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Pennies from Heaven: Why we need to give all parents cash

The amazing truth about reducing child poverty is that we already know what works: regular, no strings attached cash payments. Dr Jess Berentson-Shaw explains the research backing up her call for the government to reinstate the Family Benefit.

It was 1985; New Zealand was riding high in the waves of economic deregulation. I was seven and rode a blue Raleigh bike (not the cool type). I wore a lot of navy corduroy and scratchy turtleneck jerseys. I was free to explore the wilds of the Hutt Valley and the Heretaunga River banks with little parental oversight. The curse of the stack hat bike helmet had yet to befall me. My mother also received a weekly unconditional cash payment from the government and had done so since my birth.

The author and her sister in the 1970s, when all parents received a payment to support their children

The universal family benefit introduced in 1948 was a weekly payment for each child under 16 in recognition of the financial burden of raising a child and the role government had in supporting the next generation. In 1991 sweeping welfare reforms implemented by Ruth Richardson abolished the Family Benefit alongside huge cuts to welfare payments. This experiment, we were told, would ignite a brand new economic reality for all New Zealanders, and the trickle down would benefit us all.

Twenty-one years later, in 2012, analysis of the New Zealand Survey of Family Income and Employment (SoFIE) showed that over half of New Zealand families experienced at least a year of income poverty after the arrival of a child. Many experienced more.

In 2016, the Child and Youth Epidemiology Service at Otago University reported, yet again, that children from poorer communities in New Zealand are at a much greater risk of dying as babies, being injured and ending up in hospital with illnesses of developing countries. They don’t do as well at school, have more serious mental health issues, leave school earlier, are more likely to face unemployment and to be involved in crime.

While the children in New Zealand who tend to do well in life are the children of the well off.

SOURCE: CHILD POVERTY MONITOR / CHILDPOVERTY.CO.NZ

Money is not everything but not enough sure does bugger it up for kids

For the past two years my colleagues and I at the Morgan Foundation have been researching “what works” to ensure children from lower income families get the chance to thrive – a chance they are clearly not getting now. We wanted to know which programmes have the power to improve children’s lives. The result of that research is Pennies from heaven. In it we argue it is time to wind it all back and give parents the cash they need to support their families.

Cash with no strings attached is a very powerful tool

We researched the effectiveness of intensive in-home pre-schooling, parental training, housing interventions, food in schools and nurses in schools, additional cash for families with children, compulsory employment programmes for parents and more.

Nothing was as powerful in improving lives and preventing negative outcomes for children, as unconditional cash.

Of the many quality studies we reviewed one in particular tells the story of the power of cash support.

In the Great Smoky Mountains Study of Youth in western North Carolina, profits from a casino built on an Eastern Cherokee reservation were distributed to some but not all families in the local community (tribe members received about US$4000 per adult per year). Almost overnight, the receipt of the casino profits moved some of these children (who coincidentally had been researched since birth) out of poverty.

The families who received the money underwent a remarkable change. The children became less anxious and depressed, stayed in school longer and committed less crime; parents had better mental health, and improved parenting behaviours. These changes were greatest for the poorest families. No such changes were noted in those families who did not receive the payments.

Where does the money go? Analysis from the UK shows that when additional cash was given to low-income families, as part of their child poverty package, parents spent it on their children. Parents also reduced their spending on alcohol and tobacco.

SOURCE: CHILD POVERTY MONITOR / CHILDPOVERTY.CO.NZ

How do we explain the power of cash?

At the heart of the experience of raising children with insufficient resources is the toxic effect of stress. It is just bloody stressful not having enough and inevitably that stress starts to have serious impacts.

Researchers have found that for adults under financial pressures, the effect on their “cognitive bandwidth” is the same as losing an entire night’s sleep. Cognitive bandwidth is the idea that we have finite mental resources to commit to complex and everyday tasks. Worry and stress reduces this bandwidth and removes precious mental resources from parents. You thought the sleep deprivation was affecting your thinking? Try adding on constant worry about the next rent payment.

Parental stress can also affect children’s physical development. Brain imaging studies show us that the brain development of children from resource-poor families differs from children in other families. In the first years of a child’s life all the neural connections they need are built by their interactions with those who care for them. If their primary caregiver is under pressure, they have less energy, time, and bandwidth to dedicate to those vital interactions and hence fewer neural connections have the opportunity to be made.

Children who are exposed to poverty also experience stress themselves, affecting their immune system development. Our own world famous Dunedin Multidisciplinary study shows children who grow up poor are more likely to experience heart related illnesses as adults even if they have moved out of poverty. The childhood poverty has had a long-term effect on their cardiovascular and immune system.

Unconditional cash lifts the stress – other interventions may not

Cash without strings allows parents to alleviate their family’s particular source of stress – no family has exactly the same sources of stress or the same set of support needs. Cash does not proscribe or prescribe solutions.

Conditional or in-kind assistance (e.g. food in schools, welfare to work programmes) assume to know the source of all struggling families’ needs, or else place conditions on parents in return for that support (like low-paid casual work attendance). These assumptions and conditions can simply increase stress.

Without reference to the real problem in low-income families, we are likely to do what our prime minister has rightly expressed great concern about: enact policies on many families that do not work.

The reality is this is not a problem with poor families at all. It is about all families and what happens to us when we find ourselves poor.

Read more about unconditional cash and family wellbeing in Pennies from heaven.


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