Comment

Plight of families is everybody’s business

Kiwi children need Working For Families, unless there's something better, writes former Families Commissioner Len Cook

Supporting families with children has long been part of public policy in New Zealand. We used to have direct payments for each child paid to mothers through the family benefit. Tax allowances for children in the form of tax exemptions for the main earner and then tax rebates later evolved into payments by way of tax credits to be paid to parents. We introduced a sole parent welfare benefit in 1973. Free education and health services are another element, as was public rental housing, but where direct provision is the vehicle. In 2008 the Working for Families tax credit was introduced as another means for providing support through the tax system.

The plight of individual families is a concern to us collectively, because it places huge demands on parents that will often be beyond their means. We also have a less altruistic but vital need to ensure the demographic vibrance of our society through the welfare and development of a continuous stream of young people into the workforce from following generations who provide a life-force for the ageing generations.

Our need for this is independent of personally-accumulated wealth. Because a growing share of the New Zealand population no longer directly contributes to bringing up later generations, supporting cash transfers and direct provision of services through paying taxes is one simple means by which those who benefit from the parenting of others pay for this.

In the 1950s, a New Zealand population of some two and half million supported the families who produced nearly 600,000 babies per decade. In the current decade we expect to similarly have near to 600,000 babies born, but the population base is now some 4,750,000. As the share of children under 16 in the NZ population continues to fall so too does the share of the population who do directly contribute to the demographic viability of the future population.

Through an interest in the development of children and demographic viability, we should all be concerned about whether the Working for Families tax credit can be bettered as a means of ensuring that all of us, parents or not, are supporting the next generation.

Can the current support for the Working for Families tax credit depress the wages of those who are working but at the bottom of the income distribution? Firstly, what happened when the Working for Families tax credit was introduced - it came in as a response to the impact on children of families on low incomes, with a higher level of payments being provided when the source of low income was from low wages.

Where is the evidence that the already low income wages fell further that could be separated from the effect of the GFC. In fact, static low real wages and reduced welfare payments preceded the Working for Families tax credit by two decades. The Working for Families tax credit would have generated some transfer of income from those on higher incomes to lower income families with children. There might also have been indirectly some transfer from people on low wages without children to people with children.

Low wages having been immune from public policy initiatives since the early 1990s, apart from the occasional lift in the minimum wage. This is well-recognised in many economies similar to that of New Zealand. Globalisation, structural inequalities in capital accumulation and technological change are recognised as dominating the causes in areas of activity for which low wages and short-term employment conditions are endemic.

Examples of such jobs as those include tourism, security, personal services, construction and agriculture. There are not many ways of changing this without a strong commitment to education and training. The ready source of migrant labour in the low wage area will probably limit the influence of education and training. Mitigating the effect of low wages on families has long been part of public policy in New Zealand. Through an interest in the development of children and demographic viability, we should all be concerned about whether the Working for Families tax credit can be bettered as a means of ensuring that all of us, parents or not, are supporting the next generation. In comparison with Australia, we have lots of space to improve.

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