SocietyBrought to you by

‘The ultimate policy tool’: The case for a basic income for New Zealand families

The best way to improve the lives of thousands of our most deprived and at-risk kids? Give their parents a regular, guaranteed cash payment, says Jess Berentson-Shaw – no strings attached.

We know that families in New Zealand are struggling. So, what are we doing about it? We need people who care, we need to innovate in social policy and we need to do it based on research and evidence. We need to do something. – Emily Writes, Spinoff Parents editor

It is amazing what a difference a few miles (and a totally different political paradigm) can make to the vulnerable in society. While in the US life looks likely to become a lot harder for those on low incomes thanks to the possible repeal of Medicare by the new Trump administration, further north in Ontario, Canada they are working hard on making life for those without enough a lot better.

In 2017, Ontario is going to start giving free money to the poor via a Basic Income (sometimes called unconditional cash assistance). They are going to observe what happens when those on low or no incomes are given C$1320 per month with no strings attached. Have those Canadians gone mad and thrown all caution to the wind? Don’t they know the poor are poor because they are just no good with money?

Well it turns out the Canadians like facts and they like research and evidence too – and they use it to inform their social policy. Social policy that in turn will make Canada a fair and thriving place for all its citizens.

The realities of life without enough

Current welfare policies have not worked to improve outcomes for those who don’t have enough – not here, and not in the US or Canada. I focus on outcomes because, while we can measure incomes and wealth, and being on or off a benefit – and use those measures as an indicator of policy success – they do not tell us if anything has actually improved in terms of quality of life.

Because being poor leads to a pretty poor quality of life. Poor health, low educational attainment, reduced earning power, exclusion from feeling connected with the rest of society, poor mental health etc are all experienced at significantly higher rates by those with fewer resources, including those in New Zealand. If polices don’t improve quality of life for those suffering the most from current economic imbalances, then those policies are a moral and fiscal failure.

Another reality is that the poor are not poor because they make poor decisions. While science shows us that grinding poverty does not allow your brain to experience optimal development and performance, this is really an effect of poverty-related stress, not the cause. The poor remain poor, and fail to thrive, because social policies have not worked to right things.

New Zealand Currency

Unconditional money works – just look at superannuation

While we can argue for a long time about what leads to a life with insufficient resources, finding out what works to lift people out of it is a more important and immediate focus for policy. And this is what the Canadians are doing. A basic income has promise in the evidence and in practice, so they are going to implement it as part of a series of policy experiments (hopefully high quality ones) and note what works best and what happens to those who receive the income in different forms.

We have our own evidence of a basic income working in practice in New Zealand. Just look at universal superannuation: a government policy that has successfully reduced New Zealand’s rates of poverty in the over 65s to approximately those in Scandinavian countries. We saw a vulnerable group and a need, and we implemented a successful policy based on the idea of providing a basic income.

material

DATA SOURCE: MINISTRY OF SOCIAL DEVELOPMENT HOUSEHOLD INCOMES IN NEW ZEALAND REPORT 2016. TABLE: THE MORGAN FOUNDATION

We should be proud of that. While some argue that superannuation is a return for tax paid, the reality is that the tax paid by older people is long spent by the time they get to 65 on basics like roads and schools and their healthcare. We should not minimise superannuation by calling it a return on payments made. Rather super is something we do as a good society – we use taxpayer dollars to support a segment of our population during what can be a vulnerable period of their lives.

There are of course questions about exactly how we continue to implement this policy given its ballooning costs (see the figure below showing Super rising to nearly $15 billion per year by 2019). But good evidence-based policy undergoes tweaks and adjustments based on societal values, need and costs. I am confident that in New Zealand, a country that values fairness and transparency so highly, we will get there with Super too.

super

DATA SOURCE: MINISTRY OF SOCIAL DEVELOPMENT HOUSEHOLD INCOMES IN NEW ZEALAND REPORT 2016. TABLE: THE MORGAN FOUNDATION

We can and should implement a basic income in New Zealand for families with children

So we know how to fix things with a basic income for older people, but in failing to balance this policy for older people with a similar policy for our other most vulnerable group we now have a huge gap between the wellbeing of children and older New Zealanders. Such a gap seems out of kilter in a country that prides itself on taking care of each other. Compare the graph below with the earlier one on material derivation in people over 65 and you can see than New Zealand social policy has a major imbalance that needs correction.

world

DATA SOURCE: TREASURY. TABLE: THE MORGAN FOUNDATION

A policy correction is necessary if we want to thrive as a country. Investment in the start of life has massive benefits for our society and the individuals in it – benefits that far outweigh the costs over the long term. In doing the good thing we are also doing the economically sound thing.

Will a basic income work for families with children? The evidence says yes. In Money Works, the book the Morgan Foundation (where I work) is releasing next year, we cover in depth the scientific studies and natural experiments showing that a basic income for low income, low opportunity families with children works to improve outcomes and ensure they have the opportunity to thrive. It leads to significant improvements in their quality of life: children do better at school, engage in less crime, have fewer mental health episodes and experience better relationships with their parents. Parents themselves do better as well.

It is not a silver bullet, but it has been modelled to halve the gap in multiple outcomes between children on low incomes and other children. This is much more than any other focused policy intervention (like parenting programmes or food in schools) can achieve. That is not to say we should not do some of those other things that work, but it makes sense to do the thing that works best first.

Why does a basic income work? It’s all about relieving stress

While the lives of low income, low opportunity families and individuals are all stressful, the form that stress takes is unique to each family. However, when we give families more resources and choices via an unconditional cash payment, in the main they behave like any other family in New Zealand – they do the best they can for their children to make their lives work, and it pays off in the long-term.

When we talk about what works for low income low opportunity families, releasing stress is a major part of the puzzle. We can of course provide additional opportunities for low income families, via work for example, but the science tells us that if stress is not released or is simply moved to another aspect of their lives, outcomes don’t improve. That is a policy failure. We cannot design people into a policy; we have to design policy for how people actually are.

Unconditional cash assistance is the ultimate multidisciplinary policy tool. We need not know what the particular problems are in a family’s life, or direct them how to behave to achieve improved outcomes. We just need to know that it works.

Should it only be low-income families who get a basic income?

Interestingly, data from a Statistics New Zealand study that followed families for eight years shows that more than half of all New Zealand families experience at least one year of very low incomes after having a child. Having a child is an economic stress point in many people’s lives – this is now the reality of modern societies. As such this reality places many children at risk of the poorer outcomes associated with growing up with insufficient resources.

Again, we come back to the question: what works to mitigate these risks? A reductive response is to argue that only the wealthy should have children. Along with being offensive and having extremely sinister overtones, further delineating society into the haves and have nots simply creates more of the current economic and social imbalance. Such imbalance has not worked out very well for many countries around the world recently in terms of fostering social cohesion, applying principles of fairness or achieving wellbeing for all. Rather, correcting the imbalance by using social policies that actually work should be our focus. Evidence tells us that investment in all children in the first five years of life has significant benefits for those children and families, but also the economy. We cover this in further detail in the book too, but certainly there is an excellent case to be made for a basic income for all young families in New Zealand.

A progressive country like ours can implement brave progressive policies that work

Like Canada, we can experiment with our social policy in an ethical and evidenced based way. We need not be lead by assumptions, fears and meanness. Rather we can look at where we have been progressive, supportive and empathetic to New Zealanders and do more of it to help more people. We need not wait for big earthquakes and natural disasters to show the best and most innovative of ourselves.

Dr Jess Berentson-Shaw writes about science, evidence and families for the Spinoff Parents. Dr Jess works at The Morgan Foundation – an independent policy think tank that uses evidence to develop ideas for a fairer, better New Zealand. You can follow Dr Jess on Twitter.


This content is entirely funded by Flick, New Zealand’s fairest power deal. In the past year, their customers saved $417 on average, which would buy enough nappies for months… and months. Please support us by switching to them right now.

The Spinoff has turned off comments. If you want to have your say on a story, please head to our Facebook or Twitter – or send a letter to the editor (we publish a selection weekly): info@thespinoff.co.nz. Thanks!