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Image: Tina Tiller
Image: Tina Tiller

PoliticsJune 12, 2023

The two poverties

Image: Tina Tiller
Image: Tina Tiller

In an exclusive two-part series, Max Rashbrooke assesses the Labour government’s record on key measures. Today: hardship and poverty, and the difficulty of measuring both.

Iosua, a 41-year-old Wellingtonian, lives in a boarding house because no better accommodation is on offer. After the rent is paid, he has $130 a week for food, clothing and other costs. Paul, a 50-year-old with multiple health conditions, applauds the government’s recent benefit increases and the less punitive attitude among agencies. These men both experience hardship, to varying degrees, and together they start to shape an answer to a pressing question: how much has been done, in truth, to alleviate poverty in this country, ever since that day in October 2017 when Labour came to power promising to transform the lives of the disadvantaged?

From the outset, Labour has looked at this issue through the lens of child poverty, in part for tactical reasons: people are less likely to blame children for their situation. The Child Poverty Reduction Act, passed in 2018, made the government accountable for the first time for reducing hardship, on three main measures. 

  1. How many children are in families with less than half the current typical (median) income; this is a level where, budgeting research shows, it becomes hard for families to afford the basics. For a sole parent with one child, the poverty line in 2021 was $600 a week; for a couple with two kids, $965.
  2. Whether families have more than half the income a typical household had in 2018. This tests whether living standards are rising over time – and takes housing costs into account.
  3. How many families report being unable to afford basic things like going to the doctor, buying fresh food, and providing their children with decent clothes and shoes. (This is called material hardship.)

All three measures have fallen under Labour (that is, since 2017-18), by between 29,000 and 77,000 children. “This isn’t [yet] the structural change we need to see,” says Paul Barber, a Salvation Army policy analyst, “but we are going in the right direction, at least.” The payoff is clear in the government’s measures of child wellbeing, most of which have improved. Just 13% of children say food runs out “sometimes or often”, compared with 20% in 2019, and rates of avoidable hospitalisations have decreased. (Some measures, such as mental distress and truancy, have worsened, owing in part to the pandemic.) 

The National Party sees the hardship data differently, claiming Labour should be held responsible for the 2017-18 figures, when poverty was higher than usual. But that data actually covers the period from July 2016 to July 2018: most of it was gathered when National was in government, and virtually all of it reflects National’s policies. It is, in fact, the party’s last gift to the nation, as far as poverty is concerned.

National also claims Labour has just continued a prior trend of decreasing deprivation. And John Key’s record here was better than some on the left would admit: material hardship, for instance, was falling from 2011 onwards. But income poverty – the gap between poor families and contemporary middle-class households – wasn’t. And, crucially, Labour has continued to drive poverty down, or at least hold it steady, through a pandemic. When National was faced with its own pandemic equivalent, the global financial crisis, it allowed poverty to rise, before bringing it down some years later. 

Central to Labour’s strategy has been the welfare system, partly because it can be tweaked with relative ease and partly because beneficiaries are especially poor. The Families Package, passed in 2018, has given households an extra $1.1bn a year in Working for Families and other payments. The unemployment benefit, known as Jobseeker Support, has risen from $215 to $340 a week. The Accommodation Supplement has been boosted, the Best Start payment for newborns introduced, and the rate of the unemployment benefit linked to the average wage (so that the two increase in step). In total the government has injected an extra $16.5 billion into the welfare system. Even after accounting for inflation and higher rents, the average beneficiary’s income has risen 43% since 2018, and around 350,000 households are on average $113 a week better off.

To understand the scale of the task Labour has tackled, it helps to consider what welfare payments are worth compared to the average wage. As the graph shows, benefits were not only cut brutally in 1991 by National’s Ruth Richardson but were allowed to fall further and further behind wages under Helen Clark and John Key. Since 2018, they have headed back up towards their past peak. Only partway, of course, and some beneficiaries remain $100 or $200 a week below the poverty line.

Outside the welfare system, Labour has tried to ensure work pays. (As half of poor children live in households whose main income is from paid work, a job is not, by itself, a sure route out of hardship.) Since 2017, the minimum wage has risen rapidly, from $16.50 to $22.70. But other changes have been slow to arrive: none of the government’s much-touted Fair Pay Agreements, for instance, have been signed yet. Nonetheless, overall hardship has fallen: since Labour came to power, some 115,000 people have been lifted out of poverty.

Not that everything is rosy, of course. Material hardship rates, for instance, remain far higher for Māori and Pacific children (23% and 28%, respectively) compared to European and Asian children (10% and 6%). People with disabilities also face elevated rates of poverty.

And Labour faces a stiff challenge trying to maintain progress.  In the first chart, the dots represent its targets for child poverty in 2024 and 2028. They are demanding: income poverty, for instance, would have to fall by two-thirds in a decade – from 16.5%, a worse-than-average record in the developed world, to just 5%, among the very best performers. Why, then, does it not feel as if New Zealand is embarked on an epochal combat against the scourge of poverty?

An anecdote is telling here. According to government sources, Jacinda Ardern was known to go away and read papers on subjects like the indexation of benefits – an important but strikingly dull topic – and return them covered in red ink. Which is to say: the former prime minister was a policy wonk, and her child poverty agenda deeply technocratic. The measures employed – for instance, how many children are in families living on less than 50% of equivalised median disposable household income, after housing costs – may be beloved by experts, but are, in their raw form, unintelligible to voters. 

A government so often accused of being “all spin” turns out, ironically, to have implemented a deeply serious agenda that it is largely unable to explain to the public. And rather than wage war on exploitation – by tackling outrageous rents, for instance, or requiring all employers to pay significantly better wages – Ardern’s government has relied on more bureaucratic means, things that can be changed at the flick of a switch, like benefits and winter energy payments. There has been no real rallying cry, no sense that the state’s full resources are being mobilised to fight the evil of poverty, no crusade that would resonate deeply with the public. 

There is another sense in which the apparent reduction in poverty seems implausible. How, some will ask, can it be reconciled with the stories of record foodbank use and of families still sleeping in cars; how is it consistent with our sense that, at the bottom, life is as bad as ever, or even worse?

Leo Tolstoy would have known how to resolve the paradox. In the famous first line of his novel Anna Karenina, he wrote that although all happy families are alike, “Every unhappy family is unhappy in its own way.” So it is with poverty: each person’s experience of it is subtly different. And although it is impossible to fully capture this complexity, it is still useful to understand that there are, at a minimum, two kinds of poverty.

The families whom Labour have lifted out of hardship are, for the most part, what might be called the ordinarily poor: households that, although largely holding things together, were desperately short of cash and struggling to pay their bills. Numbering in the tens and hundreds of thousands, they have, thanks to Labour’s wage and benefit increases, often been lifted from just below the poverty line to just above it.

Under this government, some people genuinely feel better off. Paul Clutterbuck, the 50-year-old Wellingtonian living with multiple rare health conditions, says that until the recent benefit increases, his disposable income had “stagnated terribly” over several decades on what is now called the Supported Living Payment. “I have definitely been better off over the last three years [compared to] my previous 30 years on the Invalids Benefit,” he says. “Obviously there’s a long way to go, and it’s nothing like the income of working people, but I’m grateful for the improvement since Labour came into office.” Clutterbuck has also detected “a huge culture shift at Work and Income, moving away from beneficiary bashing and towards an environment of trusting the client to do the right thing. It’s obviously not perfect either, but it’s a huge leap forward.”

For some people in extreme poverty, though, nothing much has changed in recent years. Stephen Turnock, the director of Wellington social agency DCM, says the number of people his organisation works with, around 1,000 a year, has stayed static under Labour: “We are back to pretty much where we were [pre-Covid].” Sitting in his office on Lukes Lane in central Wellington, Turnock describes the agency’s whānau as “incredibly alienated” people battling multiple issues, often including physical and mental health problems, homelessness and addiction, and possessing “limited capacity to support themselves out of poverty”. 

Right at the bottom of the ladder, these people, numbering perhaps 5,000 or 10,000 across the country, “are all overlooked or lost in the rest of that much bigger picture”, Turnock says. Many do not have young children, so have gained nothing from the focus on child poverty. Briefly, during the pandemic, they were all housed, but – famously – not in permanent or suitable accommodation, and the urgency of action dissipated post-pandemic, the Covid lessons left unlearned. 

Iosua Clarke is one of those struggling to gain a foothold. Released from prison last year, he has spent 12 months in emergency accommodation, most recently the Halswell Lodge boarding house in central Wellington. Work and Income (WINZ) has been “pretty good”, he says, providing a $350 “steps to freedom” payment and food grants. WINZ and DCM have both tried to help locate more suitable housing. “But it’s hard finding accommodation, especially for [ex] inmates and fullas in the struggle. No-one will really take us – just the Lodge and places like that.” 

Staying at Halswell costs something like $300 a week, split between Clarke and WINZ, leaving just $130 a week for food and everything else. “And everything’s expensive here in Wellington – so expensive, eh? Far, you got to be rich.” Clarke is also fighting long-term alcoholism; DCM helps but there is not, he says, much state support. And he feels life has got harder recently. “I can see it in people’s faces. Ever since Covid happened, things have changed … The homelessness is getting worse, with all the drugs coming through now, not just P, different types of drugs.” For the last year, he has been trying to secure better housing and a building apprenticeship, but nothing feels certain. “I’m not happy. I’m definitely not happy. I try to do things to make myself feel better, but … I just feel lost, sort of thing. Not ‘lost’ lost, but, ‘Where do I go now?’ lost.” 

What would it take to fix these kinds of situations – and indeed the social problems that have, Turnock argues, been building up for decades? Above all, he says, government agencies need to co-ordinate their policies (a recurring request that somehow never gets answered) and, in collaboration with NGOs, revamp the services targeted to the poorest. Currently, alcohol addictions may bar whānau from accessing mental health services, or vice versa. Or there may not be a health clinic in their area that will let them in the door. This is a community that needs dedicated, flexible, whānau-friendly health services.

And – no surprises here – it needs more homes. DCM is a provider under the government’s Housing First scheme, which finds people accommodation and then wraps services around them. But of the homes DCM has used to house nearly 300 people, the vast majority have been rented – often temporarily – from the private sector; only 12 were provided by Kāinga Ora. “Everyone is in the same sandpit … just moving things around,” Turnock says ruefully.  

Several large social housing developments will shortly open in Wellington, easing the pressure somewhat. But, in an awful irony, the organisation’s housing woes are not limited to those it serves. “Our own staff are struggling,” Turnock says. “We are talking about housing [our service users], yet our own staff can’t afford the rent.”

Housing is, of course, another flashpoint for Labour. The debacle of Rotorua’s motels aside, what matters most for the poorest New Zealanders, long-term, is the supply of social housing: dwellings available at less than market rates. Superficially, this story also looks bad for the government: the social housing waitlist has spiralled upwards from 8,000 in March 2018 to 24,000 today.

Ministry of Housing and Urban Development data shows, however, that nearly 12,000 places were added to the social housing stock between July 2017 and March 2023. Of these, just over 4,000 are Kāinga Ora net new builds (7,900 built, minus 3,300 demolished and 300-odd sold), and 1,900 built by NGOs like Dwell Housing Trust. A little more than half the 12,000 “places” are new homes (once demolitions are factored in). The remainder have been bought or leased from the private sector, or “redirected” from other parts of government. (Transitional and Housing First places have also been greatly increased.)

This approach has its defenders, though. Repurposing private homes has been a quick way to prioritise housing for the very poorest, even if it adds nothing to the overall stock. And whether one takes the 6,000 or the 12,000 figure, the contrast with National’s record is a favourable one. Exact figures from that period are surprisingly hard to come by, but a 2018 stocktake found the number of state houses fell from 69,717 in 2011 to 62,917 in 2017, a drop of nearly 7,000. In many cases the homes were transferred to NGOs, with no change in rent, rather than sold to private landlords. But Labour claims that, across both the state and NGO portfolios, there were 1,500 fewer social houses in 2017 than in 2008. Leading National figures like Nicola Willis and Chris Bishop have admitted their party did not do enough last time round. And as the current housing minister, Megan Woods, likes to point out, if National had added places at the same rate in its nine years as Labour has in its six, the housing crisis would be greatly diminished.

The social housing waitlist is also biased by something that affects many such statistics: the extent to which they reflect not greater need but greater access. Across the welfare system, the consensus among experts is that help is now much easier to get. Under National there was, for instance, a lengthy social-housing triaging process, in which people hoping to go on the register had to phone the Ministry of Social Development and undergo a “screening” assessment before being allowed to make an application. As those hurdles are removed, the apparent increase in the waitlist partly reflects greater ease of access. Labour has also invested in services like Community Connectors, paying NGOs to help struggling families better understand the support available. 

Just how much this affects the figures, no one can say. One government staffer, interviewed for this article, said they had spent years trying to ascertain how much lower the waitlist would be if National’s processes had been retained, but to no avail. In any case, the scale of the recorded increases surely dwarfs such effects. The number of special needs grants, for instance, has risen from 182,187 in the December 2017 quarter to 382,707 in December 2019 and 396,909 late last year. No one outside government, and perhaps no one inside it either, believes that can be explained solely by increased ease of access.

All of these issues are, of course, exacerbated by the current cost-of-living crisis. The government’s response has been to lift benefits and minimum wages in line with inflation. But the poorest New Zealanders have long experienced a higher rate of inflation than others, as prices rise fastest in the basic goods that consume much of their budget. 

Growing social stress is evident in media reports of pensioners sitting in the dark to save energy, of households poleaxed by rising grocery prices, of widespread truancy among poor families. In early May, a survey of foodbanks found they were twice as busy as they had been pre-pandemic. The combined weight of covid and the cost of living has badly strained people who were barely coping in the first place. 

But because there are, at a minimum, two poverties, that picture is entirely compatible with a world in which benefit and minimum-wage increases have also lifted tens of thousands of people out of deprivation. So where does that leave the whole poverty debate? For analysts like Paul Barber, this is a decisive year. “Many [previous] initiatives have stopped, or need to be renewed,” he says. “The benefit increases of past years [for instance] have been paid out. My big question is, ‘What next?’ We are really going to need to move if we are going to meet the goals we have set as a nation.” For some groups, genuine progress has been made – but not to an extent that it couldn’t be unwound. “It all feels fragile, and not bedded in yet.”

Tomorrow: Wealth inequality – has Labour made it worse?

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