Getty Images

Bridging the poverty gap: Why all poor kids need Working For Families support

Working For Families payments are a lifeline for kids in poverty – but only if they happen to have a parent in paid work. It’s time to end this false dichotomy between the ‘deserving’ and ‘undeserving’ poor, writes Child Poverty Action Group’s Susan St John.

As 2020 stumbles to an end and the wage subsidies and Covid Income Relief Payment (CIRP) wind down, the threat of Covid-19 continues to harm both businesses and the people they employ. Last Friday was a sharp reminder of the possibility of more lockdowns as Auckland’s CBD was closed while a new case was investigated.

Faced with the prospect of a recession, the Reserve Bank acted aggressively to swamp the market with cheap money with the aim of stimulating the economy and the housing market in particular. The government appears to support this plan, declining to use any of its own fiscal policy options since the height of the Covid crisis. It won’t even extend the CIRP in the face of rising unemployment because, as social development and employment minister Carmel Sepuloni said last week, “The New Zealand’s economy is faring much better than was forecast at the beginning of the pandemic.”

Thus, as a difficult Christmas approaches we can expect a rising tide of New Zealanders will flounder in the toxic stress of accelerating debt, food insecurity, and wondering how to keep a roof over their heads. The government has ruled out any urgent support. Sixty organisations joined together last week to plead for urgent action to address the deep and extensive experience of unmet need – but even that fell on deaf ears. The pain of the recession for many sits starkly alongside the bountiful riches accumulating to owners of multiple houses in an out-of-control housing market.  To constrain the wealth and income divide, there is nothing in place except a pitiful promise of a top tax bracket of 39%. Even the two election promises for welfare, minor as they were – an increase to the amount of income that can be earned on a benefit, and the reintroduction of the training incentive allowance – have no sense of urgency or firm starting dates.

Surprisingly, given its rhetoric about child poverty, the government seems oblivious to the recession’s impact on children. The keystone income support programme for children, Working for Families, was never designed for recessions of the type we are facing. It works very badly for the worst-off children because it is based on the neoliberal mantra that paid work is the only way out of poverty. The in-work tax credit, a payment meant for the support of children, is dangled like a carrot to reward parents for not being on a benefit. This is cruel: for many families, paid work is inappropriate or impossible; other parents, meanwhile, are desperate to find a job – but in a recession far fewer jobs exist.

The way we protect the old and the young in New Zealand is to make sure there is a basic floor of income for both. For the old, NZ Super is widely understood as an effective basic income that is highly successful in providing unconditional support and preventing poverty.

Working for Families is the comparable programme for the young. It deserves the same understanding and support. Currently all parents or caregivers who are in some paid work, earning under $42,700 a year and not accessing any benefit, receive the full WFF weekly payment for their children. This payment is a cushion for children, and it should be unconditional for all low income children, just as NZ Super is available to all older people. We shouldn’t be differentiating between “deserving” and “undeserving” poor children.

What children need is for their parents to have an adequate income for themselves, and for children to be acknowledged as also having income needs. The children’s needs don’t suddenly reduce because their parents become so poor that they qualify for an adult benefit. Their WFF payment should not be cut when parents have no hours of paid work or need a welfare benefit because, for example, they have exhausted their wage subsidy or CIRP.

It is past time for the government to face up to the consequences of this policy: the perpetuation of the worst of child poverty. CPAG has noted many times that the numbers of children in the red danger zone of poverty – living in households with less than 40% of median after-housing-costs income – has hardly budged for 12 years. While we don’t yet have the full picture of the success of the Labour government’s first-term policies, as data is always two years out of date, the worst-off children gained little real help from the 2017 Families Package. This suggests that children below the 40% line – around 170,000 of them before Covid hit, and probably more now – continue to suffer under the current settings that deny them $500m of WFF payments per year and that keep their parents on subsistence-level adult benefits.

To repeat, welfare benefits are for adults. Putting up the adult benefit by $25 (only $12.50 each for couples) this year has often been cited as evidence of the generosity of government to families. But adult benefits have been far too low to meet the needs of the adults themselves. The additional support needed to meet the needs of children in low income households is a separate issue and has been largely ignored, in spite of all we know about poverty and child development. (The exception is Best Start which supports children under three on a non-discriminatory basis and is a welcome small step in the right direction.)

The Ministry of Social Development acknowledges the historic problem for those children excluded from the full WFF package in their annual 2019 household incomes report:

From 1992 to 2004, children in workless households generally had poverty rates around four times higher than for those in households where at least one adult was in full-time work.  From 2007 to 2015, the difference was even greater – around six to seven times higher for children in workless households. This change in relativities to a large degree reflects the greater WFF assistance for working families than for beneficiary families.

A low-income one-child family entitled to the full WFF weekly payment receives $185 a week. The caregiver in a qualifying four-child family receives $473 WFF per week to meet the needs of her children.

But the adults in these families must have some paid work to qualify for the full package. And there is a second condition: they must not be on any welfare benefit regardless of whether they have paid part-time work. A sole parent, for example, who fails to meet these two requirements loses $72.50 a week for her children, or 40% of WFF. In a four-child family the loss is $87 per week, or a cut in WFF of 18%. That’s rent for a much-needed additional bedroom, or an awful lot of fruit, milk, bread and vegetables cut out of the weekly low-income budget.

The IRD could flip the switch overnight and pay the full WFF to all low-income families. It wouldn’t cure child poverty on its own, but it is an obvious start, targeted only at those in severest poverty. It would commit the government to spending an extra $500m per year – an excellent economic stimulus as it’s money that would be spent immediately. Within government, there seems to be no questioning of expenditure like the $2 billion a year that goes into the NZ Super Fund, or the shameful subsidisation of those making extraordinary capital gains. It is not about the money, it is about letting go of a failed neoliberal ideology that withholds a poverty-reducing payment for the poorest children in the name of a work incentive. It is stunting the lives of our poorest children.




The Spinoff is made possible by the generous support of the following organisations.
Please help us by supporting them.