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Gross Domestic Product (GDP) | Income Inequality | Child Poverty and Living Standards |
Unemployment Rates | Children Reliant on Benefit Recipients Appendices

Child Poverty and Living Standards

Introduction

High rates of child poverty are a cause for concern, as low family income has been associated with a range of negative outcomes including low birth weight, infant mortality, poorer mental health and cognitive development, and hospital admissions from a variety of causes [1]. Further, the Christchurch Health and Development Study suggests that exposure to low family income during childhood and early adolescence may increase the risk of leaving school without qualifications, economic inactivity, early parenthood and criminal activity. While adjusting for potentially mediating factors (e.g. parental education, maternal age, and sole parent status) reduces the magnitude of these associations somewhat, they do not disappear completely, suggesting that the pathways linking low family income to long term outcomes are complex, and in part may be mediated by other socioeconomic variables [2]. Yet while there is much debate about the precise pathways involved, there is a general consensus that the relationship between poverty and adverse outcomes is non-linear, with the effects increasing most rapidly across the range from partial to severe deprivation [3].

In New Zealand, the Ministry of Social Development has periodically reviewed the socioeconomic wellbeing of families with children using information from two data sources:

1. The New Zealand Household Economic Survey, which can be used to assess the proportion of families with children who live below the income poverty line [4].
2. The New Zealand Living Standards Survey, which uses the Economic Living Standards Index (NZELSI) to assess the proportion of families with children who live in severe or significant hardship [5]

The following section uses information from these two data sources to assess the proportion of New Zealand children living in poverty, or exposed to severe or significant hardship in recent years.

 

Children Living in Households Below the Poverty Line

Child Poverty Trends Using Different Poverty Measures

Relative Poverty (Compared to Contemporary Median)
Before Housing Costs: In New Zealand, relative child poverty rose rapidly during 1990-1992, a rise which Perry [4] attributes to rising unemployment and the 1991 Benefit Cuts (which reduced incomes for beneficiaries to a greater extent than the median fell during this period). During 1992-1998, relative child poverty rates then declined, a trend which Perry attributes to falling unemployment, occurring in a context where median incomes did not increase. After 1998 however, as economic conditions improved, median incomes again rose, while incomes for many low-income households with children did not, resulting in a rise in relative child poverty up until 2004. From 2004 to 2007 relative poverty rates again declined, a decline which Perry attributes to the roll out of the Working for Families Package. A further rise was again seen in 2008, as the result of rapidly rising median incomes outweighing the final stage of the Working for Families roll out [4] (Figure 1).

After Housing Costs: In New Zealand during 1982-2008, while trends in relative child poverty after adjustment for housing costs (AHC), were broadly similar to before housing cost (BHC) measures, one key difference was evident: that AHC child poverty rates in 2008 remained higher than in the 1980s, while BHC measures (for those < 60% threshold) were closer to 1980s levels. Perry [4] attributes these differences to the fact that housing costs in 2008 accounted for a higher proportion of household expenditure for low-income households, than they did in the 1980s (in 1988 16% of households in the bottom income quintile spent >30% of their income on housing; in 2008 this figure was 39%).

Perry notes however, that the income-related rental policies introduced in 2000, along with later changes to Accommodation Supplements, helped reduce housing expenditure for some low income households, and that these changes contributed to reductions in AHC child poverty during 2001-2007. There were no further policy changes during 2007-2008 however, with maximum rates of assistance remaining fixed, as housing costs continued to increase. As a result, net housing expenditure rose, especially for low income households and this resulted in increases in AHC child poverty rates during 2007-2008 [4] (Figure 2).

Fixed Line Poverty (Compared to 1998 Median)
Before Housing Costs: In New Zealand during the late 1980s and early 1990s, fixed line child poverty measures increased markedly, for similar reasons to those outlined above. During 1994-1998 however, child poverty rates declined, a trend which Perry attributes to improving economic conditions and falling unemployment. During 1998-2004, child poverty fell a little (60% threshold), or remained static (50% threshold), suggesting that there were no real improvements for the poorest children during this period. During 2004-2008 however, child poverty rates fell (using both thresholds), with fixed line child poverty rates in 2008 being lower than they were in the 1980s [4] (Figure 1).

After Housing Costs: In New Zealand during 1982-2008, while trends in fixed line child poverty after adjustment for housing costs (AHC), were broadly similar to before housing cost (BHC) measures, the same key difference seen with relative poverty measures was evident: that AHC child poverty rates in 2008 remained higher than in the 1980s, while BHC measures generally returned to / were lower than 1980s levels [4] (Figure 2).

Child Poverty Trends: < 60% of 1998 Median, After Housing Costs

Poverty Rates by Age in the Total Population
In New Zealand during 1984-2008, poverty rates were consistently higher for children aged 0-17 years, than for those aged 25+ years. During the late 1990s and 2000s, poverty rates were lowest for those 65+ years (Figure 3).

Child Poverty by Number of Children in Household
In New Zealand during 1986-2008, child poverty rates for households with 3+ children were consistently higher than for households with 1-2 children (Figure 4). (Comment: Perry notes that in 2008, children from these larger households made up 47% of all poor children, a decline from 57% in 2004 [4])

 

Figure 1. Proportion of Dependent Children Aged 0-17 Years Living Below the Income Poverty Threshold (Before Housing Costs), New Zealand 1982-2008 HES Years

Source: Perry 2009[4], derived from Statistics NZ's Household Economic Survey (HES) 1982-2008

 

Figure 2. Proportion of Dependent Children Aged 0-17 Years Living Below the Income Poverty Threshold (After Housing Costs), New Zealand 1982-2008 HES Years

Source: Perry 2009[4], derived from Statistics NZ's Household Economic Survey (HES) 1982-2008

 

Figure 3 Proportion of Individuals Living Below the 60% Income Poverty Threshold (1998 Median, After Housing Costs) by Age, New Zealand 1984-2008 HES Years

Source: Perry 2009 [4], derived from Statistics NZ's Household Economic Survey (HES) 1982-2008

 

Figure 4.Proportion of Dependent Children Living Below the 60% Income Poverty Threshold (1998 Median, After Housing Costs) by Age and Number of Children in Household, New Zealand 1986-2008 HES Years

Source: Perry 2009[4], derived from Statistics NZ's Household Economic Survey (HES) 1986-2008

Child Poverty by Child's Age
In New Zealand during 1986-2001, poverty rates for younger children (0-6 years and 7-11 years) were higher than for older children (12-17 years). Differences after 2001 were less consistent [4] (Figure 4).

Child Poverty Trends by Household Type and Work Status of Adults in Household
Household Type: In New Zealand, child poverty rates for children in both sole-parent and two-parent households increased rapidly between 1988 and 1992. In absolute terms however, poverty rose most rapidly for children in sole-parent households, with rates reaching a peak of 77% in 1996 (two-parent: rates peaked at 29% in 1994). While rates for both household types declined between 2001 and 2007, during 2007-2008 child poverty rates for those in sole-parent households remained much higher than their 1980s levels, while rates for two-parent households were similar (Figure 5). (Comment: Perry notes that ≈1/3 sole parent families live in wider households with other adults, and that children living in these “other” households have significantly lower poverty rates than those living in sole parent households, because of the greater household resources available to them [4]).

Work Status of Adults in Household: In New Zealand, child poverty rates for children in workless households, or where no adults worked full time, increased rapidly during 1988-1992. Poverty rates for children in these households remained elevated during the 1990s (range 66-78%), before declining during 2001-2007. Even at their nadir in 2007, poverty rates for children in these households remained much higher than 1980s levels. In contrast, increases in child poverty for households where an adult worked full time, or was self employed, were much less marked, with rates in 2007-2008 being similar to those in the 1980s (Figure 5). (Comment: Perry notes that during the 1980s, children in workless households were ≈2x as likely to be in poor households; during 1992-2004 this had risen to ≈ 3-4x higher, and by 2007-2008 it was ≈ 7x higher [4]).

Figure 5. Proportion of Dependent Children Living Below the 60% Income Poverty Threshold (1998 Median, After Housing Costs) by Household Type and Work Status of Adults in the Household, New Zealand 1986-2008 HES Years

Source: Perry 2009[4], derived from Statistics NZ's Household Economic Survey (HES) 1986-2008

 

Composition of Children Living in Poverty by Household Type and Work Status of Adults in Household
Household Type: In New Zealand during 1988-2007, the proportion of children living in poverty who were from two-parent households steadily declined, while the proportion who were in one-parent households increased. Thus by 2008, 46% of all children living in poverty were in one-parent households, as compared to 18% in 1988 (Figure 6).

Work Status of Adults in Household: In New Zealand during 1986, the highest proportion of children living in poverty came from families where at least one adult worked full time. During 1988-1992 however, the proportion of children living in poverty who were from households where at least one adult worked full time declined markedly, while the proportion of children from workless households increased, so that by 1992 children from workless families made the greatest contribution to those living in poverty. During the 1990s however, these trends reversed, so that by 2004 a greater proportion of children living in poverty again came from households where at least one adult worked. Following the introduction of the Working for Families package, these trends reversed yet again. Thus during 2008, the highest proportion of children living in poverty came from workless households (Figure 6).

Figure 6. Composition of Dependent Children Who Were Living Below the 60% Income Poverty Threshold (1998 Median, After Housing Costs) by Household Type and Work Status of Adults in the Household, New Zealand 1986-2008 HES Years

Source: Perry 2009[4], derived from Statistics NZ's Household Economic Survey (HES) 1986-2008: Note: Totals in Each Category Sum to 100% of Children Living Below Poverty Line

Summary: Child Poverty

In New Zealand during 1988-1992, child poverty rates increased markedly, as a result of rising unemployment and the 1991 Benefit cuts. During 1994-1998 however, rates declined, as economic conditions improved and unemployment fell. During 1998-2004, child poverty trends varied, depending on the measure used, but between 2004 and 2007 they again declined, following the roll out of the Working for Families package. For the majority of this period, child poverty rates were higher for younger children (0-11 vs. 12-17 years), larger households (3+ children vs. 1-2 children), sole parent households and households where the adults were either workless, or where none worked full time.

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Families with Reduced Living Standards

 

Figure 7. Living Standards Distribution of Families with Dependent Children by Family Type and Income Source, New Zealand Living Standards Survey 2004

Source: NZ Living Standards Survey [5].

 

Living Standards by Family Type and Income Source
In the 2004 Living Standards Survey, 30% of all economic family units contained dependent children. While only 10% of family units without children were living in severe or significant hardship, this figure rose to 22% for families with dependent children. The proportion living in severe or significant hardship also varied with family type and income source, with 42% of sole-parent families being classified as living in severe or significant hardship, as compared to only 14% of two–parent families. Similarly, 58% of families who relied on income tested benefits were classified as living in severe or significant hardship, as compared to 12% of families receiving their income from market sources. Further analysis however, suggested that the difference in living standards between sole and two-parent families was largely due to the former's greater reliance on benefits as their main source of family income [5] (Figure 7).

Living Standards by Ethnicity of Family Members
The 2004 Living Standards Survey also noted that European and Other families with dependent children had higher average living standards (37.6 and 38.4 respectively) than Pacific and Māori families with dependent children (25.3 and 31.6 respectively). Of note, 30% of all Pacific families with dependent children in the 2004 Survey reported living in severe hardship, as compared to 20% of Māori families, 8% of European families and 4% of Other families (Figure 8).

 

Figure 8. Living Standards Distribution of Families with Dependent Children by Family Ethnicity, New Zealand Living Standards Survey 2004

Source: NZ Living Standards Survey [5]; Family Ethnicity is based on total responses to the ethnicity question e.g. if any adult or child specified Pacific as one of their ethnicities, the family is counted as Pacific – thus these ethnic groupings are not mutually exclusive.

 

Constraints Placed on Children's Consumption by their Families Living Standards
The 2004 Living Standards Survey also explored the constraints placed on children's consumption arising from their families living standards and noted that of children living in severe hardship, 51% had to go without suitable wet weather gear, 38% were unable to have a friend over for a meal, and 34% were unable to have friends over for a birthday party because of the cost. In addition, 46% of parents had postponed a child's doctor's visit and 36% had postponed a child's dentist's visit because of cost, and in 40% of cases children had to share a bed [5] (Table 1).

Table 1. Constraints on Children's Consumption by their Family's Standard of Living, New Zealand Living Standards Survey 2004

Source: NZ Living Standards Survey [5].

Summary: Living Standards

In the 2004 Living Standards Survey, 30% of economic family units contained dependent children. While only 10% of family units without children lived in severe or significant hardship, this figure rose to 22% for families with dependent children. In addition, a much higher proportion of sole-parent families lived in severe or significant hardship than two parent families, although these differences were largely attributed to sole-parent families' greater reliance on benefits as their main source of family income. Pacific and Māori families were also significantly more likely to live in severe hardship, than European or Other families.

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References

1. Aber, j., et al., The Effects of Poverty on Child Health and Development. Annual Review of Public Health, 1997. 18: p. 463-83.

2. Maloney, T., Are the Outcomes of Young Adults Linked to the Family Income Experienced in Childhood? Social Policy Journal of New Zealand, 2004. 22: p. 55-82.

3. Bradley, R. and R. Corwyn, Socioeconomic Status and Child Development. Annual Review of Psychology, 2002. 53: p. 371-99.

4. Perry, B., Household Incomes in New Zealand: Trends in Indicators of Inequality and Hardship 1982 to 2008. 2009, Ministry of Social Development: Wellington. p. 1-167.

5. Jensen, J., et al., New Zealand Living Standards 2004. 2006, Ministry of Social Development: Wellington. p. 99-122.