Uncovering pathways into and out of disadvantage in New Zealand
Families in poverty face significant challenges and disadvantages that are likely to have scarring effects long into their children’s futures, hindering their development and life chances. These children’s children and their families may eventually bear this burden as well. For far too long our policy response to such persistent and intergenerational poverty has been an approach the Finance Minister has gone so far as to call “flying blind.” This is not good enough. To truly address poverty, policies need to be well-informed and based on sound evidence.
We have spent billions upon billions of dollars on social policies with surprisingly little evidence that we are targeting the spending efficiently or having any positive effect on reducing long-term disadvantage and increasing opportunities for families in need. We haven’t been mindful enough of what causes families to fall into poverty, and what it is that keeps them there, even into the next generation. To hack at the destructive roots of persistent and intergenerational poverty, we need to see and understand them more clearly.
The first two papers in the series explored the meaning, definition, and measurement of poverty. This paper, the third in the series, seeks to discover the factors that cause poverty in New Zealand for this generation and for those to come.
Help families escape poverty; not just pathways in, but doorways out, too
We recognise that for policy to be well-tailored to helping people get out of poverty—or to ensure that people do not become trapped there in the first place—it must be mindful of the reasons people fall into and become trapped in poverty. Once we understand these pathways into poverty, we may recommend policies that will address these root causes and ultimately transform lives for the better. We also have an interest in the factors that help families escape poverty; not just pathways in, but doorways out, too. We hope that this work will help these families and their children to “thrive, belong, achieve,” as the Government’s vision for New Zealand children articulates.
This work sits in a policy context that is increasingly aware of the need to seek sustainable answers to this intractable, “wicked” problem.
The Expert Advisory Group, convened by the Children’s Commissioner to identify solutions to poverty in New Zealand, also outline why this task is such an important one:
“Understanding causal relationships is vital for a full understanding of the true costs of child poverty, and also for assessing how much other child outcomes would improve consequent on reducing child poverty. In addition, understanding the causal impact of family income on child outcomes goes to the heart of questions about best directions of resources in terms of investing in children. Is it better to spend on enhancing family incomes or purchasing services, such as early childhood education, on behalf of that child?”
To contribute to these questions on the way to better policy and better outcomes for New Zealanders, this paper will explore: All lead us to a clearer roadmap of the pathways into poverty, where we have found work and education to be the main routes out of lives of despair to lives of hope.
Concepts and limitations
For the clear vision we hope to achieve, the scope of this paper is limited in several ways:
- Working-age families in poverty are the primary focus of this paper. Different causal pathways exist for different demographic groups. Around two-thirds of those in poverty in New Zealand are working-age families (sole and couples) with children. As they constitute the majority of people in poverty, there is a greater availability of data for this kind of family than for other demographic groups. Focusing on families with children also allows for investigation into the intergenerational effects of poverty. We are therefore, interested in family poverty.
- We focus on proximate rather than distal causes for poverty. The focus here is on factors closest to families, sometimes called proximate causes, rather than broader macro structural (also called distal) causes like globalisation, labour market factors, economic growth/stagnation, inequality, discrimination, demographic trends and policy reforms. We recognise that factors like the number of jobs available, the nature of the benefit system, work incentives, and the returns to educational attainment, for example, matter deeply, yet the factors and events closest to families need to be understood first to focus and guide broader policy solutions.
- The findings in this paper are limited and drawn primarily from empirical research. Much of the evidence here is quantitative, complemented with limited qualitative work where available. While this means that much of the following work is based on empirical research, we conduct it with a rich, textured, and holistic understanding of people. We understand that people hold values and desires and find meaning and fulfilment through relationships and deeply held beliefs. They also live with and depend upon their families, and families over time form intergenerational bonds. We recognise that the empirical research we rely upon—while crucial for giving us solid evidence of the characteristics and events that can have a strong impact on people’s chances of falling into and remaining in poverty—is limited and does not fully explain a complex reality that we can only partially grasp through scientific methods. This work is therefore exploratory in nature. Evidence will be from New Zealand, where available.
Definition and measurement
- We define poverty as a situation where: a person or family lacks the material resources to meet their minimal needs to participate in society, as recognised by most New Zealanders. Poverty is best understood as a dynamic relationship between resources and needs. People use resources to meet their needs, and the scarring effects of hardship (going without) and social exclusion (inability to participate in society) are likely to result when these needs are not met. More specifically:
- Material Resources can be formal—that is, provided by the market or Government— or informal—provided by family, whānau, friends, neighbours, churches etc. There are two basic kinds:
- Financial: Income, benefits, assets, material goods, charitable gifts etc.
- In-kind: Health services, education, childcare from family, etc.
- Minimal Needs are determined by what most New Zealanders consider necessary for a minimal acceptable standard of living to participate in society: a range of items or activities that no one should go without. These needs may be social or material and go beyond what’s required for mere survival. The needs that are included are those that require material resources to fulfill (therefore the definition doesn’t include the full breadth of human needs like meaningful relationships, for example). Needs change over time and differ depending on personal/ family circumstances such as age, health, disability, geography, prices etc.
- Material Resources can be formal—that is, provided by the market or Government— or informal—provided by family, whānau, friends, neighbours, churches etc. There are two basic kinds:
- We accept that income measures (usually involving some proportion of the median income) are an imperfect yet reasonable marker for poverty understood broadly as a lack of resources. There is no perfect measure of poverty as it is a multidimensional concept. Much of the existing literature that will be drawn upon in this paper rests on this assumption, and due to the relative ease with which income data can be obtained these measures are also the most prominent. While hardship (also known as deprivation) measures are important because they track actual outcomes and day-to-day material living standards, the literature is limited from a causal perspective. There is significant overlap across income and hardship measures—a relationship that strengthens over time and with severity—which means many of the income-based findings will be reasonably indicative of hardship as well.
Public Conceptions of causes of poverty
Before delving into what the experts say causes poverty, it is instructive to take a moment to consider public conceptions of the causes of poverty. In a democracy like New Zealand’s, the public’s perception of what causes of poverty is important because their views influence and shape policy. A public that believes that poverty is caused predominately by the behaviour and choices of those in poverty will demand and accept very different poverty-fighting policies from its government than a public that believes that poverty is caused primarily by things outside of the control of those in poverty, such as bad luck or racism. As public health academic Margaret Whitehead notes, “[W]hen decisions are taken that ‘something must be done’ about a problem, the nature of the proposed action will depend on prevailing notions of what is causing the problem.”
Categories of causes of poverty
When asked to respond to a series of options that explain why people are poor, the public’s answers can be classified into three categories: individualistic, structural, and fatalistic, as Table 1 shows:
Polling responses in New Zealand
In 2005, New Zealanders were asked whether people were poor because society treats them unfairly or because of laziness and lack of will power (only two options were presented). Sixty percent of people surveyed responded that it was because of laziness and a lack of will power. When asked whether most poor people have a chance to escape their situation or very little chance, over three-quarters of those surveyed responded that “most poor people a have a chance of escaping their poverty.”
More recently, the Child Poverty Action Group polled New Zealanders in more detail regarding their perceptions of poverty. As Figure 1 depicts, there are broadly two camps split down the middle on the primary cause of poverty in New Zealand. One views structural factors— particularly economic—outside of people’s control like unemployment, wages, and living costs as the main culprits, while the other views poverty as caused by individual characteristics and the behaviour of the poor themselves like bad choices, neglecting responsibilities and spending money on drugs and alcohol instead of the basics. Much smaller proportions of people, around one in ten for each, laid the blame on a lack of government support, uneducated parents, and families having too many children.
For a perspective grounded in personal experience, the same survey asked people whether they actually knew a child or children in poverty. Nearly a quarter (24 percent) said that they did. Figure 2 shows how when asked what the specific main reasons why the child they knew was in that situation, again we see an interesting split between structural and individualistic reasons.
Discussion of public perceptions
Findings from the UK suggest that personal experience of poverty significantly influences people’s perception of its causes. Those with direct experience of being poor are more likely to view structural factors as more important while those without experience are more likely to  Research by Motu showed that Māori are also “more likely to believe:
- (a) people are in need because society is unfair;
- (b) government is doing too little to help people in poverty;
- (c) owners should not run businesses by themselves;
- (d) luck and connections matter more than hard work for success;
- (e) it is not fair to be paid more for better performance whilst doing the same job as someone else; and
- (f) capitalists are more threatening to society than other groups.” When you ask those in poverty in New Zealand what factors they think keeps them trapped in poverty, as the Auckland City Mission did last year, the answers are illuminating: debt, justice, housing, employment, health, food insecurity, services, and education; all exacerbated by the time required to navigate a complex system of support agencies and organisations.
The broad array and distribution of answers again highlights how multi-faceted the problem of poverty appears and, at the same time, how polarised debate and opinion can become, as people tend to simplify a complex reality with false dichotomies—it’s all the fault of the person in poverty, or it’s all the fault of things outside of the person’s control. In reality, both perspectives are right. The choices we make are constrained by our history and context. We shall see below that the pathways into poverty aren’t quite as clear-cut as popular polls and surveys might suggest.
This is an extract from Kieran’s research series “The Heart of Poverty | Uncovering Pathways into and out of Disadvantage in New Zealand” Discussion Paper. (Released 2016)
 Bernard Hickey, “English eyes major data centric reforms to Budget reporting after the election,” Interest.co.nz, accessed August 25 2015, http://www.interest.co.nz/ news/70314/english-eyes-major-data-centric-reforms-budget-reporting-afer-election.
 While there is limited evidence of the effectiveness of past policies on reducing persistent poverty, researchers have investigated the effectiveness of the tax and benefit system on reducing the incidence and severity of income poverty in New Zealand. See, for example, Bob Stephens, Charles. Waldegrave and Paul Frater, “Measuring Poverty in New Zealand” (1995).
 Kieran Madden, The Heart of Poverty: Defining and measuring what it means to be poor in New Zealand (2014); Kieran Madden, The Heart of Poverty: Matching passion with precision for struggling New Zealanders (2015).
 Ministry of Social Development, “Green Paper for Vulnerable Children” (2012).
 Wicked Problems, generally: are difficult to clearly define; have many interdependencies and are often multi-causal; are often not stable; have no clear solution; are socially complex; hardly ever sit conveniently within the responsibility of any one organisation; involve changing behaviour; are sometimes characterised by chronic policy failure; and attempts to address them often lead to unforseen circumstances. Lynelle Briggs, “Tackling Wicked Problems, A Public Policy Perspective” (Australian Public Service Commission, 2007).
 Expert Advisory Group, Working Paper no 3: What causes child poverty? What are the consequences? An economic perspective (2012), 2. For a discussion on the effectiveness of income vis á vis in-kind benefits, see Douglas Almond and Janet Currie “Human Capital Development Before Age Five: NBER Working Paper No. 15827” (2010).
 Older New Zealanders are not the focus of this paper, as they are, relatively speaking, better off than other demographics. The Ministry of Social Development, however, predict trouble in the future because “rates of home ownership are falling and hardship is increasing among older working-age people…[t]his indicates that in the future more older New Zealanders may face constrained living standards, as well as greater health and housing needs. “Briefing to the Incoming Ministers,” (2014), 31.
 Perry, Household incomes in New Zealand, 117. This increased poverty risk is largely attributable to children introducing additional needs to the family whilst at the same time reducing the time parents’ have to commit to work.
 Much of the literature focuses on “child poverty,” but we prefer to use the term “family poverty” as it better captures the existence of relationships within and across families. When the term “child poverty” is used here, it is shorthand for families with children whose incomes fall below a certain threshold. For more on terminology, see, Perry, Household incomes in New Zealand, 94. For a broader perspective on family and whanāu wellbeing, including conceptual frameworks and indicators, see SuPERU, Families and Whanāu Status Report 2015 (2015).
 For work exploring the links between poverty/inequality and macroeconomic conditions, see Markus Jäntti & Stephen Jenkins, “The impact of macroeconomic conditions on income inequality.” The journal of economic inequality 8, no. 2 (2010): 221-240, Craig Gunderse and James Ziliak. “Poverty and macroeconomic performance across space, race, and family structure.” Demography 41, no. 1 (2004): 61-86.
 This is not to dismiss these factors, as the nature of the benefit system and incentives play a key role in determining market and disposable income, for example. Rather, they will be examined in further detail in a future paper.
 W. Phillips. Shively, The craft of political research (Pearson Higher Ed, 2012), 23-24.
 As Nobel laureate Herbert Simon described it: “nothing is more fundamental in setting our research agenda and informing our research methods than our view of the nature of human being whose behavior we are studying…It makes a difference to research, but it also makes a difference for the proper design of…institutions.” Herbert Simon, “Human nature in politics: The dialogue of psychology with political science,” American Political Science Review 79, no. 02 (1985), 303.
 Christian Smith, What Is a Person? Rethinking Humanity, Social Life, and the Moral Good from the Person Up (University of Chicago Press, 2010), 21-22.
 For an overview of the relationship between income and outcomes, see section F in Bryan Perry, The material wellbeing of New Zealand households: trends and relativities using non-income measures, with international comparisons, (2015), 51-56.
 Housing may fall under both financial (accommodation supplement) and in-kind (housing NZ home).
 As Bryan Perry puts it, “household income is taken to be either an imperfect but readily available and very important indicator of the “consumption possibilities” for a household, or as an indicator that allows comparisons of the potential living standards of households, all else assumed equal.” Perry, Household incomes in New Zealand, 8. While some findings are sensitive to particular measurements used, most trends over time remain similar. New Zealand Superannuation can cause issues with median measurements, however. For more on the “pensioner spike” see Perry, Household Incomes in New Zealand, 29, 137.
 For a discussion on the relationship between multidimensional words and unidimensional measures such as income, see Shively, The Craft of Political Research, 35-37
 A discrete investigation into the causes of hardship would be worthwhile, however, it would constitute a separate paper and would be reliant on a growing, yet relatively limited, literature base.
 New Zealand Treasury, A descriptive analysis of income and deprivation in New Zealand (2012) 3. See also Bryan Perry, Measuring and monitoring material hardship for New Zealand children: MSD research and analysis used in advice for the Budget 2015 child hardship package (2015) 30.
 Brienne Hastie. “Linking cause and solution: Predicting support for poverty alleviation proposals,” Australian Psychologist 45, no. 1 (2010): 16-28.
 Margaret Whitehead, “A typology of actions to tackle social inequalities in health” Journal of Epidemiology and Community Health, 61:473−478 (2007) cited in Penelope Carroll et. al. “The widening gap: perceptions of poverty and income inequalities and implications for health and social outcomes.” Social Policy Journal of New Zealand 37 (2011): 113.
 Adapted from Dorota Lepianka, Wim Van Oorschot, and John Gelissen,”Popular explanations of poverty: A critical discussion of empirical research.” Journal of Social Policy 38, no. 03 (2009): 423, 427 and Rebecca M. Blank “Selecting among anti-poverty policies: can an economist be both critical and caring?” Review of Social Economy 61, no. 4 (2003): 447-469.) See also, Joe R. Feagin, “Poverty: We still believe that God helps those who help themselves.” Psychology today 6, no. 6 (1972): 101-110.
 Carroll et al, The Widening Gap, 117.
 Emily Rose et al. “Social Values: A Report from the New Zealand Values Study 2005.” (Massey University: 2005). See also, Carroll et al, The Widening Gap.
 Rose et al, Social Values, 12; Carroll et al, The Widening Gap, 117.
 Child Poverty Action Group, New Zealanders’ attitudes to child poverty, Research Report (2014)
 Sonia Sodha and William Bradley, 3D Poverty (Demos, 2010). Alison Park, Miranda Phillips, and Chloe Robinson, Attitudes to poverty: findings from the British Social Attitudes survey. (Joseph Rowntree Foundation, 2007).
 Arthur Grimes, Robert MacCulloch and Fraser McKay, Indigenous Belief in Just World: New Zealand Māori and other Ethnicities Compared, Motu Working Paper 15-14 (Motu, 2015), 24.
 Emily Garden et al., Speaking for Ourselves: The truth about what keeps people in poverty from those who live it (Auckland City Mission, 2014)
 See literature on behavioural economics for more on this intersection, for example, Richard H. Thaler, Misbehaving: The Making of Behavioral Economics (W. W. Norton & Company, 2015).
 For seminal work on the intersection between history and biography, see C. Wright Mills, The Sociological Imagination (1959).
 Economics and sociology place different emphases on these two interrelating factors. As economist James Duesenberry wryly describes it: “economics is all about how people make choices; sociology is all about why they don’t have any choices to make.” James Duesenberry, “Comment on An economic analysis of fertility,” Demographic and economic change in developed countries (1960): 233.