Improving Educational Performance: Why Tackling Child Poverty Must be Part of the Solution

1. Improving Educational Performance: Why Tackling Child Poverty Must be Part of the Solution Jonathan Boston Co-Chair, Expert Advisory Group (2012) Professor of Public Policy, VUW Director, Institute for Governance and Policy Studies 24 May 2013

2. Outline • Summary of argument • Measuring child poverty • Child poverty in New Zealand • The relationship between child poverty and educational performance • Implications for policy • Conclusions

3. Summary • Children from disadvantaged backgrounds (low SES) perform less well educationally than those from advantaged backgrounds; there are large attainment gaps • Low family income impacts negatively on educational performance • There are various reasons why family income matters • Reducing child poverty needs to be a policy priority – especially if the aim is to improve average educational performance, enhance equality of educational opportunity and reduce the current attainment gaps • The policy tools exist for reducing child poverty; the main issue is whether there is the political will

8. Measuring Poverty • Poverty can be defined in various ways: • deprivation or lack of material resources: • to satisfy basic human needs (food, shelter, health care) and/or • to participate fully in economic, social and political life c.f. poverty of spirit, lack of aspiration, social/cultural deprivation • Different degrees/kinds of poverty: • abject poverty (lack of basic necessities, regular hunger and starvation) • relative poverty (missing out on things that most people regard as necessary for a fulfilling life) • best to think in terms of a continuum, from very severe … • most measures of poverty are relative in some way or other • both the severity and persistence of poverty matter in terms of outcomes

9. Measuring Poverty • In developed countries there are two main ways of measuring poverty: • low income • material deprivation • There are different ways of setting the relevant benchmarks – complex area; many technical issues (e.g. equivalence scales, before or after housing costs, etc.); a range of approaches possible; no international consensus, but some common approaches • Only a few countries have official poverty measures (e.g. US, UK, etc.); NZ does not

10. Child poverty in New Zealand Main points: • Poverty rates depend on the precise measure used • Poverty rates on some measures are higher now than in 1980s • Poverty rates for children are much higher than for most other groups, especially those aged 65+ • Poverty rates are particularly high for sole parents and those on welfare benefits • Income poverty rates are around the OECD average or slightly above this on most measures • Material deprivation rates for children are higher than comparable rates in Western Europe

11. Proportion of all individuals in low-income households by age, 60% REL threshold (AHC)

12. Numbers of poor children in New Zealand

13. Proportion of children below selected thresholds (AHC): fixed line (CV) and moving line (REL) approaches compared (Perry 2012)

14. Identifying Deprivation

15. Australia -- Overall Changes in Deprivation, 2006 to 2010 (weighted %)

16. Deprivation Rates: 3+ enforced lacks, using 9 item EU index (%), 2007

17. Reasons for concern A large and growing body of research highlights: A. The negative impacts of family poverty on children, including: • Greater likelihood of death in childhood • 3x higher incidence of ill-health, including 2x greater likelihood of hospital admission for acute infectious diseases • 5-6x higher incidence of hospitalisation from assault • Lower participation in ECE and higher school absenteeism • Negative impact on cognitive development and educational attainment • Higher residential mobility, poor housing and homelessness • Lower family resilience – higher parental stress and separation rates B. The negative impacts of childhood poverty on the wider society, including: • Higher unemployment and lower productivity growth • Higher fiscal costs: health care, benefit payments, criminal justice system, etc. • Significant overall economic and social costs

18. The relationship between child poverty and educational performance • The educational attainment gap between children from different SES backgrounds – international and local evidence • The impact of family income on educational performance • The reasons why child poverty affects educational achievement – three main pathways: • The parental stress pathway • The biological pathway • The economic pathway (economic models of child development

19. Implications for policy • Policies matter; governments can make a difference • Prevention is better than cure • Alleviating child poverty needs to be part of the solution • There are compelling reasons for reducing child poverty aside from the educational grounds • Direct measures to alleviate child poverty need to be complemented by efforts to mitigate its worst impacts

20. Expert Advisory Group Solutions – Overall Approach • Acknowledge policy complexity, trade-offs and tensions • Draw on the best available international evidence regarding what works • Draw on a range of principles and considerations to guide policy development • Develop a strategic approach: • Need official poverty measures and child poverty-related indicators • Set specific targets: e.g. reduce child poverty rates by 30-40% and severe and persistent poverty by well over 50% • Embody relevant poverty measures and reporting obligations in legislation to enhance political accountability • Need to raise the disposable incomes of many low-income households by at least $100 per week (or more)

21. Policy approaches How to increase family incomes? • An employment strategy • A social assistance strategy • EAG – need a mixed approach, drawing on (1) and (2) plus other measures (e.g. changing child support and housing policies) • Assistance should be targeted particularly to low-income families with young children and more than two children • Need a range of other policy measures (e.g. improved access to quality ECE, enhanced parental education, etc.) • Achieving a substantial and durable reduction in child poverty will be fiscally costly, but worth it

22. Conclusions • Child poverty is a serious issue in NZ, with significant long-term economic and social implications • Child poverty contributes to the lower educational performance of children from low SES backgrounds • We have the means to make a difference • Fundamentally, we need to increase the incomes of low-income households (especially families) – this requires a combination of measures

23. Supplementary Slides • Principles for policy design • Specific EAG proposals • The global picture • Supplementary figures • Acknowledgements

24. Principles for policy design for addressing child poverty The following principles and considerations should guide policies: • The rights enunciated in the UN Convention on the Rights of the Child • The best interests of the child, including the child’s developmental needs • The provisions and principles of the Treaty of Waitangi • A ‘social contract’ that recognizes: • The mutual responsibilities of parents, the community and the wider society for the care and wellbeing of children • The requirement to provide social assistance to those unable to work or secure paid employment sufficient to meet the basic needs of children • The importance of parental employment in reducing child poverty, but in a context where the developmental needs of children are protected (e.g. through accessible, affordable, high-quality childcare, ECE, etc.) • The vital role of housing, high-quality education, and equitable access to health care • The desirability of a strong future focus, and hence an investment approach • The desirability of selecting policy measures that are simply, effective, efficient and fair • The need for fiscal responsibility

25. Priorities • Greater accountability via a Child Poverty Act – specifying poverty measures, and requiring targets, CPRIs, monitoring and reporting • Changes to FTC in short-term; longer-term reforms to family assistance including a Child Payment • Increase the supply and quality of affordable housing • Free child health care from birth to 18 years • Establish hubs in low-decile schools • Develop a national strategy for food in schools (especially for year 1-8 students in low-decile schools) • Pass-on child support to custodial parents on DPB • Establish a micro-financing fund

26. Specific Proposals: Measuring Poverty Need at least 5 poverty measures (should be official/authoritative): • Moving line – 60% of median equivalized household disposable income, annually adjusted, AHC and BHC • Fixed line/constant value – 60% of median equivalized household disposable income, adjusted every 10 years, AHC and BHC • Material deprivation – material wellbeing index score in levels 1 or 2 out of 7 • Severe poverty – mix of (a) and (c); and poverty gap (distance of median income of the poor from the moving-line measure) • Persistent poverty – at least 3 of 4 years, using both (a) and (c) • Supplementary measures: inter-generational transmission, life-cycle, and geographic

27. Specific Proposals:Income and Employment Short- term proposals: • Improve tax/welfare system: • Rebalance Family Tax Credits to favour young children and larger families • Lift all payments to rate of eldest child aged 16+ ($101.98 per week); implies an increase of about $10 per week for eldest child under 16, and close to $40 per week for additional children under 13 • Subsequently, raise rates incrementally for children aged 0-6 • Index all child-related benefits annually • Monitor and publish annual take-up rates • Establish performance incentives to encourage high take-up rates • Appoint a person to the Work and Income Board with child well-being and development expertise

28. Specific Proposals:Income and Employment Short- term proposals: 2. Amend the Child Support Act to require: • Pass on a proportion of payments to custodial parents who receive a sole-parent benefit • Government underwriting of payments • These changes would benefit over 130,000 children, close to 90,000 of whom live in poverty • $159m was withheld from these children in 2011 by IRD; if all this were passed on, the average per child benefit would be $1,200 per annum or $23 per week • The proposed changes would have many other benefits

29. Specific proposals:Income and Employment Longer-term policy framework: • Focus on children’s developmental needs, tilt assistance to young children, and incentivize paid employment that is appropriate to age of child • Establish a Child Payment – universal for the first 6 years, targeted thereafter; higher rate during infancy and declining gradually in steps • Undertake an independent review of all child-related benefits, including In-Work Tax Credit • EAG doing further work on income support regime for our Final Report

30. Specific proposals:Income and Employment Rationale for universal element to the proposed child payment: • Need a pragmatic approach to the debate over universality versus targeting; various criteria need consideration • There is a good case for universal funding under certain conditions • NZ has universal funding of ECE, compulsory education, aspects of tertiary education, most of health care, old age pension, etc. • 21 of 34 OECD countries have a universal child payment as part of their child assistance policies

31. Specific proposals:Income and Employment Rationale for universal element to the proposed child payment: • Reduces labour market disincentives (by reducing EMTRs) • Recognizes the wider social benefits of raising children and the high costs of younger children • Recognizes the complexity of contemporary families • Simpler and more transparent, with lower transaction & compliance costs • Ensures high take-up rates • Potentially provides an alternative to more extensive paid parental leave, and would be fairer than current paid parent leave arrangements • Supports a parent to stay at home during infancy (with positive child development impacts) • Provides a population database (for use by health and social service agencies) • Provides a symmetry with the universal nature of National Superannuation • Enhances political commitment for, and long-term stability of, the policy (political economy reasons)

32. Specific proposals:Income and Employment Employment policies: • Weak case for raising the minimum wage • Little scope for further reduction in employment regulation • Job subsidy schemes may have merit, but only under strict conditions • Need to ensure adequate incentives for paid employment and support for parents of younger children via subsidies, accessible and good quality child care, ECE, OSCAR, holiday programmes etc. • Need appropriate support for training/up-skilling/tertiary education for parents, especially beneficiaries • Need to encourage child-friendly workplaces • Need strong incentives for welfare agencies to place parents with children into sustainable, child-appropriate forms of employment

33. Specific Proposals:Housing • Improve the quality and quantity of housing • Prioritize housing in the National Infrastructure Plan • Establish a Warrant of Fitness for all rental accommodation • Extend subsidies for insulation and heating • Enhance the supply of social housing • Re-focus the Accommodation Supplement and Income-Related Rent subsidies • Enhance opportunities for home ownership

34. Specific Proposals: Health Short-term: • Support free primary health care for all children from 0-6 years especially after hours • Establish a common assessment framework and pathway for all children from before birth to identify and respond to needs, shared by all health practitioners • Apply principle of ‘proportionate universalism’ Longer-term: • Expand free primary health care progressively to all children (0-17) • Improve information systems via a unified enrolment system • Develop a national plan to improve child nutrition • Establish youth-friendly health and social services in all low-decile secondary schools

35. Specific Proposals: Education • Continue to implement ECE work programme • Develop a national strategy for food in schools • Incentivize schools and ECE centres in disadvantaged areas to become ‘full service schools’ or ‘community hubs’ • Improve access to after-school care and holiday programmes • Expand the Teen Parent Units

36. Specific Proposals:Pasifika • Develop measures and indicators using Pasifika understandings of identity and success • Focus on making progress in Auckland especially • Overcrowding • Employment • Education • Health promotion • Justice • Ensure government services have effective links with Pasifika community and church groups • Encourage high-quality research to drive innovation & responsiveness in public services for Pasifika children

37. Specific Proposals: Māori • Develop measures of Māori well-being and set targets to eliminate the disparities in rates of poverty for Māori children • Better outcomes in education, health, employment & justice • Develop a strategy to prevent Māori homelessness • Better integrated health & social services for Māori children, including parenting programmes • Support trusted workers and develop integrated service hubs

38. Specific Proposals: Other Other specific proposals cover: • Community & local initiatives • Debt • Substance abuse • Gambling • Research needs

39. The Nature of Poverty: The Global Picture • Around 1 billion people (around 15% of the world’s population of 7 billion+) experience regular hunger • Many millions die of poverty-related causes each year • By NZ standards, most people in the world are poor – about half live on less then US$2.50 per day • In relative terms, things are improving globally, but many future risks, including the impact of climate change and political instability

41. Long-term Trends in Child Poverty in Australia

42. Child Poverty and Overall Poverty in OECD Countries

43. Child Poverty among Couple and Sole Parent Households in OECD Countries, 2008

44. Australian data -- Are Identified Essentials Robust?(unweighted percentages)

45. Australian data -- Are Children’s Needs Universal?(unweighted percentages)

46. Acknowledgements Expert Advisory Group, Solutions to Child Poverty in New Zealand: Issues and Options Paper for Consultation, August 2012 Expert Advisory Group, Solutions to Child Poverty in New Zealand: Evidence for Action, Final Report, December 2012. Bryan Perry, Household Incomes in New Zealand: Trends in indicators of inequality and hardship, 1982 to 2011, Wellington, Ministry of Social Development, 2012) Peter Saunders, Presentation for IGPS Workshops, 19 and 21 September 2012