Addressing hardship better than measuring manufactured poverty

May 28, 2015

A few years ago a newspaper asked Oamaru clergy to comment on poverty.

One vicar said that he came from South Africa where hundreds of people shared a single cold water tap which made it difficult for him to comment on a town where people drove to the food bank.

The dictionary defines poverty as the state of being extremely poor.

The measuring class—people with tertiary education who spend all their time telling us how much misery there is in our community  have manufactured a new definition – 60% of the median income.

By that measure poverty could only be solved by taking everyone’s money and redistributing it equally and ensuring it stayed redistributed equally for ever.

While gross inequality can be a problem, making the rich poorer will not address the causes of, nor provide a longterm solution to, the problems of the very poor.

This is why Finance Minister Bill English took a swing at critics of the government on ‘poverty’:

“The term ‘poverty’ has been captured by a particular idea of how you measure poverty and a particular solution to it. That is, you measure it relative to incomes, and the solution is mass redistribution.”

Those who use the term “poverty” and “child poverty” in this way have been “admirably open” about their objectives, Mr English told the meeting but it is not a view the government shares.

“We are not addressing that phenomenon. What we are addressing is absolute levels of hardship. That is someone not having enough to live, and we don’t think that is worse just because someone else has a bit more.”

Incomes are only one part of what keeps people at the bottom of the social heap, he says, and other factors matter more.

“What we are addressing is what I think is the kind of communal or moral dimension and the worst examples of it are not purely about poverty. They are about ways of behaving, and I don’t think poverty is an excuse for serial criminality or beating up your kids. But those are parts of the ways of behaving of parts of our community, in my view sometimes made worse by the way the government deals with some of these problems.” . . .

It is not often a politician talks about the moral dimension and that should not be taken to mean that moral problems are the preserve of the poor.

But when Northland GP Lance O’Sullivan says children will be better off away from their homes and the social dysfunction in them, the problem of hardship is not just a financial one.

When National came to government it took an actuarial look at welfare and uncovered the longterm costs of it.

Those costs were both financial and social which is why reducing dependency and addressing real hardship are so important.

It doesn’t matter what you call it, the problem is whether or not people have enough which in turn begs the question how much is enough?

Regardless of the answer, the solution lies in addressing real hardship, as this government is doing, not by manufacturing poverty by redefining it in a misguided attempt to solve it through redistribution.


Another angle on inequality

March 9, 2014

Most discussions on inequality focus on income, and pre-tax income at that.

There is another angle on the topic:

. . . If you measure consumption inequality, it is far lower than pre-tax income inequality, because the top 40 per cent of earners pay more in than they get out, while the bottom 60 per cent get more out than they pay in. Indeed, in Britain the top 1 per cent generate about 30 per cent of the total income-tax haul. After such redistribution, the richest fifth of the population has only four times as much money to play with as the poorest fifth. . . .

This comes from a post by Matt Ridley who points out that poverty and inequality are both falling.

. . .  by any conceivable measure, absolute poverty has fallen dramatically over the past few decades, so why should it matter if the rich get richer? Today’s British poor spend half as much of their income on food and clothing as in the 1950s, while working many fewer hours, living about eight years longer and having access to phones, cars, medicines and budget airlines that would have amazed even the rich in the 1950s.

Moreover, here’s a question I’m willing to bet that chimpanzees would do better than people at: given that inequality has been rising recently in China, India, America and many other countries, is global inequality rising or falling?

The answer: it’s falling and has been for several decades, however you measure it. The reason is that people in poor countries are getting richer more quickly than people in rich countries are getting better off.

That fall in global inequality has accelerated since the start of the financial crisis. As Africa now experiences record rates of growth, the number of people trying to live on $1.25 a day is plummeting fast. Mr Rosling likes to show two charts in his talks: the graph of global income was once a two-humped camel; now it’s a one-humped dromedary, with the vast majority of the world’s people in the middle.

Here’s another question that I fancy the chimps would beat the people at: did poverty and inequality in Britain increase or decrease as a result of the recession? The answer is that both fell. Inequality has fallen to levels not seen since the mid 1990s, as it usually does during recessions, though it is still higher than it was in the 1970s. Meanwhile the Left’s favourite measure of poverty — those earning less than 60 per cent of the median income — has by definition gone down, because median income has gone down. Redefining poverty in this relative (and very inadequate) way has therefore rather backfired. . .

A percentage of median income is a very blunt instrument with which to measure poverty because a fall in the incomes of higher earners will improve the measure but make absolutely no impact on the problem.

As poverty and inequality improve the differences between rich and poor become less obvious:

Imagine being told that one of the people in a meeting is a genuine billionaire (I owe this idea to Professor Don Boudreaux). How would you tell which one? His bodyguards, private jets and grouse moors are outside the room; his shirt and jeans are unlikely to give him away (as they would in 1900); his Rolex could be a cheap imitation; his teeth, girth and height are probably unremarkable (unlike in 1800); even his Diet Coke is the same as everybody else’s. Much more than in the past, most inequality in this country these days — though by no means all — is in luxuries, rather than necessities.

That helps to explain why some welfare is now directed at people who already have more than enough, though it doesn’t make it any more right.

. . .  does income generally grow faster for people in the lowest fifth of the population or people in the highest? It’s the lowest, because many of those people are young, low-paid people just starting out on their careers, while many of the richest fifth are older people at the peak of their pay, about to retire. That is to say, the category “poorest fifth” may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood.

Mobility is very important. It’s not just how much people have which matters but the ability for those with less to get more.

But why, when both poverty and inequality are declining are both regarded as more serious issues?

None of this is meant to imply that people are wrong to resent inequality in income or wealth, or be bothered about the winner-take-all features of executive pay in recent decades. Indeed, my point is rather the reverse: to try to understand why it is that people mind so much today, when in many ways inequality is so much less acute, and absolute poverty so much less prevalent, than it was in, say, 1900 or 1950. Now that starvation and squalor are mostly avoidable, so what if somebody else has a yacht?

The short answer is that surely we always have and always will care more about relative than absolute differences. This is no surprise to evolutionary biologists. The reproductive rewards went not to the peacock with a good enough tail, but to the one with the best tail. A few thousand years ago, the bloke with one more cow than the other bloke got the girl, and it would have cut little ice to try to reassure the loser by pointing out that he had more cows than his grandfather, that they were better cows, or that he had more than enough cows to feed himself anyway. What mattered was that he had fewer cows.

For some the problem isn’t how much they have but that others have more.

If they use that to motivate themselves to improve their situation that can be good.

If it just makes them resentful and feel they’re owed more, even if they have enough, it’s  merely envy.

Hat Tip: Anti Dismal


Zero-sum fallacy

November 4, 2013

Damien Grant says inequality isn’t the fault of the rich:

A recent book edited by Max Rashbrooke, Inequality; a New Zealand Crisis, portrays an alarmist view of an unfolding dystopian disaster. However, Rashbrooke and many of those concerned at rising inequality fall for the zero-sum fallacy; the idea that there is a set amount of cash in the economy.

The fallacy goes that if Bob has made an extra dollar then he must have taken it off someone else; the rich get richer and the poor get poorer.

The easiest way to dismantle this illusion is to imagine two farmers. The first is content with his lot but the second works extra hours to build himself a new cow shed, making his farm more valuable. He has become richer but not at the expense of his neighbour. . . .

Not only has the farmer not become richer at the expense of his (or her) neighbour, s/he may well have helped increase someone else’s income by using more goods and services and/or employing more people.

Economic growth is driven by innovative entrepreneurs adding to the total economy. They sometimes become rich by retaining some of the extra wealth they created. Equally, a surgeon who works long hours will derive a large income, but only as a result of repairing the lives of his patients; both benefit from the transaction. We can reduce inequality by restricting the amount of operations he performs, and rising income tax has that effect.

However, that will not reduce poverty, it will exacerbate it. The rich will buy the reduced number of operations and the poor will miss out. . .

The focus on inequality is driven by the belief that life isn’t fair; that those with more have taken advantage of those with less and that there’s little or nothing those with less can do about it without state intervention – higher and more taxes and more redistribution.

Life isn’t fair but the easiest way to reduce inequality is to make the rich poorer which doesn’t help anyone.

The problem isn’t that some people have more than others, it’s that some people don’t have enough.

The causes for that are many. The state has a role in helping address some of those including poor education and health either directly through its own programmes or indirectly in funding other groups to help.

It also has an obligation to do so in a way that tackles the real problem of poverty, not one that merely addresses the symptom of inequality.

#gigatownoamaru is seeking to provide opportunities for entrepreneurs by becoming the fastest town in the Southern Hemisphere.


Poverty doesn’t cause abuse

August 15, 2013

The first topic of discussion on Afternoon’s Panel on Tuesday was Paula Bennett’s proposals for countering the scourge of child abuse.

One of the panelists, Gary McCormick, asserted that the root cause of the problem was poverty (starting at about 9:01).

Host Jim Mora said there was disagreement about the extent to which poverty is related to child abuse.

McCormick disagreed.

Guest Anthea Simcock from Child Matters then came on (about 12 minutes) and said while poverty was related to the issues it was not the primary cause and child abuse wouldn’t be fixed by fixing poverty alone.

McCormick came back in (13:56) and told her she was wrong and poverty was the cause of the problems.

She countered that by saying it was a co-existing factor but not a causal one.

He came back and eventually said he refused to believe what she was saying.

This is a prime example of someone not letting the facts getting in the way of their convictions and he’s not the only one.

Lindsay Mitchell blogs:

John Minto says that Labour needs “a kick up the backside” for not pushing the message that poverty is the “key factor” behind child abuse.

He says there are NEVER any excuses for child abuse but there are REASONS behind it.

Unfortunately reasons becomes excuses very easily.

Can I take you back to just a couple of things that people like John Minto ignore.

Child abuse rates are not high amongst all groups with high poverty rates. In fact they are lower amongst poor Asians.

Household incomes of Maori and Pacific families are growing faster than the median, yet the rate of Maori child abuse is not declining. . .

Poverty is a problem but a lot of very poor people love and care for their children and some who aren’t poor abuse them.

The problems of poverty and child abuse both need to be addressed but it is wrong to assert that solving the former will solve the latter.


From protester to MP and back

September 18, 2012

It hasn’t taken former MP Sue Bradford long to get back to her former vocation as a protester:

Anti-poverty campaigners protesting the Government’s welfare  reforms have chained themselves to the Ministry of Social Development (MSD)  Auckland regional office.

About 20 people took part in today’s protest at the office  in suburban Ellerslie, entering the building and chaining themselves to  equipment.

Inspector Lou Alofa of the police northern communications  centre said up to six people had been arrested.

“We have several people who have chained themselves to one  of the pillars there and police are working towards a resolution,” he said.

It was reported left-wing protester and former Green MP Sue Bradford was among  those at the protest.

They are protesting against reforms designed to get people off benefits and into work which is a big step towards relieving poverty.

How genuine is their concern about poverty when they are showing they’d prefer people stay dependent and poor?


Who said poverty not core concern?

December 17, 2011

Misconception  of the day:

Poverty is not a core concern of National supporters. Colin James

Where on earth did he get that idea?

It certainly wasn’t in the party’s vision which says:

The National Party seeks a safe, prosperous and successful New Zealand that creates opportunities for all New Zealanders to reach their personal goals and dreams.

It is probably fair to say most National supporters aren’t in favour of spending more money on benefits which trap people in dependence. But that doesn’t mean we’re not concerned about poverty and determined to help people get out of it.

We want a healthier, wealthier, better educated and safer country. That won’t be achieved without addressing the causes of poverty and helping people help themselves out of it.

 

 


How poor is poor?

August 4, 2009

Is poverty not having enough or not having enough in comparison with what other people have?

Is it absolute or relative?

The notion of relative poverty has driven a lot of social and economic policy.

It was one of the motivations behind Working for Families. The television advertisements clearly showed the money was directed at people who already had luxuries and turned middle and upper income families into beneficiaries.

Defining policy by comparison with what others have is a flawed concept because as Michael Blasland points out on the BBC website, poverty, by this measure,  could decline during the recession.

That doesn’t mean poor people will have more, they could well have less, but richer people will have reduced incomes too. Relative poverty is defined as less than 60% of the median income, if rich people get poorer the median income would decrease and therefore fewer people would be poor.

The column includes an interactive graph which illustrates just how flawed this definition of poverty is.

Hat Tip: Liberty Scott


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