Lindsay Mitchell: Council of Trade Unions economist wrong on many counts

Council of Trade Unions economist had this piece published in the DomPost, December 27 (not on-line):

Rosenberg claims that recent OECD research  "...affirmed that higher welfare benefits and more progressive taxation were part of the solution..."  to tackling poverty. He should search the term "higher welfare benefits" in the paper. It can't be found. That is because the paper specifically promoted better in-work benefits. The NZ example would be the In Work Tax Credit.

To reduce inequality the author, Federico Cingano, recommended, "...active labour market policies, childcare supports and in-work benefits".

Then Rosenberg writes, "According to the Ministry of Social Development's Household Incomes Report, half of the children in hardship are in working families."

What the report actually says:

Poverty rates for children in working families are on average much lower than for those in beneficiary families (11% and 75% respectively), but 2 out of 5 poor children come from families where at least one adult is in full-time work or is self-employed.

The percentage is 40, not half. But the important distinction is that children in poor families with work tend to be in temporary poverty whereas those in families on benefits tend to experience chronic poverty. The latter is more damaging.

Next he writes "Benefits have been adjusted only by inflation..." which ignores that add-ons or second tier benefits like the accommodation supplement and family tax credits have increased by more than the inflation rate.

The claim that, "A single parent with two children in New Zealand receives 54 percent of the average wage according to OECD data..." is also suspect. The OECD will be working with basic benefits rates which are only part of what a beneficiary receives. 

According to Paula Bennett last year,

An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.

The average income from wages or salary in 2013 was $962 (June quarter). That makes the DPB income 67 percent of average wage. (The median earned income was $834 in 2013 but we must compare apples with apples.)

Rosenberg's over-arching view that, "Being born into a family reliant on a benefit is close to a guarantee of poverty" is correct based on the official poverty measure (at or below 60 percent of the median equivalised household income).

Unfortunately every year around one in five babies born will be benefit-dependent at birth or shortly after.

This is the behavioural pattern that is causing the poverty problem. It's the pattern that has to change. If Mr Rosenberg's solution of higher welfare benefits is adopted, those trend lines will go up.