Triggering movements into and out of child poverty: a comparative study of New Zealand, Britain and West Germany.

• Author: Ballantyne, Suzie

Abstract

We know quite a lot about cross-sectional child poverty rates. But we want to move closer to answering the dynamic question of why children move into and out of poverty. Using a longitudinal data set developed out of the Income Supplement to the Household Labour Force Survey, this research examines trigger events (like losing a job or losing an adult from the household) and responses to these triggers by families, as a means of considering child poverty dynamics in New Zealand. It compares New Zealand's dynamic experiences with Britain and West Germany. The comparative approach provides information on whether it is differences in frequency of trigger events or in responses to trigger events across countries that drives cross-national differences in chances of children moving into or out of poverty. A study of the trigger events and responses associated with transitions gets us one step closer to understanding causes of child poverty, an important part of making policy to reduce poverty.

INTRODUCTION

What events are related to children moving into and out of poverty? This paper considers the impact of trigger events and responses to these events for chances of moving into and out of child poverty in New Zealand. It compares New Zealand's experience with Britain and (West) Germany. This comparative approach provides information on whether it is differences in events or in responses to events across countries that drives cross-national differences in chances of children moving into or out of poverty. A study of the trigger events associated with poverty transitions also gets us one step closer to understanding causes of poverty and of the different factors contributing to inflows and outflows from child poverty, an important part of making policy to reduce poverty.

The base New Zealand data are considered briefly, followed by a description of child poverty rates and entry and exit rates from poverty in the three countries. The next sections--the core of the paper--deal separately with trigger events for two types of child households--children in lone-parent households and children in couple households--moving into and out of poverty. The conclusion summarises the key elements of the study.

This paper is short and relatively accessible. It draws on a longer, more detailed, and more technical paper (Ballantyne et al. 2003). Readers interested in the full results and technical detail should refer to the longer version.

THE LINKED INCOME SUPPLEMENT DATA

New Zealand's quarterly Household Labour Force Survey (HLFS) is a rotating panel, designed to facilitate the inter-temporal reliability of cross-sectional estimates of labour force status. The basic unit of sample selection is the geographic address. Each geographic address is in the panel for up to eight consecutive quarters. Thus the entire panel turns over in a two-year period. While designed for cross-sectional purposes, the rotating panel of the HLFS provides potentially useful longitudinal information, albeit over a relatively short period.

The Income Supplement (IS) of the HLFS occurs annually every June quarter. The IS has been running since 1997. It is designed to collect information on current hourly and weekly earnings and income from self-employment and from government benefits over the reference week of the HLFS.

Because of the rotating nature of the panel, in theory, up to half the dwellings in one IS will also be in the IS the following year. Due to sample attrition, exclusion of imputed records and accelerated sample rotation during the study period, the achieved linkage rate is about half of this theoretical figure (Ballantyne et al. 2003). The longitudinal data and the household demographic data provide information on short-term household income dynamics, which is employed here to examine child poverty transitions.

The unit of analysis is the child, defined as less than 18 years of age. The unit of income accounting is the household. Data on gross weekly total income of those who live in a household with at least one child, observed in both ISs, are used. Households with imputed incomes are excluded from the analysis. Current pay-as-you-earn (PAYE) tax rates are applied to gross income to obtain after-tax personal weekly income. A series of adjustments for child support payments is made, assuming that weekly-income questions are not picking up annual IRD family tax credits. Net income is then summed across the household and equivalised using the square root of the number of people in the household. This net weekly household equivalised income is attached to each individual child in the household. Poverty is defined as an equivalised disposable household income below 60% of the median income for all persons (adults and children).

DESCRIPTIVE INFORMATION ON CHILD POVERTY TRANSITIONS

This section describes annual exit and entry rates from child poverty and undertakes a cross-national comparison with Britain and (West) Germany. British and German data are taken from Jenkins and Schluter (2003).

Basic cross-national comparisons are shown in Table 1. New Zealand has a child poverty rate (23.2%) between that of Germany (19.4%) and Britain (30.1%). However, the poverty rate for New Zealand children in lone-parent households (47.0%) is similar to that in Germany (49.1%), which in turn is lower than that experienced in Britain (68.1%). New Zealand's couple-household child poverty rate (17.7%) is similar to both Britain's (22.4%) and Germany's (16.3%).

Table 1 also contains information about poverty dynamics, in the form of exit and entry rates. New Zealand has the highest child poverty exit rate (38.6%). This high exit ranking is due primarily to high exit rates for children in couple households (46.3%), since New Zealand's exit rate for children in lone-parent households (25.2%) is actually between Britain's (20.4%) and Germany's (33.4%). New Zealand's child poverty entry rates for both types of household are similar to Britain's but higher than Germany's.

In New Zealand, the difference in exit rates between children in lone-parent households and those in couple households is particularly stark. The chance of exit for a child in a lone-parent household in New Zealand is about half the exit chances of a child in a couple household (25.2% compared to 46.3%), whereas for Britain the ratio is higher--more like two-thirds (20.4% compared...