Better targeting the baby bonus

I think the baby bonus can be much better targeted and spread.

There’s been a lot of criticism of Labour’s proposed baby bonus, some of it justified. In particular the inclusion of payments to households earning $150,000 has incensed many.

I’ve been critical of that and other aspects, including the potential time bomb, but I’m not against properly targeted assistance for families, especially for early childhood.

I think the Labour policy looks too packaged for election appeal – to put it bluntly, voter bribery.  It has major flaws.

There are four ways I think it could be better targeted and far more effective where and when it is needed the most.

It should be extended to five years
– once children are at school parents are better able to earn supplementary income.

It should be in less frequent lump sums
so parents see it as an actual bonus and not a part of regular and relied on income. 

I suggest an up front payment at birth of the child – low income parents can have trouble setting up what they need – and then three monthly.

It needs to give more to those who need it more
using a diminishing scale as income rises, with a cutoff well below $150k.

Have a base amount and calculate a percentage off that based in family income.

For example take the previous year income off 120,000 and divide by 1000 to give a percentage. Pay that percentage of the base rate.

It needs to be gradually phased down
as the child ages so parents become less reliant on it, and they are better able to earn supplementary income.

Example table:

Month Base 75% 50% 25%
0 1000 750 500 250
3 950 713 475 238
6 903 677 452 226
9 858 644 429 215
12 815 611 408 204
15 774 581 387 194
18 735 551 368 184
21 698 524 349 175
24 663 497 332 166
27 630 473 315 158
30 599 449 300 150
33 569 427 285 142
36 541 406 271 135
39 514 386 257 129
42 488 366 244 122
45 464 348 232 116
48 441 331 221 110
51 419 314 210 105
54 398 299 199 100
57 378 284 189 95
60 359 269 180 90
Total: 13196 9900 6603 3304
Avg Weekly: 51 38 25 13

This is what I think is a sensible guess with more paid to those on low incomes but spread over five years, and about the same total as Labour proposes for those on a family income of $45,000.

I haven’t done any costings.

I think this targets far better and helps families more when the need it most, but allows a transition off the bonus.

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4 Comments

  1. “Major flaws” You do not say what they are or how many. If you are promoting it (with suggested improvements) why not spell out the flaws so they can be addressed too?

    Reply
  1. Cash for kids time bomb | Your NZ

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