Purpose
The papers and communication material relating to the child hardship (CH) package in Budget 2015 include survey-based information on child material hardship. The policy development process for the CH package used a range of material hardship and income information.
This MSD report documents the more detailed research and analysis that sits behind the tables, graphs and other information provided by MSD for officials’ advice to Ministers and for the policy development process. This material hardship information comes both from already-published MSD research and from new research and analysis that has been carried out and will be published in more detail later in 2015.
Methodology
The report uses and in places extends previous MSD work published in various Living Standards reports and in Section L of the Household Incomes Report, all of which are available on the MSD website.
The report uses data from MSD’s 2008 Living Standards Survey (LSS) and Statistics New Zealand’s Household Economic Survey (HES) which has included a suite of material hardship indicators since 2006/07. There is some limited use of Statistics New Zealand’s longitudinal Survey of Family, Income and Employment (SoFIE).
Key Results
Using the EU-13 index, 11% of the New Zealand population had 5 or more enforced lacks, ranking New Zealand alongside Austria, Spain, the UK, Belgium and Ireland, at the median for the 20 selected European countries and a little below the median for the full 27 EU members (12%). Many of the newer EU countries had much higher rates of deprivation, as did Portugal and Greece.
Using the EU’s “severe deprivation” measure (7+/13), country rankings were very similar to those using the 5+/13 measure (correlation =0.98). New Zealand’s “severe deprivation” rate of 4% was a little below the EU’s median “severe” rate of just under 6%.
Older New Zealanders have a much lower material deprivation rate (3%) than their counterparts in almost all European countries (Figure C.2 and Table C.4). New Zealand ranks alongside Sweden, Luxembourg, Denmark and the Netherlands for having very low material deprivation rates for those aged 65+, using the 5+ threshold with the EU-13 index. Using the “severe deprivation” threshold of 7+/13, New Zealand still ranks at the top of the chart. Even richer western European countries such as Germany (10%) and France (11%) have much higher rates than New Zealand. Many of the newer eastern European EU members have very high rates (eg Hungary at 36%), with Portugal only a little better at 32%.
New Zealand children have a material hardship rate of 18% on the EU-13 measure (5+/13 threshold). This ranks New Zealand at the ‘low’ (ie higher hardship rates) end of the old EU for hardship rates for children, similar to Italy, Ireland and France (17%), and the UK (16%), and better than Germany (21%) and Greece (22%). In contrast to the comparisons for those aged 65+, New Zealand’s child deprivation rates are much higher than countries like Sweden, Denmark, Norway, Finland and the Netherlands (3-6%). See Figure C.3 and Table C.5.
Using the “severe” deprivation threshold (7+/13), New Zealand’s rate for children is 8%. This is a little higher than the median, similar to Belgium, Italy and France. There is however no evidence of any greater depth of hardship for New Zealand children when compared with countries with similar “standard” EU hardship rates (ie the ratio of the more “severe” hardship rate to the “standard” rate is in the middle of the bunch).
The child hardship risk ratio for New Zealand is 1.6, higher than for any of the 20 European countries in the comparison.
When the other EU countries (except for Bulgaria and Romania) are added to the comparison, the median risk ratio drops a little below 1.2 as more of the extra countries have ratios below 1.2 (eg Poland and Cyprus) than above 1.2 (eg Iceland and Malta). New Zealand’s relative position remains unchanged when these other countries are included.
Using the original 9-item index, the ratio for New Zealand is 1.4, higher than all the other countries except the UK (1.5). The median ratio was 1.2 using the EU-9 index.
Figure E.1 shows how the recession and recovery impacted much more on hardship rates using less severe thresholds (the top three lines) than when using more severe thresholds.
Further analysis is needed before this preliminary finding can be considered to be an established new piece of knowledge. The finding is however supported to some degree by what we know of the composition of the population at different parts of the material wellbeing distribution:
- A large proportion of those in less severe hardship and those “just getting by” are in households where there are adults in paid employment. When employment for the second earner disappears or hours diminish these households feel the pinch very rapidly, as indicated in the top three lines.
- Those in deeper hardship are predominantly those in receipt of a main working-age benefit, with some in working households on low wages. Benefit rates were maintained in real terms during the recession so the deeper hardship rates were more steady.
- The deeper hardship rates could have been expected to rise a little (more than they do), however, as some low-wage jobs disappeared.
- The overlap between low-income households and households in hardship increases for deeper hardship levels
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The longer that households have low income the greater is their risk of (higher) material deprivation
- The cumulative impact of lower low income leads to higher deprivation