New Zealand's Financial Assistance for Poor Children: Are Work Incentives the Answer?

Published date01 September 2006
Date01 September 2006
European Jour nal of Social Sec urity, Volume 8 (2006), No. 3 299
S S J*
European countries have been concer ned with reforming the labour market and
promoting ‘employability’ and are now being asked to set out pl ans to eliminate child
poverty and social exclu sion.  e experience of Ne w Zealand might well provide an
interesting case study. Labour market  exibility was promoted in the early 1990s,
assisted by welfare bene t cuts. Family assistance was allowed to fall in real terms,
while becoming more tightly targeted and more selective. New Zeal and’s child poverty
rate rose to unprecedented levels in the mid 1990s f rom which it abated only slowly
as the economy improved. Under the Labour gover nment from 1999, child poverty
was at l ast ackno wledged wi th promise s to elimina te it, but sp ending on fa milies was
not increased signi cantly until 2005. Even then, work ince ntives were prioritised as
the best way to address child poverty. Rather th an treating all low income children
the same, a signi cant part of child-related assistance depend s on the work status
of the parents, and none of the assist ance is universal.  us while the new spending
will eventually signi cantly reduce the incide nce of child poverty in working families,
those children whose parents fail the qualifying c riteria can be expected to slip fu rther
below the relative poverty line and ex perience increasing rather than d ecreasing
social exclusion. Work-related child payments may prove di cult to administer and
have low take-up rates, but in a conse rvative political climate they appear to be the
preferred way to augment family incomes.
* Dr Susan St John is a S enior Lecturer in the Depa rtment of Economics, University of Auck land,
New Zealand ; tel: +64 9 3737599 ext 87432; email : s.stjohn@auckl
Susan St John
300 Intersentia
New Zealand is followi ng the international emphasis on work as the way out of
poverty and ‘maki ng work pay’ (OECD, 2004). In this, t he experience of New Zealand
as it unfolds may be of interest to European count ries where the goals of elimination
of child poverty and social exclusion may also take a lower level of priority, or are
assumed to be best addres sed by policies that reward work.
New Zealand’s growing children’s movement re ects not only an increased
international awareness that children have unalienable rights as citizens but also a
growing appreciation that a failure to invest adequately in children carries high long-
term health consequences and economic costs.1 Child poverty is a complex problem,
manifested in New Zealand in many ways such as a high incidence of third world
diseases, hig h rates of child abuse, food insecurity, need for food banks, failure to
learn, and a high turnover of families in rental housing with disruption to children’s
education (Child Poverty Action Group, 2003; Shaw, Blakely, Crampton, and Atkin son,
2005; St John, Dale, O’Brien, Bla iklock, and Milne, 2001).  ere are no easy or quick
xes to chi ld poverty but one obvious contributing factor to its growth and severity
in New Zealand has been the neglect of preventative measures aimed at supporting
family incomes.
e t reatment of the young in New Zealand is in marke d contrast to the treatment
of the old whose relative living standards have been protected by a wage-lin ked,
universal state pension. In contrast to complex targeting for the young , the pension
is simple to apply for with mini mal residency requirements and no claw-back for
additional income except that provided by normal taxation (St John, 2005). Unlike
Britain and many ot her European countries, there has been no u niversal child bene t
in New Zealand since the early 1990s when al l family assistance became subject to
an income test. In 1996, a new principle for part of the child-related assistance was
introduced based on rewardi ng work behaviour. Ten years later, in 2006 , this principle
was extended, driv ing a further wedge bet ween the income support of children whose
parents are in work and those on bene ts.
In the rhetoric of the ‘third way’, work has been promoted as the way out of
family povert y with the state playing an enabling role w ith selective work incentives
and childcare subsidies. At the same ti me as the rhetoric becomes more strident in
demanding work e ort from parents almost regardless of their circumstances, work
conditions must conform to the relentless downwards wage pressure in t he labour
market as the pressures of globa lisation increase.
1 See for example, Ch ild Poverty Action Group NZ, htt p://,/, Every Child Counts
http://www.ever nz/ and Children’s Commi ssion z/.

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