Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author. THE CASE FOR REINTRODUCING UNIVERSAL CHILD ALLOWANCE IN 21 sT CENTURY NEW ZEALAND A thesis presented in partial fulfilment of the requirements for the degree of Master of Arts . ID Social Policy at Massey University, Palmerston North, New Zealand. GILLIAN R. LEIGH 2006 ii ABSTRACT The purpose of this thesis is to contribute to contemporary debates on the most suitable family financial assistance policies for 21 si century New Zealand. Based on documentary research, using books, articles, theses and official sources, this thesis presents a case in favour of reintroducing a universal child allowance within the mix of financial support to New Zealand children. The reason for a focus on this benefit is that it would arguably help meet a number of vitally important policy goals, while contributing to the wellbeing of families raising ch ildren. Current challenges for social policy 111 most OECD countries include low birth rates and projected long-term labour shortages. Policies to encourage higher labour force participation rates by mothers without further falls in fertility are recommended by the OECD and have already begun in countries such as New Zealand. In addition, the United Nations Millennium Goals include the eradication of poverty and the empowerment of women by 2015. One way to help New Zealand meet these goals would be to reintroduce a universal child allowance. This thesis argues that reintroducing a universal child allowance payable to the primary carer, commonly the mother, would be of assistance in reducing child and maternal poverty in New Zealand, including the hidden poverty that exists when aggregate household income is adequate but not fairly shared. Providing a reliable and regular income, would also contribute to the empowerment of women. It would remove the poverty traps that exist because of means-tested benefits, and which create disincentives to longer hours of employment. It would also reduce current financ ial difficulties that are causing couples to delay having chi ldren. This thesis outlines the New Zealand history of universal family benefit from its introduction until its abolition in 1991, and describes some of its effects and its popularity. The thesis examines the effectiveness of universal child benefits in countries such as Britain where they are still an integral part of the welfare system. It also looks in detail at a range of ways in which universal child allowance could help New Zealand meet some of the major policy challenges of the 21st century. iii ACKNOWLEDGEMENTS Completing this thesis would have been considerably more difficult without the support from a small number of people who have assisted me with the process. I am extremely grateful to my two thesis supervisors, Celia Briar and Peter Beatson. They have guided me and exchanged ideas on issues related to my topic over a considerable period ohime. Their critical comments along with their patience, reassurance, practical and editorial help and attention to structural detail have been most appreciated. It would have been impossible to have researched my topic in depth without the help of the Massey University Library Staff. In particular, the staff at the Library's Document Supply Centre provided an excellent service in obtaining a wide variety of resources in a timely manner from a variety of local and international sources. Thank you to my husband, Trevor, who has supported me through the highs and lows of the thesis and has been a constant source of strength and encouragement. CONTENTS TITLE ABSTRACT ACKNOWLEDGEMENTS TABLE OF CONTENTS CHAPTER 1: INTRODUCTION AND METHODOLOGY 1.1 INTRODUCTION 1.2 CHOICE OF TOPIC 1.3 DEFINITION OF TERMS 1.4 METHODOLOGY AND RESEARCH DESIGN 1.4.l Approach Used 1.4.2 Data Collection and Analysis 1.5 AIMS OF THE RESEARCH 1.6 OUTLINE OF THE THESIS CHAPTER 2: A HISTORY OF CHILD BENEFIT IN NEW ZEALAND: 1926-1946 2.1 INTRODUCTION 2.2 OVERVIEW OF THE HISTORY OF FAMILY ALLOWANCES 2.2.1 The Family Allowances Act 1926 2.2.2 Analysis of the 1926 Family Allowances Act: Success and Failures 2.3 OVERVIEW OF THE HISTORY OF FAMILY BENEFIT 2.3.1 The Origins of Universal Family Benefit 2.3.2 Introduction of Universal Family Benefit: Economic, Social and Political Context 2.3.3 Analysis of Universal Family Benefit: Successes and Failures 2.4 CONCLUSION CHAPTER 3: RETREAT FROM UNIVERSALISM: 1950s TO THE PRESENT 3.1 INTRODUCTION 3.2 THE 1950s AND 1960s: DECLINING STATE GENEROSITY 3 .2.1 Introduction 3.2.2 Changes to Universal Family Benefit 3.2.3 Declining Real Value of Family Assistance 3 .3 THE 1970s TO THE 1990s: CHANGING NATURE OF THE WELFARE STATE 3 .3 .1 Introduction 3.3.2 Changing Economic Climate 3.3.3 Changing Political Philosophy 3.4 THE 1990s: THE END OF UNIVERSAL FAMILY BENEFIT 3 .4 .1 Introduction 3.4.2 The End of Universal Family Benefit 3.4.3 The Importance and Popularity of Universal Family Benefit 3.5 THE 21 51 CENTURY: POLICY ENVIRONMENT RELEVANT TO FAMILIES 3 .5 .1 Introduction 3.5.2 New Family Financial Assistance Policy: Influences and Direction 3.5.3 The 2004 Social Security Reforms: Working for Families Package 3.5.4 Working for Families Package: Two Concerns 3.6 CONCLUSION iv ii iii iv 1 1 3 4 5 5 5 6 7 9 9 9 9 12 14 14 16 19 20 22 22 22 22 23 23 23 23 24 24 25 25 25 26 27 27 28 28 29 31 v CHAPTER 4: PREVENTING CHILD POVERTY WITH UNIVERSAL CHILD ALLOWANCE 33 4.1 INTRODUCTION 33 4.2 CHILD POVERTY 33 4.2.1 Child Poverty in New Zealand 33 4.2.2 The Need to Respond to Child Poverty 35 4.3 CHANGING FAMILY CIRCUMSTANCES AND FINANCIAL INSTABILITY 36 4.4 CONCLUSION 37 4.5 UNIVERSAL CHILD ALLOWANCES: AN APPROPRIATE POLICY RESPONSE 38 4.5.1 Introduction 38 4.5.2 Universal Child Allowance and Poverty Prevention 39 4.5.3 Universal Child Allowance and Overseas Evidence 41 4.6 UNIVERSAL CHILD BENEFIT: A CASE STUDY OF BRITAIN 43 4.6.1 Introduction 43 4.6.2 The Policy Environment 43 4.6.3 Contrasting Policies 44 4.7 CONCLUSION 46 CHAPTER 5: PREVENTING MOTHERS' POVERTY AND EMPOWERING WOMEN WITH UNIVERSAL CHILD ALLOWANCE 49 5.1 INTRODUCTION 49 5.2 EVIDENCE OF MOTHERS' POVERTY 50 5.3 ISSUES ASSOCIATED WITH MOTHERS' POVERTY 51 5 .3 .1 Introduction 51 5.3.2 Greater Financial Hardship Experienced by Mothers 51 5.3.3 Mothers' Poverty Leads to Poor Health 55 5.3.4 Mothers' Poverty and Parenting Skills 55 5.3.5 Conclusion 56 5.4 UNIVERSAL CHILD ALLOWANCE: A RESPONSE TO MOTHERS' POVERTY 57 5.4.1 Introduction 57 5.4.2 Universal Child Allowance Caters for Diverse and Changing Family Arrangements 57 5.4.3 Universal Child Allowance Offsets the Inequality of Household Income 57 5.4.4 Universal Child Allowance and the Empowerment of Women 59 5.5 CONCLUSION 61 CHAPTER 6: UNIVERSAL CHILD ALLOWANCE: ASSISTANCE WITH THE COSTS OF RAISING CHILDREN 62 6.1 INTRODUCTION 62 6.2 THE DIRECT COSTS OF CHILDREN 63 6.3 THE INDIRECT COSTS OF CHILDREN 64 6.3 .1 Introduction 64 6.3.2 Relationship between Childrearing and Wage Rates 65 6.3.3 Evidence of the Indirect Costs of Childrearing in Liberal Nations 67 6.4 UNIVERSAL CHILD ALLOWANCE: CONTRIBUTING TO CHILDREN'S COSTS 68 6.4.1 Introduction 68 6.4.2 Universal Child Allowance: A Practical Remedy 68 6.4.3 Universal Child Allowance: A Remedy Based on Principles 70 6.5 CONCLUSION 71 CHAPTER 7: PARENTING AND THE PUBLIC GOOD 7. I INTRODUCTION 7.2 THE PUBLIC GOOD ARGUMENT OUTLINED 7.3 UNIVERSAL CHILD ALLOWANCE: PAYING FOR THE PUBLIC GOOD 7.3 . I Introduction 7.3.2 Universal Child Allowance: A Policy to Recognise the Value of Childrearing 7.3.3 Universal Child Allowance: Payment to Parents Based on the Equity Principle 7.3.4 Universal Child Allowance: Formalising an Intergenerational Contract 7.4 CONCLUSION CHAPTER 8: LABOUR SUPPLY AND UNIVERSAL CHILD ALLOWANCE 8.1 INTRODUCTION 8.2 CURRENT POLICY FRAMEWORK TO INCREASE LABOUR SUPPLY 8.3 UNIVERSAL CHILD ALLOWANCE AND LABOUR FORCE COMP AT ABILITY 8.3 .1 Introduction 8.3 .2 Universal Child Allowance and the Principle of Maintaining Work Incentives 8.3.3 Universal Child allowance and the Absence of Effective Marginal Tax Rates 8.3.4 The Swedish Example 8.4 CONCLUSION CHAPTER 9: PRONATALISM AND UNIVERSAL CHILD ALLOWANCE 9.1 INTRODUCTION 9.2 POLICY FRAMEWORKS AND THE INFLUENCE ON WOMEN'S FERTILITY 9.3 THE NEED FOR A PRONATALIST POLICY IN NEW ZEALAND 9.3.1 An Overview of New Zealand's Population Trends 9.3.2 General Concerns over Fertility and Population Trends 9 .3 .3 Conclusion 9.4 UNIVERSAL CHILD ALLOWANCE: AN EFFECTIVE PRONATALIST POLICY 9 .4.1 Introduction 9.4.2 Success of Universal Child Allowance as a Pronatalist Policy 9.4.3 International Evidence: The Scandinavian Model 9.4.4 Why Universal Child Allowance is a Viable Pronatalist Policy 9.5 CONCLUSION CHAPTER 10: BENEFITS OF UNIVERSALISM: CHILD ALLOWANCE EXAMPLE 10.1 INTRODUCTION 10.2 THE BENEFITS OF UNIVERSALISM OUTLINED 10.2. l Universalism and Simplicity 10.2.2 Universalism and Reliability 10.2.3 Universalism and Stigma 10.2.4 Universalism and Take-Up 10.2.5 Universalism and Social Cohesion 10.3 UNIVERSALISM: ANSWERING THE CRITICS 10.3. l Introduction 10.3.2 Universal Benefits and Resource Scarcity Arguments 10.3.3 Universalism: The Effectiveness Argument 10.4 CONCLUSION vi 73 73 74 76 76 77 77 78 78 80 80 81 82 82 83 83 85 87 89 89 89 91 91 92 93 93 93 94 95 96 96 98 98 98 98 99 99 101 102 103 103 103 105 107 vii CHAPTER 11: CONCLUSION 109 11.l INTRODUCTION I 09 11.2 CONCLUDING COMMENTS: WHY UNIVERSAL CHILD ALLOWANCE? 109 BIBLIOGRAPHY 118 1 CHAPTER 1 INTRODUCTION AND METHODOLOGY 1.1 INTRODUCTION The quotation below is from Marilyn McLachlan, a young New Zealand mother w ith four small children who one afternoon, without forethought, penned a letter to the Prime Minister, Helen Clark. Feeling as if she had been pushed to the limit emotionally, physically and financially, McLachlan questioned why it was increasingly difficult to raise a fam ily in New Zealand. A lack of support for mothers, increasing medical costs, student loan debt and high living expenses were just some of the issues highlighted. ls government-funded financial assistance for families bad for the future of New Zealand? Will it diminish our lives and make us not want to reach our potential? Will it make us state-dependent? Our own parents were given a Universal Family Benefit. Would all parents who received this benefit, before it was cut in 1991 consider themselves welfare-dependent? I doubt it. Instead of being insulted by such an approach, I say that we can view state-assistance in a much more positive light: 'Hey, we realise that you are raising kids and this means that a lot of your money goes to them and that kids are expensive. We realise that unless you had children, New Zealand society would become obsolete. So, family, thanks for doing a great job. We realise that your income is not your own, that you support two, three, four or more people on that. We realise that you are making a contribution to New Zealand. So, here is our acknowledgement of that ' (McLachlan, 2005:241-242). McLachlan 's attitude epitomises that of many New Zealand parents. Eager to be effective and provide their children with opportunities so they develop into healthy and happy children, the reality for many modern parents is that of financial stress and living on tight budgets. This thesis presents the case for re introducing a universal child allowance for New Zealand families with dependent children. It is written w ithin the context of the sorts of issues affecting New Zealand 's children, their parents and society which McLachlan refers to. These include persistent child and maternal poverty, the substantial costs of raising children, a falling birth rate and efforts by government to encourage mothers into paid work. Increasing numbers of children living in lone parent families, ch ildren residing in fami lies with unemployed parents, low levels of relative pay for unskilled workers and reduced benefit levels since 1991 have resulted in chronic poverty for some families and occasional poverty for others. At the same time there is an appreciation that low income impacts on a child 's quality of life 2 including health status, access to education and recreational activities (Brooks Gunn & Duncan, 1997; Mayer, 2002). It is, therefore, essential that families have adequate income to provide for their children. The wellbeing of children depends on the welfare of mothers. There is evidence, however, that many New Zealand mothers live in poverty. The rapid growth in female-headed households and the way in which liberal welfare regimes discriminate against such households have contributed to the increase in mothers' poverty. This is not only in mother-headed households as there is evidence that inequalities exist in the distribution of household income leading to hidden poverty (Fleming & Easting, 1994). Mothers tend to be the primary carers of children and are responsible for spending on children (Phipps & Burton, 1998). When mothers are living in poverty their ability to spend is compromised, and the resulting stresses on their mental and physical health make it very difficult to be an effective parent (Goode, Callender & Lister, 1998). Additional income for children paid to the primacy carer, commonly mothers, can ease the resulting pressures. Demands on the family budget to meet the costs of feeding, clothing and housing children as well as the costs of educating and socialising today's children are substantial (Percival & Harding, 2005). However, raising children involves more than physical costs. The costs of unpaid care provided by parents, particularly mothers who leave the paid workforce or reduce their hours of paid work to care for children, are also significant (Gray & Chapman, 2001). Providing extra income contributes to the costs of raising children and compensates for earnings foregone. As New Zealand's population ages and the proportion of retired people grow, there are concerns for shortages within the work force. The Organisation for Economic Co-operation and Development (OECD), of which New Zealand is a member country, argues that New Zealand could alleviate labour shortages with policies that encourage more mothers into paid work (OECD, 2004a). At the same time, however, because New Zealand ' s birth rate is below replacement level, policies encouraging paid work should not lead to further reductions in fertility. Tax/benefit policies affect people's decisions to undertake paid work by reducing the disposable income that families receive from working (Nolan, 2004). This is particularly true for means-tested benefits which can have the unintended effect of creating poverty traps. Rather than assisting people into jobs, they act as disincentives and, therefore, create barriers to paid work. In providing financial assistance to families, policies are needed that do not interfere with employment decisions. 3 As well as an ageing popula tion, New Zealand 's birth rate is falling with repercussions in terms of the size of the future work force to fund our social security system (Callister & Rose, 200 I). Increasingly, the decision to have children is influenced by their economic cost even though most people plan to have children at some stage. In New Zealand many prospective parents are delaying having children until they can provide a financially secure environment for them (Robertson, Rogers & Pryor, 2006). Because of cuts in welfare spending, increasing student debt and less secure employment, it is now common for couples to wait longer before having children. In some cases postponement has meant that once couples are ready to have children they are no longer fertile . A financial assistance policy is needed that provides parents with a more secure environment in which to have children. This thesis argues that universal child allowance, in combination with existing means-tested family policies, is a policy which addresses these issues. By providing additional income to parents, it provides financial relief to fami lies living in chronic poverty and those in occasional poverty. It is also a policy that empowers women and therefore responds to mothers' poverty. Moreover, it contributes to the costs of raising chi ldren, and compensates mothers who give up paid work or reduce their hours of work to raise children. As an unconditional benefit, universal chi ld allowance enables mothers to combine employment and raise children without disincentive to either. 1.2 CHOICE OF TOPIC A number of factors influenced my interest in researching uni versal chi ld allowance as an appropriate policy for 21 st century New Zealand families. My initial interest began in 2002 during my role as convenor of the Economics Committee of New Zealand National Council of Women (NZNCW). As part of that role, I undertook a review of state financial support for New Zealand families with dependent child ren. My research showed that the nature and Jack of financial assistance to families was a contributing factor to increased poverty levels. The research led to my presenting a remit to the 2002 NZNCW national conference calling for the reintroduction of universal family benefit to be paid to New Zealand families with dependent children. The remit was passed with an overwhelming majority. Since 2002 my interest in the topic has continued, and has focused on the success of government policies to improve the income of families. For example, the 2004 Budget signalled significant changes to fami ly assistance with the introduction of the Working for Families package. There was hope that at last ch ild poverty in New Zealand would be addressed . However, while the package included a number of improvements, the emphasis on 4 work incentives remained. This was evidenced by the inclusion of the In-work Payment for couples who worked 30 hours or more per week and for sole parents who worked 20 hours or more per week. It was clear that the Payment was intended as a work incentive rather than a means of providing adequate income to families and relieving child poverty. My research into how other countries have successfully reduced child poverty showed clearly that countries adopting policies where all children are treated the same have significant reductions in poverty as well as achieving other objectives. Such policies included a universal child allowance. In New Zealand tax/benefit policies continue to be means-tested, with a significant portion of child-related income supplements dependent on the work status of parents. Given my interest in New Zealand family financial assistance policies, when the opportunity came to choose a master's thesis topic it seemed logical to pursue an area of study in which I had already gained some knowledge and was passionate about. The reintroduction of universal child allowance for all dependent New Zealand children was chosen. 1.3 DEFINITION OF TERMS Several key terms as used in this thesis require defining. The term family or families is broadly defined and encompasses a variety of types, structures and relationships. This thesis adopts the definition of family as set out in the Families Commission Act 2003 which states that the family includes "a group of people related by marriage, blood or adoption, an extended family, two or more persons living together as a family, and a whanau or other culturally recognised family group" (True, 2005: 15). That is, the term family encompasses de facto and de jure relationships by cohabitation and marriage, relationships between same sex and opposite sex couples, biological and adopted children, single, two parent and extended families. This thesis is concerned with cash payments to children. Cash payments provided to families with children are referred to by a variety of names including family allowances, child allowances and child benefits (Kamerman, 1984:252; Kamerman & Kahn, 1989:582). Specifically, Vadakin (1958: 1-2) defines them as "systematic payments made to families with dependent children, whether by employers or by government, for the primary purpose of promoting the welfare of such children". In particular, this thesis is concerned with universal cash payments. These are defined as the allocation of benefits on the basis of criteria other than income (Kamerman & Kahn, 1987:277). Universal cash payments to dependent children are referred to by a variety of names including 5 universal family allowances, universal family benefit, universal child benefit and universal child allowance. All of these terms refer to a non-taxable payment made to families with dependent children funded from government revenues which is not contingent on income level, labour force attachment or family structure. While the payment can be provided as a flat-rate benefit, with a specific amount paid for each child, the amounts can also vary by age of the child, their ordinal position and the number of children within the family. Universal child allowance is the preferred term used by this thesis, but the alternatives are also used depending on the term adopted by a particular country. For example, British policy refers to universal child benefit, while Swedish policy refers to universal family allowances. The former New Zealand equivalent was called a universal family benefit. This thesis also refers to means-tested family benefits. These are defined as benefits which focus on a particular family group by limiting provision to those who pass a means test where incomes and assets are below a certain level (Kamerman & Kahn, 1987:277). 1.4 METHODOLOGY AND RESEARCH DESIGN 1.4.1 Approach Used The principal method used in the thesis to obtain information was that of documentary research. This involved the use of published and unpublished documents as background information and as a source of data, ideas and supporting arguments. The selected documents included published books, journal articles, Government Working Papers, university and Government Discussion Papers, Government Research Reports, Government Briefing Notes, Government Department Annual Reports, Non-Government Organisation (NGO) Reports and published articles, Parliamentary Debates, Royal Commission Reports, Statements from the New Zealand House of Representatives, unpublished Master's thesis, newspaper articles, conference reports, and web articles. 1.4.2 Data Collection and Analysis Search for relevant data continued throughout the duration of the thesis. The process of collecting resources began by searching the Massey University library's on-line catalogue system and bibliographic databases. This enabled lists of articles and reports containing information on family financial assistance policies in New Zealand and internationally to be obtained. Databases searched included Sociological Abstracts, Social Services Abstracts, Index 6 NZ (INNZ), JSTOR, Expanded Academic, Web of Science, Academic Search Elite, (IBSS) International Bibliography of the Social Sciences, EconLit and Ingenta.com. Further sources were discovered from searching the bibliographies and reference lists of sources already read and noting authors who were frequently cited. Massey University Library Document Supply Services obtained on my behalf many technical reports, journal articles and books on the topics of universal benefits, child benefit and family financial assistance policies both from New Zealand and international sources. For example, references were obtained from the National Library of New Zealand, National Library of Australia, University of New South Wales Library, Australian Parliamentary Library and the British Library Document Supply Centre. Where possible, journal articles were obtained using the library's electronic journals. Further information was accessed through the internet. This method was convenient for accessing Government Department websites and proved useful in obtaining working papers and published reports. As family financial support policies are a topical issue, newspapers and radio broadcasts provided commentaries on recent government reports and policies. Personal contact was made with organisations such as the United Kingdom Child Poverty Action Group who provided several valuable publications documenting their campaign to reduce poverty in Britain. The New Zealand Child Poverty Action Group was also helpful. Once the information was obtained, summary notes were made and organised into themes. When analysing the information certain questions became a focal point. For example, the author's background, the authenticity of arguments presented and data included, the assumptions underlying the information and data, the major themes presented and how the arguments were justified and supported. 1.5 AIMS OF THE RESEARCH In providing a coherent and researched piece of work in which the main arguments for universal child allowance are outlined, it is hoped that the thesis will contribute to the debate on the success of family financial assistance policies in New Zealand. 7 1.6 OUTLINE OF THE THESIS This thesis is organised into eleven chapters. Chapters two and three introduce the historical case for universal child allowance and cover the period 1926 to 1946. Chapter two examines the introduction of universal family benefit in New Zealand and its predecessor family allowance. The economic, social and political factors leading to their introduction, their successes and failures and the lessons that can be gained from each policy are examined. Chapter three continues the historical review of universal family benefit concentrating on the period since 1950. In particular, it emphasises the changing political ideology of government and the gradual move away from universal benefits towards means-tested family policy. It describes the abolition of universal family benefit in 1991 and the main policies which replaced it. A brief analysis is provided of current policy and the lessons that can be learnt from the period . Chapters four to ten develop the case for universal child allowance within the context of New Zealand's current policy framework. Each of the seven chapters presents a separate argument. Chapter four examines the extent of relative child poverty in New Zealand and outlines the need to respond with appropriate policies. The chapter also argues that the increasing proportion of single parent families and the constant exposure to insecure employment create risks which lead to poverty. Universal child allowance, because of its poverty reducing properties, is suggested as an appropriate policy response. Evidence is also provided of countries that have used universal child allowance as part of a successful policy package to reduce child poverty. Chapter five has a similar theme to chapter four but refers to maternal poverty. The chapter suggests that mothers ' poverty arises for several reasons including the fact that mothers continue to take responsibility for unpaid work within households, but do not always receive an equitable share of household income. It argues that as mothers tend to be the primary caregivers and spend the most on children, mothers ' poverty impacts negatively on children. Mothers who are impoverished tend to suffer ill health which in turn affects their ability to be effective parents. The second half of the chapter provides reasons for why mothers are empowered through a universal child allowance. Chapter six outlines the substantial costs of children which include both the direct costs of maintaining children ' s physical needs as well as the indirect costs of earnings from paid employment foregone to look after children. The arguments supporting universal child allowance as a means of contributing to the costs of raising children and compensating for lost earnings are presented. 8 Chapter seven is based on the theoretical argument that sound parenting benefits society because it increases the likelihood that children will grow up to be caring and productive adults. It suggests that universal child allowance is a payment to parents from society for the advantages which good parenting brings. The underlying argument is that those who gain future benefits from children have an obligation to fund the costs of raising children. One of the more pressing arguments from a policy perspective concerns the role that universal child allowance plays in encouraging parents, particularly mothers, into paid employment. Unlike means-tested benefits which create poverty traps, universal child allowance encourages mothers to combine work and family without creating a disincentive to either. This argument is outlined and debated in chapter eight. Current New Zealand demographics are characterised by a declining birth rate and an ageing population with implications for the future supply of workers. Chapter nine outlines the social and economic policy frameworks which have resulted in women having fewer children. These include the need to work longer hours in paid employment, insecure jobs, low pay, the impact of student loans and the unreliability of family financial assistance policies. The chapter addresses the question of why universal child allowance might have a pronatalist effect on prospective parents. Chapter ten presents a variety of arguments for universal child allowance based on the general advantages of universal benefits. It begins by outlining their general properties including simplicity, regularity and reliability. Because of these attributes and the fact that universal benefits are non-stigmatising, they also have high take-up rates. Universal benefits also contribute to solidarity within communities because they are a means of connecting families. The final section of the chapter addresses the main arguments against universal benefits as debated by critics. The final chapter provides a summary of the main arguments for universal child allowance presented in this thesis. 9 CHAPTER2 A HISTORY OF CHILD BENEFIT IN NEW ZEALAND: 1926-1946 2.1 INTRODUCTION This chapter provides an analysis of New Zealand's family allowance and family benefit schemes from the early 1920s until the post-war period of the late 1940s. Three questions are addressed in the chapter: What were the economic, social and political factors which led to the introduction of family allowances and universal family benefit? What were the successes and failures of each policy, and were there lessons to be learnt from either policy? It is intended that the answers gained from these questions will provide an insight into the appropriateness of reintroducing a universal child allowance as a social policy in 21st century New Zealand. 2.2 OVERVIEW OF THE HISTORY OFF AMIL Y ALLOWANCES 2.2.1 The Family Allowances Act 1926 Economic, Social and Political Context/or Introducing Family Allowances A century ago New Zealand governments, like those of other liberal nations, made little provision for the support of families with children, least of all for families with a male able bodied breadwinner. At the beginning of the 20th century financial assistance to families was highly selective, with state policies focusing on large families rather than all families with children. Selectivity was achieved by both income and asset testing. However, New Zealand's experience of social and economic problems preceding the 1925 election as well as the influence of sector groups heightened politician's awareness of family issues and led to the introduction of means-tested family allowances in 1926. The following is a brief discussion of factors leading to the 1926 Family Allowances Act. The first factor concerned the growing recognition that male wages were insufficient to keep large families out of poverty. The quinquennial census, published prior to the introduction of the Family Allowances Bill, revealed that approximately 50,000 children or one-eighth of the total child population were living in poverty (Campbell, 1927:373). There was growing acknowledgement that low pay and large family size rather than irresponsible parenting was the 10 cause of poverty and, therefore, worthy of state assistance (Beaglehole, 1993 :8). Family allowances, which subsidised the family wage for larger families, were a possible solution. Another rationale behind the 1926 Family Allowance Act was the belief that allowances would promote women ' s maternal role in response to concerns about a declining birth rate (Beaglehole, 1993:8). For example, in the 1860s the average New Zealand marriage produced 8 children. By the 1920s, however, the statistic had fallen to 2.5 children (Thomson, 1991 :35). Many believed that family allowances as a pronatalist policy would be likely to find favour in New Zealand (Campbell, 1927:373). Similarly, the New Zealand Labour Department ' s 1925 report affirmed the belief that family allowances would tend to increase the average size of the family while single men would be encouraged to marry. The family allowance concept thus appealed to moral conservatives. Acceptance of the idea of a family allowance was also influenced by the eugenic movement who were concerned with population quality. As Beaglehole (1993:8) suggests "giving low­ income mothers an allowance would enable them to rear healthier children for the good of the race ". Numerous eugenic books were published in New Zealand, and during the period 1900- 1920 close ties developed between eugenics and the progressives of the Fabian Society, an organisation which publicised the concept of a motherhood endowment (MacNicol, 1980:81). While some of the advocates of family allowances openly expressed views which would be now seen as racist in the extreme, other supporters saw different potential for such a benefit. Impetus for the idea of a family allowance also came from feminist organisations. For example, the National Council of Women (1925) and the Women ' s Christian Temperance Union (1920) argued for an allowance to ease the financial burdens of childrearing, and as a reimbursement to mothers for the costs of children. New Zealand feminists, however, were not alone in their fight for family allowances. In Britain Eleanor Rathbone was a principle advocate for family allowances, with her views published in the book "The Disinherited Family " (Rathbone, 1927). Undoubtedly, Rath bone ' s views would have contributed to the determination of New Zealand feminists and their advocacy for family allowances. While these issues were important, however, they tended to be background factors rather than the immediate impetus for passing family allowance legislation. It is argued that the 1926 Family Allowances Act came about because of the 1920s wage crisis, a crisis which arose because of the debate between workers ' rights to a living wage and unfavourable economic conditions (Burns, 1974; Thane, 1982; Castles, 1985; Martin, 1990). To illustrate, following 1921 the economy was characterised by fluctuating prices, a destabilised farming environment, 11 extensive government borrowing, unemployment and bankruptcies (Sutch, 1969: 199). During this time there was growing demand for the provision of a ''fair wage" that would take account of men's family responsibilities (Beaglehole, 1993:8). However, in such an unfavourable economic climate, employers objected to wages increases. Moreover, the idea of a fair and reasonable wage offering a predetermined standard of living highlighted the inequity of paying the same wage to families of different sizes. The obvious solution was to supplement the basic wage with state assistance taking account of family size. By 1925 the Court of Arbitration agreed that a minimum basic wage should be sufficient to maintain a man, wife and two dependent children (Easton, 1980: 105). The government then agreed that families with more than two children would receive family allowances as a supplement (Bryder, 1991 :39). The following quote, taken from the Reform Party ' s 1925 Political Manifesto, summarises the desire of the Government to help families with more than two children: The Government recognises that while wages are fixed by the Arbitration Court on the assumption that a man has a wife and two children, those wage earners whose families exceed that number must find it difficult to make ends meet. Proposals to meet this difficulty have been put forward. The Government will examine them carefully, with a view to finding some means of helping the worker, so that large families will be encouraged and not discouraged (Assistance to Large Families, 1925: 15). Features of the 1926Act The 1926 Family Allowances Act established non-contributory provisions funded out of the Consolidated Fund paid directly to the mother. While means-tested and restricted to working families whose total family income was less than four pounds per week, it provided two shillings weekly allowance for the third and each subsequent child aged less than fifteen years (McClure, 1998:41 ). The strict eligibility was attributed to the reluctance to introduce policy perceived as taking over the breadwinner's responsibility for supporting the family (McClure, 1998:42). Although the family allowance was paid directly to the mother, the legislation was not designed to create financial autonomy amongst women with children: It was paid only to mothers in a traditional family structure where the father was the breadwinner, and was not available to alien or Asiatic families (Royal Commission on Social Security in New Zealand, 1972:44). It, therefore, also reflected eugenicist concerns current at the time. 12 2.2.2 Analysis of the 1926 Family Allowances Act: Successes and Failures. Introduction The 1925 Reform Party's election manifesto outlined two objectives relevant to family allowances: encouraging families to procreate, and improving the welfare of low income families (Martin, 1990:30). How successful was the 1926 Family Allowances Act in achieving these objectives: Did the allowance stimulate fertility, and did it alleviate the financial hardship of needy families? Which Objectives Were Achieved? Family allowance advocates claimed that it would encourage the procreation of children (Reform Manifesto, 1925: 15). There is little New Zealand evidence, however, to support this hypothesis with statistics indicating a declining birth rate. For example, in 1926 there were 28,4 73 births, giving a rate of 21.05 births per 1000 of mean population. A declining trend then occurred through the late 1920s and 1930s, eventually levelling out in 1935 at 23,965 births or 16.17 per I 000 mean (Department of Statistics, 1939:80). The evidence that family allowances had little influence on the New Zealand birth rate was similar to that provided by international researchers. For example, during the 1930s and 1940s international research showed little correlation between family allowances and any rise in birth­ rates. Such conclusions were also reinforced by evidence showing that population increases occurred in countries without family allowances (Burns, 1974: 12). There is some evidence that family allowances had limited success in helping families living in poverty. The first point, however, is that fewer families than expected appl ied for the allowance. For example, the number of applications lodged in the first year totalled 3,980 of which 3,154 were granted providing for a total of 16,066 children. The 1926 New Zealand census showed that at that time there were 426,695 children under the age of 16 years, 233,821 married women and 3,063 legally separated women (Beaglehole, 1993:9). The Pensions Department attributed the smaller number of applications to parents' apathy and ignorance (Department of Pensions, 1929: I). Others, however, argued that the minimal amount of the allowance was probably not worth parents applying for it (McClure, 1998:42). Indeed the amount of two shillings per child was described as meagre. A politician from the Alliance of Labour Party argued that "it would not keep a well developed fowl let alone a healthy child" 13 (Sutch, 1966: 152). In terms of its generosity, New Zealand's means-tested family allowance did not compare as well as schemes later adopted in other countries. For example, the New South Wale's Government implemented a universal family allowance scheme of five shillings per week for every child (Martin, 1990:31 ). In comparison, the New Zealand scheme of two shillings per eligible child meant that in 1926 only 23.5 percent of married men and widowers with three or more children earned less than the qualifying amount of two hundred and eight pounds per year or four pounds per week (Department of Statistics, 1926:24, 40, 43 ). Although it is difficult to isolate the impact family allowances had on family income and poverty reduction, the fact that the amount of the allowance was minimal and means-tested suggests that its impact was likely to be small. This does not mean, however, that it was insignificant. Regardless of its less generous amount, Beaglehole (1993 :9) suggests that as family allowances were paid in cash and directly to the mother, they were of some benefit. Although in 1927 two shillings per week represented only 2.2 percent of the average nominal weekly wage, the amount could buy four two pound loaves of bread or a pound of butter (Department of Statistics, 1928:769,771). To summarise, although the success of family allowances was mixed, family allowances were amongst the more important income relief measures introduced during the early part of the century, and contributed to New Zealand's reputation for humanitarian legislation (Hanson, 1980:24; McClure, 1998:40). Believed to be one of the first nationwide Acts of its kind in the world providing for state funded family allowances, the 1926 Family Allowances Act recognised that raising a large family was as much a cause of poverty as being indisposed or elderly. Although the 1926 Act was not generous in its monetary provision and only provided a means­ tested benefit, it was important in establishing certain principles which remained in existence for a number of years. The first of these was that the state had some responsibility for the welfare of families with children (Social Security Department, 1950:29). Second, it provided for a payment direct to the mother as recognition of her role in managing the family. Moreover, although the amount paid to poor families was minimal, it set a precedent to be extended by the Social Security Act I 938 and then the Social Security Amendment Act 1945. It is reasonable to conclude, therefore, that the Act was significant because it created a model for continued state support of families. 14 2.3 OVERVIEW OF THE HISTORY OF FAMILY BENEFIT 2.3.1 The Origins of Universal Family Benefit Introduction The depression of the early 1930s led to political changes with the overwhelming victory of the Labour Party in 1935. Significant social and economic legislative changes followed over the next ten years. For example, two important pieces of legislation relevant to families were the Social Security Act 193 8 and the Social Security Amendment Act 1945 . The former oversaw the renaming of family allowance to family benefit with increases in the amount and threshold limits, while the latter introduced a universal family benefit. The following discussion begins by looking briefly at each of the Acts. It then discusses the social, political and economic contexts in which universal family benefit was introduced. A brief analysis of its success follows. Social Security Act 1938 The apex of the new Labour Government's social legislation was the Social Security Act 1938 which saw the adoption of a unified approach to health, income maintenance and general welfare of society (Rudd, 1997:241 ). However, significant in many aspects, the Act did not add to the 1926 principle of financial support for two-parent families where the father was employed. One explanation was that the Labour Government viewed rising prosperity, social security for atypical circumstances, free health and education, the housing assistance program and the 1936 legislation of amended wage rates as sufficient (Easton, 1980: 106). For some families, however, the 1938 Act proved beneficial. Apart from a name change from family allowance to family benefit, the Act increased the amount of payment for the third and subsequent children to four shillings and the income limit to five pounds (Sutch, 1969:254). Four shillings was equivalent to 4.1 percent of the average male nominal wage, while five pounds was 15 percent above the average male nominal wage rate. Moreover, alien, Asiatic and illegitimate children were included as eligible recipients. Subsequent amendments included payment of the benefit to the second child in 1940, followed by the first in 1941. Although post 1938 New Zealand embraced a more generous welfare system, it remained more residual than social democratic in principle (Rudd, 1997:242). This was evidenced by the 15 continued means-testing of family benefit. Further, the distinction between the deserving and undeserving poor, a salient feature of financial assistance programmes, was still to be found in the 1938 Act. For example, family benefit could be stopped if it was being used to pay for items other than the costs of raising children (O'Brien & Wilkes, 1993 :54). Over the next few years the amount and qualifying requirements for family benefit were progressively extended, particularly during the war years when the benefit was increased to keep pace with the wartime price index (Sutch, 1969:254). For example, July 1943 the benefit was increased to seven shillings and six pence, equivalent to 6.7 percent of the male average nominal wage rate. In October 1944 it was increased to ten shillings, equivalent to 8.8 percent or the average of the Arbitration Court awards (McClure, 1998:98). Sutch (1969:254) described the increases as "a great step forward in social security and in raising living standards ". Such increases illustrated the potential for improving provision for children and their families once the principle of state responsibility became established. Social Security Amendment Act 1945 One of the most significant changes to family assistance following the Social Security Act 1938 was the Social Security Amendment Act 1945. The amendment made provision for a universal family benefit for all children of ten shillings per week per child commencing on 1 April 1946 (McClure, 1998: I 05). The rate was equivalent to 8 percent of the average nominal weekly wage of six pounds and ten shillings. This was equivalent to one-tenth of the male minimum wage and one-sixth of a woman's minimum wage of three pounds and three shillings (McClure, 1998: 106; Beaglehole, 1993: I 0). In the first year of universal family benefit it was paid to 485,000 children out of a total New Zealand population of less than two million (McClure, 1998: I 06). Both the universal aspect of family benefit and the increased amount meant a substantial increase in family income. It also indicated the Labour Government's commitment to the family, and reflected the growing popularity of family allowances world-wide (Bryder, 1991 :41 ). It was in this year that Britain introduced family allowances. 16 2.3.2 Introduction of Universal Family Benefit: Economic, Social and Political Context Introduction Child allowances encourage the creation of life and rearing of children who, in due time, will come to adult estate and take their places as workers and taxpayers. The limited New Zealand family allowance, which has been operating in one form or another since 1927, has been a godsend to some parents on the lower income levels but the middle groups, which form the core of the community, have had to go along paying their own way. Moreover, it is important that an economic incentive towards having children should react through all the groups. Whether the provision of £26 a year for every child will have that effect only time can tell but the experiment is well worth trying (An Incentive To Have Children, 1945 October 8). The aftermath of World War 2 saw the development of new policy priorities as attention shifted from the elderly and concerns over superannuation to fostering the potential of a young productive society. As the following discussion highlights, one of the objectives of universal family benefit was to create a fit and healthy population capable of rebuilding a nation whose people had been affected by war. However, there were also other important reasons underpinning the introduction of universal family benefit. Politicians were concerned about the financial status of the family and the well­ being of children. It was recognised that children were an investment in the future and as such the state had some responsibility for them. Politicians were also convinced that given a declining birth rate and the need to populate the country with healthy children, universal family benefit would act as an incentive for couples to have more children. Although each of these reasons is valid, one of the more important points was the acknowledgement that means-tested family allowances discouraged the take-up of paid work. The attributes of universal family benefit as an unconditional allowance meant that disincentive problems would not occur. The following reasons were given at the time for introducing universal family benefit. To Improve the Financial Status of Families It was argued that in the midst of post-war social and political change the economic status of the family had declined. The state, however, not only recognised that families were suffering from war, but also acknowledged that childrearing exposed families to extra financial pressures. An important principle was that families with children should not be worse off than those without. 17 Politicians agreed, therefore, that direct legislative action was required to bring families to a "level of economic near-equality" (An Incentive to Have Children, 1945 October 8). Moreover, by putting the family benefit on a universal basis, the state acknowledged that all families were facing financially challenging times. The following quote from the Auckland Star expressed such a view: The desirability, on both ethical and economic grounds, of the family allowance is now widely recognised. It is a matter of common observation that, from the strictly economic point of view, married people with children are handicapped and the greater the number of their children, the greater is the handicap. It is certainly in the public interest that this handicap should be reduced, and the immediate effect of the new legislation will be to give financial relief in places where it is most needed. The real relief may be greater among some people of the 'middle-income ' groups than in the lower groups. This is the Bill's justification (Universal Family Allowances, 1945 October 5). To Improve the Wellbeing of Children as an Investment in the Future An important principle outlined by Walter Nash (1945:632) also added to the impetus for universal family benefit. Nash argued that as members of society on whom the future depended, children had a right to community support. Such support had traditionally been seen as the responsibility of parents. Others also perceived children as an investment in the future and, therefore, their welfare should be maintained through universal financial assistance. The following quote from the Greymouth Press summarises this widely held view. The family is by far the most important unit in the community. If it fares well, so will the country. Next year will in this respect witness an innovation that must focus world­ wide attention. This is the universal family benefit affording every child under the age of sixteen years ten shillings per week towards its maintenance. It is no negative provision, such as an income tax concession, but a positive payment (Universal Family Benefits, 1945 October 5). To Provide an Incentive to Counteract the Declining Birth Rate Politicians believed universal family benefit would act as a "direct economic incentive for parents to have children" (An Incentive to Have Children, 1945 October 8). There was increasing concern during the depression and war years at the low level of childbirth, and a fear that the pattern would repeat itself post-war (Keating, 2002: I 0). 18 The perception was that an incentive was needed for families to have children which in tum would ensure that New Zealand had a future productive workforce. Strong, healthy children and lots of them were a vital component of post-war economic policy planning. As Acland, a Member of Parliament, claimed "The prime need is for reconstruction through hard work with a young and virile population" (Nelson Evening Mail, 1945 30 August, cited in McClure, 1998: 100). To Gain Middle Class Support Although the middle classes acknowledged the government's drive for a population increase, at the same time they argued that all parents incurred increasing costs of rearing children. Such expressions added to the pressure for more inclusive family benefits (McClure, 1998: 102). To illustrate, teachers and skilled workers, who formed part of the group of poorly paid middle class professionals, argued that they were deserving of the same financial assistance given to wage earners. Moreover, they also argued that if family benefit was paid to the middle class, who formed the core of society, it would no longer be considered a charitable allowance. It would, therefore, receive greater support and its provision in the future would be assured. To Counteract the Disincentives of Means-Tested Family Allowances Another reason for introducing universal family benefits was based on the argument that means­ tested family allowances were a disincentive to paid work. To illustrate, one of the objectives of government following the war was to increase production and extend the hours of paid employment (McClure, 1998:98). It soon became obvious that a universal family benefit would be more conducive to achieving these goals than means-tested family assistance which served to discourage increased hours of work, greater pay rates and job promotions. To illustrate, instances were quoted where family men in receipt of family allowances were refusing promotion or higher paid work because extra remuneration received was negated by reductions in the allowance (Family Allowances, 1945 October 6). If parent's combined income exceeded the five pounds per week income limit, then family allowances were reduced pound for pound of earnings (McClure, 1998:97). 19 2.3.3 Analysis of Universal Family Benefit: Successes and Failures Introduction While it can be argued that the primary goal of universal family benefit from the perspective of politicians was to encourage a nation of healthy and productive workers, universal family benefit contributed to the wellbeing of families and society in a variety of ways. The following discussion highlights its main achievements. What did Universal Family Benefit Achieve? There is evidence that in combination with free education, cheap housing and a readily accessible health system, universal family benefit contributed to improved family living standards. Increased income enabled families to live healthier lifestyles evidenced by improved features such as the heights and weights of children. For example, between 1934 and 1954 fifteen year old girls became an inch taller and seventeen pounds heavier, while boys were on average four inches taller and twenty six pounds heavier (Sutch, 1966:364). However, not only did universal family benefit improve living standards depressed by six years of war. Rather, it also removed the social division between those families receiving the benefit and those who were ineligible (Sutch, 1966:299). Hence it is reasonable to conclude that the universal nature of the benefit contributed to improved social cohesion and solidarity within communities following the devastation of war. Universal family benefit was a welfare policy from which women benefited and greatly valued. Although the benefit may well have been a response to a male vision of the need to rebuild the country ' s industrial capacity, women perceived it as an acknowledgement of their domestic duties (McClure, 1998: I 09). Moreover, the benefit contributed to a new political emphasis on the role of motherhood . For example, a Labour Member of Parliament, William Parry, argued that an attitude of indifference towards mothers was to be discouraged. Universal family benefit by raising the status of the mothers would help achieve this . " We have to create such enthusiasm for the service the mother renders, that it will be lifted to the highest pinnacles of service in the nation" (Parry, 1945 :532). As a payment to mothers, universal family benefit was likely to be their only source of independent income and, therefore, provided a form of financial independence to those who remained at home as caregivers. It also provided continued independence to women who had 20 participated in the paid workforce during the war, but subsequently became redundant as men returned home (McClure, 1998: I 09). A payment of ten shillings per week per child in 1946 represented a substantial amount of money. For example, while the benefit for one child was one-tenth of the male minimum wage, it was almost one-sixth of a woman's minimum wage of three pounds three shillings. Moreover, as benefits were not taxed, a woman with two children received the equivalent of a full day 's pay for a labourer (Beaglehole, 1993: I 0). Raising three children earned a mother almost half a woman ' s minimum wage. Finally, from society's perspective the universal nature of family benefit meant that an increasing proportion of the community were participants in the social security system. Middle­ class disparagement of the welfare state, therefore, was unlikely. As McClure (1998:111) argued universal family benefit was perceived as a right, uniting families from all walks of the socio-economic spectrum, and intensifying the feeling that social security was for all New Zealanders. 2.4 CONCLUSION Given the successes and failures of means-tested family allowances and the successes of universal family benefit, what conclusions can be drawn from the brief analysis of each policy? Are there lessons for current policy advisers? First, although means-tested family allowances were more extensive that previous financial assistance policies, they did not meet all intended objectives. One particular observation was that not all eligible families made applications for the allowance. While possible explanations included the lack of public information and the allowance ' s limited value, a more disturbing explanation was the negative images associated with means-tested benefits. The complexity of such benefits, confusion over qualifying criteria and the stigma that was attached may have overridden the logic that extra assistance was available. It is possible that for these reasons some families failed to take-up their family allowance entitlement. The lesson for today's policy advisers is that the negative features of means-tested benefits may influence their take-up and compromise achieving the relevant policy goal. It was argued that the rate of family allowances was too low to improve family budgets and impact on child poverty. By contrast, a more generous universal family benefit provided additional income to all families leading to improved lifestyles and healthier children. Two points are worth noting. First, the contrasting differences between each policy in terms of eradicating poverty suggest that universal benefits do have a role to play in improving family 21 living standards. Second, at the time of its introduction, universal family benefit was relatively generous and impacted positively on living standards. In order to be effective, therefore, in reducing child poverty today, the amount of family assistance needs to be reasonable. From the perspective of mothers, universal family benefit provided a valuable source of family income to be spent on children. Payment direct to the mother meant that income was effectively distributed into mother's pockets. Not only did this provide an important source of income to meet the costs of raising children, but in cases where the male breadwinner failed to adequately share income provided the wife with money of her own. This point was relevant not only for poor families, but also for households where the husband was earning sufficient income. The lesson here is that additional income paid to mothers in the form of child allowance could be important in developing a sense of independence and empowering mothers. Another key lesson from the analysis of the two policies concerns the disincentive effect of means-tested family benefits on increased hours of paid employment. A current policy goal is to increase the number of people in paid work. As observed in the post-war period, universal family benefits did not interfere with employment decisions. Their lack of interference makes them an appropriate policy instrument in today's economic climate of encouraging people's attachment to paid work. Finally, the universal nature of family benefit and the fact that it was the right of every child helped create social solidarity amongst families of differing socio-economic status. Such policies were particularly important in the post-war rebuilding of society. In today's society, where the emphasis of liberal policies tends to be on individualism, the sense of unity and belonging which characterises universal benefits could help socially integrate people. The relevance of these points to reintroducing universal child allowance in the 21 st century is discussed in depth in the proceeding chapters. Before looking at these, the next chapter looks at the demise of universal family benefit and the kinds of policies which replaced it. 22 CHAPTER3 RETREAT FROM UNIVERSALISM: 1950s TO THE PRESENT 3.1 INTRODUCTION This chapter continues the review of New Zealand's child benefit policies concentrating on the period since 1950. The discussion provides a brief account of the transition of family financial assistance policies from family benefit based on the principle of universality to that of means­ testing. The underlying determinants leading to change are also discussed . From the perspective of the thesis the most significant event leading into the 21 st century was the abolition in 1991 of universal family benefit. This occurred as changing ideology favouring selective benefits emerged. One of the more significant selective policies during the period was Family Support. Although revamped under the Working for Families package, Family Support and the In-work Payment remain the cornerstone of today's family financial assistance. The chapter addresses the following questions. In what ways did family financial assistance change during the period, and what were the underlying factors causing change? What was the public's reaction to the abolition of universal family benefit? What were the main policies replacing it? Do these policies present problems which universal child allowance could ease? What lessons can be learnt from the period? 3.2THE1950s AND 1960s: DECLINING STATE GENEROSITY 3.2.1 Introduction During the 1950s and 1960s the New Zealand economy was characterised by prosperity. As an illustration, official registered unemployment was less than 1 percent of the workforce, economic growth averaged 4.5 percent per annum, workers experienced rising real wages and employers enjoyed high levels of profitability (Rudd, 1997:243). Moreover, full employment became the cornerstone of the welfare state, with both National and Labour Governments pursuing labour market policies . An able-bodied, full-time employed male received a social wage, as determined by the Arbitration Court, sufficient to care for a dependent wife and three children. For individuals who were not fit for employment the state 23 provided support (Rudd, 1997:243). However, such support was not adjusted for changes in the Consumer Price Index (CPI), a point to which the thesis will return shortly. 3.2.2 Changes to Universal Family Benefit During this period significant legislative changes were made to universal family benefit. The Family Benefits (Home Ownership) Act 1958 was passed allowing for the capitalisation of future family benefits up to the value of one thousand pounds to assist with the purchase of a new home (Hanson, 1980: 127). At a later period the Labour Government extended the Act to include capitalisation of the benefit for the purchase of existing homes. It could also be used to purchase clothing and equipment for children attending intermediate or secondary school. These changes intensified financial assistance for childrearing at a time when families needed it most and, therefore, were a logical extension to the principle behind the family allowance concept (Hanson, 1980: 127). 3.2.3 Declining Real Value of Family Assistance Although many families benefited from the 1958 Family Benefit Act, others were disadvantaged because of the failure of universal family benefit to be adjusted for changes in the CPI. As its value fell to a token amount, it became a smaller proportion of a family's income. For example, relative to the average wage the value of the benefit declined from 7.7 percent of average weekly earnings in 1947 to 5.5 percent in 1958 (Beaglehole, 1993:10). Politicians believed that given full employment and the availability of overtime work, family benefit was less essential (McClure, 1998: 150). By contrast, others argued that a lack of accurate budgeting exacerbated the ignorance of politicians over family needs. Moreover, a lack of philosophical commitment to maintaining an adequate level of financial assistance for families meant that the government failed to ensure the same level of economic wellbeing as for childless couples at the same income level. 3.3THE1970s TO THE 1990s: CHANGING NATURE OF THE WELFARE STATE 3.3.1 Introduction A changing economic environment combined with the 1984 election victory of the Labour Party led to comprehensive economic reforms and welfare state restructuring. To illustrate, the period 24 marked the beginning of a revolution in economic and social policy involving greater reliance on market allocation of resources, less state regulation and less direct public provision (de Bruin, 1999:6). Moreover, the strategy adopted by the Labour Government created the pre-conditions for the National Government ' s extension of "economic-rationalism" of the welfare state in the post- 1990 period. The increasing emphasis on means-tested financial assistance eventually led to the abolition of universal family benefit. 3.3.2 Changing Economic Climate Both the formal entry of the United Kingdom into the European Economic Community and the first oil shock made 1973 a distinctive dividing line in the economic history of New Zealand (de Bruin, 1999:4). Increasing integration into a global economy, reduced access to the British export market and resulting balance of payment problems contributed to growing unemployment. As a result the economy experienced a downturn in economic growth, high inflation, businesses recorded a decline in profitability and employees experienced a fall in real wage growth . While small budget surpluses were still evident in the mid 1970s, by 1983/84 a Budget deficit of 6.9 percent of GDP led to a fiscal crisis (Dalziel, 1992:20). Government advisers were concerned that social welfare spending, the major component of government spending, showed significant growth. For example, in 1971/72 welfare spending excluding education and health accounted for 2 I percent of total government spending. By 1980/81 it had increased to 28.3 percent, reaching 30 percent by 1986/87. As a percentage of GDP during the same period, welfare spending increased from 6 to 11 percent (Rudd, 1997:247). The economic and social problems referred to led critics to argue for reforms that would have a significant impact on both the economy and the welfare state. Future changes included deregulation of the labour market, the abandonment of full employment as a key policy goal, a shift away from progressive taxation and extensive changes to welfare benefits. 3.3.3 Changing Political Philosophy In its 1984 Briefing Papers to the incoming government, the Department of Social Welfare advocated a new approach to family hardship (Department of Social Welfare, 1984:79). Perceiving that the government was unlikely to increase wages, the Department suggested a new 25 form of assistance involving an income supplemented benefit modelled on similar measures to Australian and British policy. Government's desire to improve economic conditions meant family assistance policies underwent radical change. The objectives of preventing family poverty and achieving a vertical redistribution of household income through means-testing underpinned family policies. Existing alongside universal family benefit, a new form of means-tested income support, termed Family Support, was introduced in October 1986. A form of direct income support, it provided a refundable tax credit based on joint parental income and the number of children (St John 2004:4). Both beneficiary and working families were entitled to Family Support, with eligible families receiving $36 per week for the first child and $16 for subsequent children (Foubister, 1991 :9). From 1988 Family Support abated by 18 cents in the dollar from joint parental income of $17,500 up to $27 ,000 and by 30 cents above that (Child Poverty Action Group, 2001: 1 ). 3.4 THE 1990s: THE END OF UNIVERSAL FAMILY BENEFIT 3.4.1 Introduction The fifteen years from 1984 was a significant period in New Zealand's economic and social history. The Labour Governments between 1984 and 1990 took steps to reduce the public sector by limiting public welfare spending and privatisation of state assets. In 1990 the newly elected National Government even more firmly embraced monetarism. In adopting a market reform strategy, pressure was placed on the social welfare system to also conform to the market (Saunders, 1999:498). A particular economic principle adopted by the National Government was that work should receive a different reward from non-work and that non-workers should not be entitled to the same quality of life as workers (Bolger, Richardson & Birch, 1990:9). As a result National continued the fourth Labour Government's efforts to cut welfare benefits making explicit its aim that welfare changes were to shift people into the workforce. Moreover, resulting reductions in public expenditure were perceived as having added economic advantages of reducing budget deficits and public debt levels (Saunders, 1999:498). 3.4.2 The End of Universal Family Benefit The incoming 1990 National Government introduced a number of changes that would directly affect families, especially those on low incomes. These included cuts in welfare benefits, 26 removal of subsidies for state housing rentals, increased user part charges for health care and the Employment Contracts Act. One of these changes for families was the announcement in December 1990 of the forthcoming abolition of universal family benefit. As a result in 1991 universal family benefit and Family Support were amalgamated with the entire amount subjected to abatement against joint family income (St John, 2003:4). While low-income families received a selective benefit and average-income families received minimal amounts, high-income families were now completely responsible for the costs of child rearing. At the time of repeal the value of the family benefit was $6 per week per child, equivalent to less than 1 percent of average wages (Child Poverty Action Group, 2001: 1 ). As the benefit was only a token amount, its removal attracted little protest (McClure, 1998:238). Its disappearance after almost fifty years, however, marked the end of an era of universal family assistance and recognition of the contribution that families made to the nation regardless of individual family incomes. 3.4.3 The Importance and Popularity of Universal Family Benefit Before looking at recent policies, a brief summary is provided of the importance of universal family benefit to those who received it. Even though the amount of $6 had not increased since 1979 and in spite of its diminished value, the benefit' s demise was significant. Evidence as to the importance of universal family benefit can be observed by mother' s reactions to government suggestions that it be abolished. To illustrate, in 1987 when the Labour Government publicly mooted the idea of abolishing family benefit, women's organisations objected strongly on behalfof their members. National Council of Women (NCW), an umbrella organisation for women's groups, received correspondence from members suggesting that women regarded the family benefit as important in providing independence. They also viewed it as an acknowledgement of the importance of child rearing. National vice-president Stella Casey stated the following: "For some women, the family benefit is the only money of their own they handle until they get superannuation " (Vincent, 1987:26). It was evident that if universal family benefit was abolished, mothers who did not have an income of their own would be deprived of a payment they were entitled to in their own right. Further evidence was provided by a survey conducted by the New Zealand Women ' s Weekly in 1988. Survey results showed that 96 percent of respondents opposed the Government's plan to abolish family benefit (Parker, 1988: 16). Moreover, the survey highlighted some disquieting facts not least that middle-income New Zealand families greatly valued the fortnightly 27 supplement of family benefit as they also were experiencing financial hardship. The following is a quote taken from the survey: Topping the list is the genuinely hard time middle New Zealand - the working couple on one income or the family where a young mother works part-time to supplement a low wage - is having in these inflationary days of exorbitant interest rates, spiralling costs and sky rocketing food bills. They 're people in the $20, 000 to $30, 000 a year income bracket with young children and they are silently stewing about their diminished standard of living (Parker, 1988: 16). Universal family benefit was also an important contribution to the portion of family income used to pay for children's expenses. To illustrate, a respondent to the Women's Weekly survey described how over the years family benefit was used to help pay children's fees including school, sports, dancing, speech, music, woodwork, sewing, Brownies, Guides, Rangers, Cubs, Scouts, school trips, admission to the movies, haircuts, stationery and clothing. For others, it contributed to meeting a shortfall in the payment of urgent bills including the doctor and dentist and on weeks when household cash flow was challenged "it has bailed the housekeeping purse out"(Parker, 1988:16,17). To summarise, universal family benefit was a popular and valued form of assistance to families with dependent children. The various quotes support claims that it assisted mothers to achieve some financial independence, bestowed a sense of dignity and assisted in meeting the costs of raising children. Each of these issues will be discussed in more detail in future chapters. 3.5 THE 21st CENTURY: POLICY ENVIRONMENT RELEVANT TO FAMILIES 3.5.1 Introduction In 1999 the New Zealand Labour Party was re-elected to office, and is currently in its third successive term. Although they have not restored welfare benefits to their pre 1991 levels and have not reintroduced universal family benefits, there has nevertheless been greater assistance to families with children than during the 1990s. State housing rentals are now once again controlled by government, Paid Parental Leave has been introduced and extended and there is more state funded childcare and financial assistance to families with employed parents. Some of these policy changes in 21 st century New Zealand stem from a greater commitment to a more equitable society. However, governments are influenced to varying degrees by international agencies. In understanding the direction of family policies in the 21st century, it is useful to look at the nature and influences on the policy environment. Family financial 28 assistance policies are developed within the context of the economic, social and political environment, and include influencing factors such as demographic trends, employment patterns and poverty levels. The policy environment is also influenced by the international environment including organisations such as the Organisation for Economic Cooperation and Development (OECD). The following discussion illustrates the influence of the OECD on New Zealand family financial assistance policy. In accordance with the OECD's recommendation, the New Zealand Government considers the best means of raising living standards for families is through paid employment and means-tested financial assistance. The most recent means-tested family policy, Working for Families, is outlined including a brief assessment of the package. 3.5.2 New Family Financial Assistance Policy: Influences antl Direction In 2005 the OECD Economic Survey of New Zealand documented one of its concerns as significant levels of relative poverty amongst families. The organisation argued that in order to rank in the top half of OECD country living standards, New Zealand needed to make greater progress in improving labour utilisation (OECD, 2005a). In particular, two categories of workers were under-represented in the New Zealand labour market, both of whom required attention in policy terms. Working-age beneficiaries including sole parents and non-beneficiary mothers were the two categories identified (OECD, 2005a: 121 ). The influence international organisations have on government policies aimed at improving family living standards, lowering child poverty and boosting economic growth is quickly evident when looking at the most recent family policy initiative. The policy announced in the 2004 Budget and referred to as the Working for Families package has implications for work force participation as the key to improving economic status. In focusing on rewarding persons who leave welfare and enter the workforce, Working for Families is consistent with OECD concerns on both the fiscal costs of welfare and the shortage of skilled labour (Wynd, 2006a: I). 3.5.3 The 2004 Social Security Reforms: Working for Families Package In the 2004 Budget the Minister of Finance announced a number of social security reforms which collectively are known as the Working for Families package. The underlying theme of the package is means-tested assistance to low and middle-income families with dependent children. The mechanics of the scheme involve increasing tax-based assistance by using existing Family Assistance tax credits (Johnson, 2005:vi). The package aims to reduce child 29 poverty by ensuring income adequacy, strengthen work incentives by rewarding individuals for their work effort and improve the delivery of assistance by making it easier for families to access financial assistance (Ministry of Social Development, 2002-2004:2). The package has a number of key features. These include increases in Family Support by $25 per week for the eldest child and $15 for each additional child. As well, there is an In-work Payment (IWP) of $60 per week for the first three children, with a $15 per child top-up for the fourth and additional children. The In-work Payment, which replaces the former Child Tax Credit, reinforces the rewarding of those in paid employment by being available only to families not receiving a main benefit and working 30 hours per week if a couple or 20 hours per week if single. The rate of abatement of family assistance is 20 percent on income above the $35,000 threshold. From 1st April 2007 Family Support rates are to increase by a further $10 per-child per-week. The package is also to be indexed to inflation, with the rates and thresholds increasing when CPI increases reach a total of 5 percent (Nolan, 2004:15; Taylor, 2005:1). 3.5.4 Working for Families Package: Two Concerns The purpose of the following discussion is to neither condemn Working for Families nor to suggest that universal child allowance should replace it. Rather, by acknowledging the package's positive aspects and suggesting how universal child allowance could improve its weaker points, the thesis suggests that both policies should exist along side each other. While universal child allowance can ease the problematic features of Working for Families, in turn, the package can provide eligible families with greater amounts of income than would be possible with only a universal child allowance. While overall the increased assistance provided by Working for Families is generous, it has also been described as "rigorous" in its efforts to maintain the difference between children of workers and those of beneficiaries (St John & Craig, 2004:42). In analysing the policy two key questions come to mind: (1) to what extent will Working for Families provide financial relief for poorer families and assist children in poverty and (2) will middle-income families gain from the package? Analyses provided by St John (2005a; 2006a; 2006b), Nolan (2004) and Johnson (2005) indicate that the Working for Families package will provide financial assistance to many families. By 2007, when the package will be fully implemented, an extra $1.6 billion per annum will have been allocated to low income families (St John, 2006b: 1 ). Moreover, Johnson (2005: 16) suggests that one of the "headline strengths" of Working for Families is its likely 30 impact on child poverty. In 2001 New Zealand ' s child poverty rate ranked tenth highest among the twenty six nations of the OECD (Perry, 2005 : 12). Using a poverty standard of 60 percent of median income, Perry (2004:35) notes that by increasing the incomes of many low-income families, through increased tax-based aid, the Working for Families package has the potential to reduce child poverty rates by nearly one third. While acknowledging the potential impact on poverty, however, there are two anomalies in the Working for Families package which are commented on. The first concerns the In-work Payment, while the second involves the relationship between family assistance and marginal tax rates. The In-work Payment is designed to reward those who are in paid employment rather than a tool to alleviate poverty. To illustrate, because the policy discriminates against families receiving student allowances, sickness, domestic purposes and the unemployment benefit, it ignores the fact that many beneficiary parents raising children have few alternative options. Although the In-work Payment is worth up to $60 per week for a one, two or three child family, if the income earning parent is made redundant, not only is employment income lost but also additional assistance. As Wynd (2006b:4) argues family needs don 't simply change because of a lost job. Neither do children deserve less because of a parent's changed circumstances. Denial of extra assistance to sickness beneficiaries, separated parents and the unemployed means children of these caregivers suffer even greater hardship. Evidence of beneficiary adversity is provided by the recently published Living Standards Report 2004 which suggested that public policy needed to invest more in the poorest children. For example, the percentage of children living in families in the "severe" and "significant" hardship categories increased from 18 percent in 2000 to 26 percent in 2004. The increase was almost entirely driven by falling living standards for beneficiaries with dependent children (Wynd, 2006c: 1 ). Moreover, the decline in living standards did not occur evenly across race, class and gender. For example, the percentage of Maori and Pacific families living in severe hardship increased during the period 2001 to 2004 from 11 to 20 percent for Maori and 16 to 30 percent for Pacific families (Jensen, Krishna, Hodgson, Sathiyandra, Templeton, Jones, Goldstein­ Hawes & Beynon, 2006: 107). There are around 200,000 Maori children living in New Zealand of which 93,423 live in families who are ineligible for the In-work Payment. Approximately 50,000 Pacifika children live in non-qualifying families . As Wynd (2006c:2) suggests these are the children most likely to live in families whose living standards have fallen. 31 The second anomaly of Working for Families is the impact high effective marginal tax rates (EMTRS) have on two parent working families. Under the package, the number of two-parent families with children qualifying for financial assistance increases. However, while partnered couples receiving family assistance have greater total incomes, because the assistance is means­ tested the amount of entitlement declines as total family income increases. The key point is that high EMTRs only apply to conditional means-tested benefits. Universal unconditional benefits, such as universal child allowance, are not affected. Although pre-election changes to Working for Families, announced in August 2005, raised the threshold rates for abatement of assistance, the discouraging impact of EMTRs is simply shifted up the income scale. These points are more fully discussed in a later chapter. 3.6 CONCLUSION Given the popularity of universal family benefit and the fact that the Working for Families package has some disturbing outcomes, what conclusions can be drawn from a period of family policy spanning 56 years? Are there relevant lessons for policy advisers? The first point is that universal family benefit was a reliable and valued source of income for mothers from all economic strata who made good use of it. Evidence highlighted the importance of the benefit as a form of independent income for mothers and as a means of paying for the education and maintenance of children, costs which the benefit's founders intended that it be used for. It was not only financial independence that these women lost, however, but also a sense of being valued. The demise of family benefit meant the end of society's acknowledgement of the investment parents made in their children. There is no doubt that its demise also impacted on the living standards of families. The second point concerns the likely impact of Working for Families. The package, which was intended to improve the financial status of families with children, divides families in work and those on benefits . Rather than treating all children the same, the government has chosen to make child-related income supplements dependent on the work status of parents. To that extent, it discriminates against poor children. While the package redistributes resources to working families, those who do not qualify for the new In-work Payment are decidedly worse off. While Working for Families attempts to encourage beneficiaries to take up part-time work or exit from the benefit into full-time work, analysis shows that such efforts are still likely to come at an economic cost. In ensuring an earnings gap, the problems of poverty traps are simply shifted up the income scale. In developing an incentive for beneficiaries to work, not only must 32 low benefits impoverish them, but when they are rewarded for moving into work abatement impacts on additional income. Moreover, the term social cohesion is increasingly referred to by politicians as a worthy goal for New Zealand society. How appropriate then are policies, like the In-work Payment, which discriminate between those in paid employment and those not? The thesis suggests that the anomalies created by Working for Families could be eased by universal child allowance. As an unconditional payment, universal child allowance would not discriminate between those fortunate enough to be in paid employment and those who were not. Moreover, families entitled to universal child allowance while attached to the workforce would not be subjected to high EMTRs. Rather, the allowance would foster a feeling of inclusiveness, belonging and being valued for the important work of parenting regardless of the employment status of parents. CHAPTER4 PREVENTING CHILD POVERTY WITH UNIVERSAL CHILD ALLOWANCE 4.1 INTRODUCTION 33 This chapter develops the case for universal child allowance as a policy instrument to provide financial relief to children currently living in chronic poverty, and to prevent families with children from falling into occasional poverty. It consists of two main arguments. The first establishes the need to provide cash transfers to families living in chronic and occasional poverty, while the second develops the case for making the transfers universal. The first argument describes the extent of chronic poverty amongst New Zealand families with dependent children. It then provides reasons for responding with financial assistance policies. The discussion is extended to include financial help to families exposed to changes in family circumstances or labour market instability. While not living in chronic poverty, they are subjected to intermittent poverty. In developing the second argument, that child allowances should be universal, the thesis uses a range of supporting material. The section begins by identifying the properties of universal child allowance that make it an attractive policy tool. In developing an evidence based case for universal child allowances, the thesis draws upon international research. The discussion concludes with a case study of Britain to illustrate the successful application of policies, including its universal child benefit, to stem child poverty. 4.2 CHILD POVERTY 4.2.1 Child Poverty in New Zealand Child Poverty Action Group applauds the reduction in child poverty and the improvement in a range of other important data affecting children and families as evidenced in the Social Report 2005 released by the government. However the group points out that there is still a long way to go. The current level of poverty among children (21%) is almost three times that of the elderly (8%) and 50 % higher than before the economic reforms, 1988 (14%) (Child Poverty Action Group, 2005:1). 34 The level of child poverty in New Zealand remains unacceptably high (Ball & Wilson, 2002; Child Poverty Action Group, 2003; Stephens, 2003; St John, 2005b). An increasing number of children living in lone parent families, children residing in families with unemployed parents, a reduction in the relative pay of low skilled workers and reductions in relative benefit levels have resulted in the spread of child poverty. While there are no official measures of New Zealand poverty, this thesis uses the economic standard of living approach pioneered by the Ministry of Social Development. A multifaceted term, the measure looks at the physical circumstances in which people live, the goods and services consumed and the economic resources accessed (Ministry of Social Development, 2005:58). There are numerous indicators providing information on different aspects of economic standards of living. One measure adopted by the Ministry of Social Development includes the proportion of the population with low incomes. The Ministry defines such a population "as the proportion of the population in economic family units with equivalent income net of housing cost below three thresholds (low, medium and high)" (Ministry of Social Development, 2005:64). The benchmarks for the thresholds are 40 percent, 50 percent and 60 percent of 1998 median equivalent net-of-housing-cost family incomes . The Ministry's research shows that in 200 I 26.7 percent of dependent children lived in "economic family units" below the 60 percent line, twice the 1988 proportion of 13.5 percent. By 2004 the statistic had fallen to 20.6 percent, a pleasing downward trend, but still higher than 1988 (Ministry of Social Development, 2006:62). Information gathered by the Ministry shows "economic family units" most commonly living with low incomes are families relying on income-tested benefits, lone parent families, families belonging to an ethnic group other than European, families living in rented dwellings and families with three or more dependent children. For example, in 2004 43.3 percent of children in lone parent families had net-of-housing-cost incomes below the 60 percent line (15.4 percent in 1988). In terms of two parent families, 14.6 percent of children lived in families below the 60 percent benchmark (13.1 percent in 1988). Relevant statistics for children living in families with a Maori adult were 23.6 percent in 2004 and 13.5 percent in 1988. For families with a Pacific adult, the statistics were 40.2 percent in 2004 and 23.4 percent in 1988 (Ministry of Social Development, 2006:63). 35 To summarise, the opening discussion shows that one fifth of New Zealand's children live in households where the income of the economic unit is below 60 percent of the medium income. Although child poverty rates have fallen from a third in the last five years, they are still unacceptably high and continue to be greater than prior to the economic reforms of the 1980s. 4.2.2 The Need to Respond to Child Poverty New Zealand has an extensive body of research demonstrating that low parental income in childhood is associated with a range of negative consequences for children. Although there is much debate on how parental income affects children, families that are poor for a significant period tend to be different from other families. For example, persistently poor families are more likely to have a caregiver suffering from mental stress, physical health problems, low cognitive skills, drug or alcohol abuse and other problems (Krishnan, Jensen & Rochford, 2002: 119). Such factors reduce the likelihood of consistent and nurturing parenting which in turn impacts on child well-being. Krishnan et al (2002) examined the extent to which New Zealand children below the poverty threshold differed in their living standards. Parents surveyed were asked whether they restricted certain activities or purchases in order to economise, and whether they had foregone particular items and activities because of costs. Results confirmed that poor families were more likely to go without basic items important to children ' s wellbeing including fruit and vegetables, visits to the doctor and school books. For example, 26 percent of poor children reliant on government transfers and 18 percent of poor children reliant on market incomes were in families where school outings were restricted because of a shortage of disposable income (Krishnan et al, 2002:130). There is evidence that New Zealand children have experienced deteriorating indicators of health over the last 15 years in part due to low household income. The survey administered by Krishnan et al (2002) provided examples of restrictions in children ' s health care. For example, 17 percent of poor children in families reliant on government transfers and 8 percent of children in families reliant on market incomes had visits to the doctor postponed due to inadequate income (Krishnan et al , 2002: 130). This is despite the fact that visits to the doctor are free for children under the age of 6 years. More recent studies confirmed the link between poverty and poor health outcomes (Shaw, Blakely, Crampton & Atkinson, 2005). Widespread and severe poverty existed in New Zealand in the 1990s. Evidence of food poverty was provided by the New Zealand Network Against Food Poverty (1999, cited in Child Poverty 36 Action Group, 2003:15). Their Report "Hidden Hunger: Food and Low Income in New Zealand" suggested that food poverty was a reality and affected women and children most severely. Moreover, the Report argued that where there was insufficient money for basic food, there was insufficient money for other necessities. Although improved budgeting assisted in some instances, the authors argued that too little income rather than lack of budgeting was the problem. Although as we have seen poverty has been reduced in New Zealand in recent years, food banks are still required to address food poverty. This is the case even though the Labour Government has instituted policies (Working for Families package) to stem the increase in child poverty. The following quote provides evidence of the continuing demand for food bank services: In the first five years of this century, the New Zealand economy has been robust, yet for the first time ever under such conditions food banks such as the Auckland City Mission h