election

Two millionaires, one on the left and one on the right, set up parties to get into Parliament in the recent New Zealand election. The millionaire of the left failed abysmally. The millionaire on the right made progress towards getting into Parliament in the 2017 election.

Each spent vast sums of money by New Zealand standards on their party:

  • Kim.com gave $4.5 million to his Internet – Mana party; and
  • Colin Craig gave about $1.5 million to his Conservative party with another millionaire giving $750,000 to the Conservative party.

By way of context, the maximum that a political party can spend on campaign expenses in the three months prior to the election is $1.1 million, plus $25,000 per electorate seat It is contesting. None of this is spent on radio and television advertising because this is allocated for free by the electoral commission based on previous election performance.

One of the major rationales for election finance regulation is to stop the rich buying elections by flooding the airways and billboards with their call to arms and buying politicians short of campaign donations:

Conventional wisdom holds that money plays a central and nefarious role in American politics.

Underlying this belief are two fundamental assumptions:

(1) elective offices are effectively sold to the highest bidder, and

(2) campaign contributions are the functional equivalent of bribes.

Campaign finance regulations are thus an attempt to hinder the operation of this political marketplace.

John Milyo

New Zealand is a good example of how difficult it is to buy votes if you’re underlying message does not work. This is a key point to remember.

The millionaire of the left, Kim.com, gave money to a far left party in New Zealand, recycled a couple of middle-aged lefties, ran a hard left campaign, and won all of 2000 extra party votes over last time out of electorate of about 2 million.

He came unstuck because his sitting electorate MP lost 3000 votes and lost his seat. If he had kept his seat, his party would have been also entitled to a List MP seat because his party won 1.3% of the party vote. Under the New Zealand system of mixed member proportional representation, if you win a seat in Parliament, you’re entitled to list seats to ensure that your representation in Parliament is equal to your party vote.

The millionaire of the right, Colin Craig, ran a socially conservative, economic nationalist campaign and won 4% of the vote. A party needs 5% of the party vote to get into Parliament if your party does not win an electorate seat.

Both of these parties that did not get into Parliament outspent the winning national party which won 60 of the 121 seats in Parliament.

The failure of Kim.com and Colin Craig to buy their way Parliament should be no surprise. Most systematic studies find no effect of marginal campaign spending on the electoral success of candidates.

For example, see Steven Levitt, “Using Repeat Challengers to Estimate the Effects of Campaign Spending on Electoral Outcomes in the U.S. House,” Journal of Political Economy 102 (1994): 777–798.

Levitt noted that previous studies of congressional spending have found a large positive effect of challenger spending, but little evidence for effects of incumbent spending. Those studies did not adequately control for inherent differences in vote-getting ability across candidates.

  • His paper examined elections in which the same two candidates face one another on more than one occasion; differencing eliminates the influence of any fixed candidate or district attributes.
  • His estimates of the effects of challenger spending are an order of magnitude below those of previous studies. Campaign spending has an extremely small impact on election outcomes, regardless of who does the spending.

Jeff Milyo also found that a more systematic analysis of the electoral fortunes of wealthy candidates found no significant association between electoral or fund-raising success and personal wealth. For example, see Jeffrey Milyo and Timothy Groseclose, “The Electoral Effects of Incumbent Wealth,” Journal of Law and Economics 42 (1999): 699–722.

A range of rich candidates have attempted to buy Senate seats and gubernatorial posts with little success if they were themselves unappealing candidates.

The best explanation to date for the minor effect of campaign spending on electoral success is competent candidates are adept at both convincing contributors to give money and convincing voters to give their vote.

The finding that campaign spending and electoral success are highly correlated exaggerates the importance of money to a candidate’s chances of winning.

Campaign donors give more money to the expected winners because they want to be on the winning side. What lobbyist doesn’t want to be that the best new friend of the incoming minister?

Legislators tend to act in accordance with the interests of donors, but this is not because of a quid pro quo. Instead, donors tend to give to like-minded candidates. See Steven Levitt, “Who are PACs Trying to Influence with Contributions: Politicians or Voters?” Economics and Politics 10, no. 1 (1998): 19–36.

It is a much surer thing  to give donations to a party that already agrees with you, rather than persuade someone to change their minds with campaign donations. That is a much less certain bet.

Studies of legislative behaviour indicate that the most important determinants of an incumbent’s voting record are constituent interests, party, and personal ideology. These three factors explain nearly all of the variation in incumbents’ voting records. See Steven Levitt, “How Do Senators Vote? Disentangling the Role of Party Affiliation, Voter Preferences and Senator Ideology,” American Economic Review 86 (1996): 425–441.

As an aside, the hard left campaign was instructive in another regard. The hard left honestly believes that there is a large number of people out willing to vote hard left if only their message was properly funded and got a hearing. These would be hard left voters are currently parking their vote  elsewhere, such as with the right wing  parties, apparently.

A massively funded hard left campaign in New Zealand won 1.2% of the party vote. In the 2011 election, the same hard left party, when woefully underfunded, won 1.1% of the party vote. Getting the message out appears to have absolutely no effect on the party vote of the hard left. The median voter theory rules.

The Conservative party was much more successful because the Christian parties in New Zealand usually get about 4% of the vote, except when they’re fighting with each other over who was following the Word of God better, which is rather common.

Furthermore, about 10-15% of the New Zealand election is both socially conservative and economically nationalist. They used to be called working-class Tories. Much of this vote currently votes for the New Zealand First Party– a one-man party – and its leader will be 72 at the next election.

HT: Jeff Milyo

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