Give cash to the poor?

If giving cash to poor people, with no questions asked, no strings attached, could be shown to successfully improve the health and education of children, should we do it?

“Unconditional Cash Transfers work better than almost anyone would have expected. They dent the stereotype of poor people as inherently feckless and ignorant”.

This is the conclusion reached by The Economist in a feature on giving cash to the poor. It neatly summarises the evidence regarding what works best to improve the lives of the poor and strikes at the heart of the prejudices we hold about those in poverty.

There’s a claim that the cost of child poverty to New Zealand is something like $8 billion per year. Handing out a few billion dollars to improve the lives and long term outcomes of hundreds of thousands of children shouldn’t our Government seriously consider it?

An American example:

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

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

But that is a small proportion of people in one part of one state.

In Norway in the 1970s an offshore oil field was discovered, bringing a short-lived boost in incomes to certain areas of the country. For those children born into poor households the sharp increase in incomes had a significant impact on their educational achievement.

Again only some people in parts of Norway. Did this merely give some people an advantage over others to improve their situation? Or would it work on a country wide scale?

This is from Stuff of – Giving cash to the poor is the best way to fix poverty.

OPINION: They might not be popular, but cash transfers with no strings attached are the best bet for reducing family poverty, writes Jess Berentson-Shaw.

Dr Jess Berentson-Shaw is a science researcher at the Morgan Foundation.

It’s frustrating that our politicians prefer to blame parents and champion policies that push poor parents into low-paid work, despite there being clear evidence that does not help children. Their approach sees the kids get dumped into childcare, and unless that childcare is very high quality (in our poorest communities it often isn’t) they may end up worse off.

Like many before us, we asked “what is the single most effective action we can take to improve the lives of families and children in poverty in New Zealand right now?” The answer from the evidence is clear and conclusive: we should give them money, no strings attached, especially when the children are young.

The only time in recent years New Zealand reduced child poverty was when we gave cash to some poor via Working for Families.

The fact is that everyone would be better off if we just gave poor parents the money.

Boost the incomes of the poor with no conditions attached?


Answering weka’s questions

Amongst a lot of discussion at The Standard there have been requests that I answer weka’s questions. There’s been many questions and comments on various threads but I’ll respond to what seems to be the most requested questions here. My comments are in parentheses.

“Not sure how it can be avoided setting benefit levels statistically lower then people who are employed.”

Benefits were cut by $20/wk in 1990. In the mid 80s the unemployment benefit was around the same rate as what school leavers were earning going into office jobs. We used to have relatively higher benefit rates then, why can’t we now?

Cost. I presume there’s many more people on benefits now. At the end of March 2014: 295,320 working-age* people were receiving a main benefit. (MSD).

And wanting to encourage people into paid employment.

“I’m not sure than any of the larger parties are suggesting that should be substantially changed.”

The GP want a UBI.

Their Income Support Policy states “The Green Party supports a full and wide-ranging public debate on the nature of UBI and the details of a UBI system, and government funding for detailed studies of the impacts of UBI. The Green Party will: Investigate the implementation of a Universal Basic Income for every New Zealander”. They are interested in the concept (as I am) but don’t say they want one.

“The aim is to raise people’s income by getting them into employment.”

That disqualifies you from having any opinion on beneficiaries until you answer the question: how many beneficiaries are not required to seek/gain employment?

It doesn’t disqualify me from anything. I have already said that some people on benefits cannot seek employment. Both Labour and National governments want to encourage those who can seek employment to do so.

I’ve also already said that if the number of people on benefits is substantially reduced then those who have to remain on benefits should be able to be provided for better.

Then you will have to answer how many people are now required to see work, despite previously being exempt.

I don’t have to do anything. I don’t know what point you are trying to make with this.

Some current details are here at MSD.

I think it’s reasonable to expect that those who are capable of working should be seeking paid employment and taking responsibility for their own welfare.

I acknowledge that it can be very difficult finding work that people want with the pay they want. Some are more motivated than others. Some people have unrealistic expectations but for many there simply aren’t enough jobs.

Then come back and explain how those people are supposed to live. 

They live how they live. It’s very tough for many. Others find a way manage.

And why those people aren’t entitled to a livable income.

You tell me why you think they should be entitled to a ‘livable income’.

Ideally everyone should have an income that makes living not too much of a struggle. But expecting everyone should have comfortable style of living without having any money problems is fanciful and idealistic.

Life can be hard work and bills can be difficult to manage, especially if you have children. We should strive for better and easier but it can never always be guaranteed or provided,

Then explain why you think that beneficiaries are all unemployed.

They’re not, some are partly employed. There’s a range of reasons why beneficiaries could be unemployed, including circumstance, health, choice, lack of alternatives and a shortage of jobs.

And then explain how unemployed beneficiaries are supposed to raise their income via employment when there aren’t enough jobs.

Some can supplement their benefit. Some could be more flexible in what work they seek and where they seek it (that’s difficult for many). And there are not enough jobs for many. That’s one thing benefits are designed to assist with.

Then, when youve done all that, retract your statement that NACT don’t keep people poor.

You’ll have to be more specific, I’ve made a number of comments related to that.

I don’t believe that in general National (or Act) want to “keep people poor”. The effect of Government policies (Labour and National) may be that some people stay poor, but I question whether any MP wants to ‘keep people poor’.

All parties propose economic growth with the intention of improving incomes and increasing the number of jobs.

“I presume you know that if the minimum wage was raised by 50% and work was provided for anyone who wants it then we’d still have the same number of people under the statistical poverty line.”

What everyone else just said. Plus, you’re a dick. If the people at the bottom end of the scale have enough to live on, then poverty stops being an issue irrespective of the statistics.

But waving a money wand and waving a job wand aren’t realistic options.

Can you show any country in the world where giving everyone “enough to live on” has succeeded over a period of years or decades.

Poverty is a problem that needs to be addressed as well as possible, but Government giving substantially more money to people with productive work being an unpressured option is unlikely to succeed if history and current world conditions are anything to go on.

But perhaps weka can outline how he thinks an entitlement to a livable income could work, with examples of how similar policies have worked elsewhere.

National “deliberately keep them” poor

I asked Metiria Turei for a clarification from a question put to her on Campbell Live:

@metiria Not clear from @CampbellLiveNZ – do you think National willfully neglect children and deliberately keep people poor?

Her response:

@PeteDGeorge @CampbellLiveNZ I think they deliberately keep them (min wage, benefits) The burden is borne by the kids.

This is similar to the implication from a recent question to John Key in Parliament:

Metiria Turei: When will the Prime Minister drop his inequality denial and admit that his policies are creating a growing class of people who sit at the bottom of the most unequal education system in the developed world?

I hear similar to this this often, to the extent that National and John Key hate the poor and hate kids.

How National’s rich mates are going to get richer by keeping everyone else poor has never been explained to me.

There will always be a political battle between encouraging business growth which will (hopefully) result in more jobs and better paying  jobs versus transferring wealth from the middle class and the rich to the poor.

We already do both, the argument is on what balance will work best.

National, like Labour, have an orthodox approach. Greens have a much more socialist ambition – Turei has talked about “equality recently in Turei on kids and inequality:

To have every citizen be deeply free – our institutions, economic, political, social need to be purposefully built to deliver equality.

Just making little tweaks in a band aid response to inequality is not good enough for our kids.

And if you suggest that this approach may be flawed and tweaks to the current approach might be less risky or less flawed you can get accused of hating the kids and hating the poor.

It’s going to be an interesting election year.

And if Labour, Greens and Mana (who are socialist as the Greens) get to form the next Government New Zealand could be in for an interesting experiment.

I hope we don’t end up like Greece. We may have to learn to say “oh σκατά!”

Government spoon fed

Greens play rich versus poor

Russell Norman is promoting a Capital Gains Tax in part by playing the rich versus poor card.

Capital gains tax would hit rich, not poor  (ODT)
Rich people benefit from not having to pay a capital gains tax, Green co-leader Russel Norman says.

Class politics like rich versus poor is dirty politics, and it often ignores complexities.

I think we should have a good look at the merits and drawbacks of a Capital Gains Tax, but rationally and not emotionally.

Dr Norman said the research highlighted those on lower incomes earned money from wages which were fully taxed while the largest proportion of capital gains was earned by those at the upper end of the income spectrum and this income was untaxed.

This ignores a number of things, including:

  • People on relatively low incomes also benefit from untaxed capital gains
  • Most people on high incomes pay much more tax than those on lower incomes already
  • Capital gains are often used to finance retirement, including health care and care of the elderly, which reduces costs to the state
  • “Rich” people benefiting from capital gains often use that money for a wider circle of people who aren’t “rich”, for example for children’s education, parent’s care

It’s far from being a simple rich versus poor argument. Argue for CGT on it’s merits, not by promoting rich envy.

Ironically Green voters tend to be reasonably well off people rather than poor people.


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