Academic journal article Social Policy Journal of New Zealand

The Level of Financial Assistance to Families with Dependent Children: A Comparative Analysis

Academic journal article Social Policy Journal of New Zealand

The Level of Financial Assistance to Families with Dependent Children: A Comparative Analysis

Article excerpt


In 1992, a comparison study using a model-family methodology found New Zealand to be one of the least generous countries in the OECD in terms of offsetting the additional costs of children. Targeting meant that low-income families did comparatively better, but were still below the OECD average. Since the time of that study, the level of the Family Support Tax Credit has been increased and an in-work benefit, Child Tax Credit, has been introduced. However, other countries, notably the United States, Australia and the United Kingdom, have also increased their level of family assistance, linked to explicit statements on the removal of child poverty. This paper updates the earlier study to July 2001, covering 18 OECD countries, based on eight income levels and nine family types (single and two-parent families, with one to three children of differing ages). New Zealand is still seen as a laggard in this analysis, even on low incomes, after taking account of universal and targeted child assistance, child tax credits, and the additional expenditures that result from dependent children for health and dental care, education, housing and childcare compared to singles and couples without children. This lack of financial assistance is seen as a major factor contributing to the high level of poverty among families with dependent children and to poor child outcomes.


There has been increasing concern at the paucity of outcomes for children in New Zealand. Attention has been drawn to the high and rising levels of income poverty among families with dependent children (Stephens et al. 1995, Waldegrave et al. 1996, MSD 2001, Waldegrave and Stephens 2003), with confirming evidence that this income poverty has impacted on adverse living standards for children (MSD 2002). Other studies indicate the degree of correlation between child income poverty (and low living standards) and child health outcomes (Asher et al. 2002), educational attainment (Wylie et al. 2001), teenage pregnancy and behavioural problems (Fergusson 1998), employment levels (Smithies and Stephens 1999), with concerns over the development of intergenerational cycles of disadvantage (Fergusson 1998, Chapple and Yeabsley 1997).

There are significant debates in the international and New Zealand literature on the extent to which income per se is a cause of poor outcomes for children, as opposed to factors such as mothers' educational attainment, ethnicity, age, neighbourhood characteristics, etc. Mayer (1997, 2002), for example, argues that when the relevant family background variables are controlled for, parental income has a small to modest impact on most child outcomes. On the other hand, Brooks-Gunn and Duncan (1997) and Yeung et al. (2002) claim a much larger parental income effect, especially when the inter-related nature of all the family background variables and outcomes are considered. The cumulative impact at low-income is much larger than at higher-income levels. Mayer (2002) concedes that the relationship between income and outcome is probably non-linear, an issue supported from the literature reviews by Boggess et al. (1999) and Smithies and Stephens (1999). These studies agree that the persistence, duration and severity of low income have a strong adverse impact on child outcomes.

Not all children brought up in low-income households suffer from the afflictions of poverty, due to the presence of asset holdings, parenting skills, individual and family resilience to stress factors, and good fortune. Equally, increasing incomes in lower decile households is not a magic wand to offset the detrimental impacts on child development from material hardship, as the effects of family background or lack of social capital within a community have not been overcome. The long-term solution to adverse child outcomes requires a combination of financial resources and an integrated and co-ordinated package of social services and income maintenance in-kind, in the form of education, housing and health care, tagged to the source of the adverse outcome (Davies et al. …

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