Teen mums give best returns

The Government has worked out that spending on young, single mums' health and training has a big payoff. Photo / Glenn Jeffrey

Imagine if you could invest $14.1 million up front and get a return over the next 50 years of $3.3 billion. Would you do it?

Most would say a return of more than 200 times on the investment was probably worth it. But who has those sorts of opportunities, or the ability to magic up $14.1m at the drop of a hat at a low cost?

The thing is, everyone in New Zealand does, as taxpayers in common to a Government that has these opportunities.

This is what the Government's social investment approach is all about and the apparatus of Government is starting to get its head around how to measure those costs and benefits, and what types of investments it could make.

There is potentially a huge opportunity if the early results are any indication.

In 2013, the Government announced it would spend $7.9m to employ individual case workers to essentially nag and cajole teen single mums back into work and education, and to help them make sure the bills are paid and their kids looked after. It was like employing a "super nana" for every mum and baby.

It also spent $6.2m on setting up seven supported shared homes for these young women, including around-the-clock support and care for their babies.

The theory was that single mums who stay on benefits without any ability to get a job and start an independent life are often the ones most at risk of being stuck on benefits for decades and, more importantly, their own children get stuck there, too.

The risks that those kids will be sicker and get into trouble with the justice system is also much higher, amplifying the cost, not to mention the human misery.

The Government's actuaries have worked out a single parent on a benefit and aged under 20 is likely to be on them at one time or another for 20 years by the time they retire. The net present cost of that person is $220,000.

So investing heavily in training, health, housing and life skills can have a big payoff. Do it for enough teen mums, kids in bad housing, and illiterate teenagers and you could end up with a very big return.

The early verdict was a very big number.

The actuaries worked out the lifetime liabilities to taxpayers of those single mums reduced by $3.3b between June 2013 and June 2014 - at least partly because the early interventions reduced the numbers and their expected time on benefits. There are 43,000 fewer single mums on benefits than three years ago.

This week, ANZ Economist Cameron Bagrie sensibly questioned whether it was time for the Government to use its balance sheet, which means its ability to borrow cheaply, to invest and spend in the economy and help keep it growing strongly.

Prime Minister John Key said it was too early to push the panic button, but the Government would invest heavily again to support the economy if it needed to.

He referred to the Government's billions of dollars of investments in motorways and infrastructure during and after the 2008/09 Global Financial Crisis and the 2010/11 earthquakes.

Here's the opportunity. The Government's net debt is just over 25 per cent of GDP and forecast to drop towards 20 per cent over the next couple of years. The IMF and OECD say our Government could easily handle net debt of 60-90 per cent and was more than 200 per cent of GDP away from its absolute limit.

The OECD also recommended that countries invest in skills to help restart productivity growth.

No one is suggesting investing billions in training and nagging and doctoring and housing thousands of kids and teenagers. A few hundred million dollars could make an enormous difference.

The spending certainly appeals more than a couple of kilometres of concrete.