Examining child support

Child support that works - what a good idea!

An article recently published by the New Zealand Listener, Child support that works, asserts that the existing system of child support "is next to useless at reducing poverty" - because, to a large extent "Government simply takes the child support to offset the benefit".

Yet this is exactly what should happen if the purpose of the benefit is to top up inadequate child-support payments by non-custodial parents.

Child-support payments allow more children to be supported than could be funded otherwise. Taxpayer dollars are scarce, and the public debt continues to rise daily.

The requirement to pay child-support also rests on the elemental proposition that those bringing children into this world bear prime responsibility for supporting them.

Yet at one point the article argues that non-custodial parental payments are merely a less efficient form of raising tax revenue than broad-based taxes at a low rate.

This is akin to arguing that paying one's own credit card bill is less efficient than having taxpayers pay it.

After all, if past actions don't have consequences with respect to children, why should they when it comes to liability for credit card bills?

The article also asserts that taxpayers, rather than non-custodial parents, need to pay more to custodians in low income households and more again to non-custodial parents by way of employment subsidies, apparently regardless of the circumstances. 

An accompanying article in the same issue, New Deal for Kids, by Victoria University of Wellington Professor Jonathan Boston and University of Otago Senior Researcher Simon Chapple, similarly calls on taxpayers to fund "significantly higher" child-related benefits and to provide "extensive sole-parent employment supports". 

Their proposition seems to be that over 25 per cent of children in New Zealand are income poor and that around 18 per cent of New Zealand children are experiencing relative hardship in terms of material living standards.  

Their definition of income appears to treat social welfare benefit as income. So in their minds, bigger benefits mean bigger 'income' and less income poverty.  

But problems of relative poverty, welfare dependency and lack of self-sufficiency will remain.

Whether larger benefits mean less material hardship depends in part on how well the money is spent, and, longer-term, on how many other children are born to parents that cannot support them.  

The authors do not raise these questions. Yet, household income, however defined, is not a good measure of the quality of household life.  

A household living entirely on benefits is setting a different parental example than one with a smaller 'income' that is all derived from holding down two or three jobs.

A minority of households, not just low income ones, will be more violent and dysfunctional than most of us would care to imagine. A great many others provide a loving, achievement-oriented environment based on honest living, education, hard work and commitment.  

Many low-income households have the benefit of support from wider family members, as many a grandparent can attest.

Current income is also less than future income for people starting out in their careers, or putting their careers on hold to bring up children. Such households do not necessarily regard themselves as victims who are entitled to hand outs, even if academics choose to see them that way.  

Pride in self-reliance is not entirely a quaint virtue.

The articles fail to assess why many households are not earning higher market incomes but they do observe that 71 per cent of the children they deem to be poor do not have even one parent working full-time. No wonder their incomes are low! 

Throwing more money of other people's money at problems that are not fundamentally caused by lack of money can cause much harm, notwithstanding the good intentions.  

The 1942 Beveridge Report in the UK warned about the longer-term adverse effects of policies that made people more dependent on the state. These need to be recognised and assessed.

One obvious reason for low market incomes is the rise of sole parent households.

An OECD paper, Doing better for families, reported that 23.7 per cent of New Zealand children were living with just one parent in 2007.  

Only the US (25.8 per cent) and Ireland (24.3 per cent) out of 27 member countries kept us out of top slot.

To their credit, Boston and Chapple acknowledge the importance of employment.  

Unfortunately, they do not analyse why our schools are failing so many young people, why so many fail to make a successful transition from school to work, the effective marginal tax rates faced by many beneficiaries, and the wider legislative barriers to investment, job creation and productivity growth.  

Child support that works is surely support that strengthens family formation and the ability and incentive to earn good market incomes.  

Addressing this question adequately requires a proper assessment of what are the causes of low incomes in New Zealand generally and at the lower end in particular. These articles neglect both aspects.

- Dr Bryce Wilkinson is Senior Fellow at the New Zealand Institute