Full-time work on the minimum wage is enough to keep a NZ family out of poverty!

An OECD chart that shows New Zealand parents only need to work a little over 40 hours a week on the minimum wage to lift a family out of poverty in New Zealand.

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The figure above shows that a lone parent with two children needs to work about 25 hours a week stay out of poverty in 2013 in New Zealand Once taxes are taken into account as well as additional family benefits such as in-work tax credits. New Zealand is one of the easiest places in the world to get out of poverty by working part-time for a sole mother.

The figure above from the OECD shows that New Zealand couple with two children needs to work about 40 hours a week to stay out of poverty. Of course, what is poverty depends on the definition of the poverty line and in this case by the OECD, it is defined as 50% of the median wage after taxes and family benefits. Another common definition of poverty is earning less than 60% of the median wage

The minimum wage is $14.75 per hour in New Zealand while proposals for a living wage in New Zealand are now $19.25 an hour. The Labour Party wants to increase the minimum wage to $15 per hour.The Greens want to increase the minimum wage to the living wage.

Simon Chapple and Jonathan Boston pointed out in their excellent book last year on child poverty in New Zealand that full-time work by one parent and part-time work by the other in the same household is enough to lift families out of most  definitions of poverty:

Sustained full-time employment of sole parents and the fulltime and part-time employment of two parents, even at low wages, are sufficient to pull the majority of children above most poverty lines, given the various existing tax credits and family supports.

The best available analysis, the most credible analysis, the most independent analysis in New Zealand or anywhere else in the world that having a job and marrying the father of your child is the secret to the leaving poverty is recently by the Living Wage movement in New Zealand.

According to the calculations of the Living Wage movement, earning only $19.25 per hour with a second earner working only 20 hours affords their two children, including a teenager, Sky TV, pets, international travel, video games and 10 hours childcare. This analysis of the Living Wage movement shows that finishing school so your job pays something reasonable and marrying the father of your child affords a comfortable family life.

The OECD’s analysis also showed that incentives for New Zealanders to work more and earn more is better than in most countries in terms of what happens if they earn a wage increase.

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In New Zealand, when there is a 5% minimum wage increase, four percentage points  of that wage increase actually stays in the hands of the worker.

In some countries such as Australia, the USA  and UK, 60 to 80%of the minimum wage increase is gobbled up in reductions in benefits and taxes. At the same time, the minimum wage increase makes it less profitable for your employer to retain you so your job is more at risk.

The only explanation I have for why the Labour Party, NZ Greens and the living wage movement don’t highlight the success of the existing minimum wage in reducing family poverty in New Zealand is mass kidnappings.

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But for these abductions most fowl, I’m sure the Labour Party,  NZ  Greens and the living wage movement would be dancing in the street celebrating successes of capitalism and freedom in New Zealand in keeping families out of poverty through the minimum wage.

Chapple and Boston on the extent of welfare benefit fraud in New Zealand

What is more surprising about this honest disclosure of welfare  fraud to the Household Labour Force Survey of Statistics New Zealand in 2011 is  these welfare beneficiaries were so upfront about their criminal fraud.

These estimates must underestimate the extent of welfare fraud because some of these criminals would be aware that they should be slightly discreet in the company of any government official when discussing their eligibility for welfare benefits and any false information supplied in their claims for welfare benefits.

Some welfare cheats are alert to this  basic criminal skill and do not claim their benefit if called in to the welfare benefits  office for a reassessment of their eligibility. They don’t have the front to go near a government official while defrauding the taxpayer.

Yes, welfare fraud is a crime so people who perpetrated these crimes by obtaining welfare benefits under false pretences are criminals. If these criminals are caught, they are prosecuted for a crime and sometimes sent to prison.

HT: Muriel Newman

The long-term solution to child poverty in New Zealand

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The politics of ethnicity-based research in New Zealand

When Simon Chapple in 2000 wrote “Māori Socio-Economic Disparity”, which showed that disadvantage in New Zealand is more closely tied to age, marital status, education, skills, and geographic location than it is to ethnicity, broadly conceived, such as Māori ethnicity:

  • He was summoned before the Māori Affairs Committee of parliament to defend his paper! His chief executive at the Ministry of Social Policy went along with him to defend what he wrote while employed as a senior analyst at the Department of Labour. Staff at his new ministry launched a petition to have Simon fired.
  • The head of the Māori Affairs Ministry accused Simon of breaching the public service code of conduct.

Chapple also found that there are important differences in socio economic development by Māori self-identity. Those who identified only as Māori did worse than those that are identified as Māori and another ethnicity. Identifying only as Māori also correlated with living in rural New Zealand.

In terms of employment discrimination, employers would not know whether a Māori job applicant identified as only as Māori or also with another ethnicity, so discrimination is not a good explanation of Māori disadvantage because of this counterfactual. A major driver of Māori disadvantage, which is identifying on the Census form solely as Maori, is simply unknown to discriminating employers as a basis for discrimination in hiring and promotion.

There were editorials in the Dominion Post, which I cannot find online,  and in the New Zealand Herald. The latter said:

The Government is being prodded to recognise that Maori deprivation has more to do with socio-economic factors than ethnicity.

This was the conclusion of a report by the Labour Department’s senior research analyst, Simon Chapple. Helen Clark might well have had that finding partly in mind when she referred to a lot of water having gone under the bridge since the Government first formulated legislation.

Mr Chapple said, in essence, that place of residence, age, education and skills had more to do with poverty than race. In areas such as South Auckland, Northland and the central North Island, there were poor Maori, but there were also poor Pākehā and poor Pasifika.

The Minister attacked him and the paper as well for contradicting the Minister’s claim during the election campaign that everything got worse for Maori in the 1990s.

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Real equivalised median household income rose 47% from 1994 to 2010; for Māori, this rise was 68%; for Pasifika, 77% (Perry July 2014)

See Karen Baehler’s Ethnicity-based research and politics: snapshots from the United States and New Zealand for more information and a comparison with the similar response to Daniel Patrick Moynihan’s The Negro Family: A Case for National Action in 1965.

About a quarter of Negro families are headed by women. The divorce rate is about 2 1/2 times what it is [compared with whites],” Moynihan said. “The number of fatherless children keeps growing. And all these things keep getting worse, not better, over recent years.”

Moynihan, now retired from the United States Senate, was a senior official in LBJ’s Labor Department in 1965. He wrote his report on a typewriter over a few weeks and had the publications office in the basement of the Labor Department print 100 of them, marked “For Official Use Only.”

  • He warned about the breakdown of the African-American family where deprivation and disorganisation had formed their own vicious circle.
  • Many civil rights leaders had labelled Moynihan’s report a subtle form of racism because of its unflattering portrayal of the black family (Wilson 1987).
  • These accusations of racism helped make the breakdown of the family a taboo subject in social policy in the USA

see The Moynihan Report Revisited: Lessons and Reflections after Four Decades for a review by the best and the brightest in American economics and sociology on Daniel Patrick Moynihan’s prophetic warnings. Holzer says, for  example:

Moynihan was extremely insightful and even prescient in arguing that the employment situation of young black men was a “crisis . . . that would only grow worse.”

He understood that these trends involve both limits on labour market opportunities that these young men face as well as skill deficits of and behavioural responses by the young men themselves.

More children are growing-up without a working father living in the home and glean the awareness that work is a central expectation of adult life (Wilson 1987, 1996).

Single-parent households increased from 13 per cent of all Māori households in 1981 to 24.4 per cent in the 2006 Census. In the 2006 Census, 70 per cent of Māori single parent households were on a low income compared to 15 per cent of other Māori one family households (Kiro, Randow and Sporle 2010).

Most of the skill gaps that are present at the age of 18 – skill gaps which substantially explain gaps in adult earnings and employment in all groups – are also present at the age of five (Cunha and Heckman 2007). There is much evidence to show that disadvantaged children have lower levels of soft skills (non-cognitive skills): motivation, persistence, self-discipline, the ability to work with others, the ability to defer gratification and plan ahead, etc. (Heckman 2008). Most of the skills that are acquired at school build on these soft skills that are moulded and reinforced within whānau.

When I started working on labour economics in 2007 I found that the labour economics of Māori was very narrowly written and stayed well clear of the minefield that Simon braved about how ethnicity does not matter that much to Māori social disadvantage.

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