Richie Poulton and David Craig: Crisis may just be starting for poor

Responding to recent rising unemployment figures, Social Development and Employment Minister Paula Bennett's response was to point to positive signs in the end of the recession and in falling numbers actually eligible to receive the unemployment benefit. And a decision to increase training opportunities for young people.

Business New Zealand's Phil O'Reilly noted: "It is very hard for unemployed people and their families. We do however have a sound unemployment support system and there are many public-private initiatives under way to help provide employment for those affected."

This week's release of the New Zealand Children's Social Health Monitor (www.nzchildren.co.nz) however raises important questions about whether the crisis has passed, and whether youth training will do the job. The report, launched at the New Zealand Paediatric Society's conference, was put together by a consortium of health researchers through the New Zealand Child and Youth Epidemiology Service, which supports DHBs and government around child illness and its causal factors.

It summarises extensive research, including New Zealand's own lifecourse studies of children's wellbeing, which suggests that children exposed to low family income in the early years, in addition to experiencing higher hospital admissions and mortality in the short term, also have worse long-term results.

This includes poorer cardiovascular and oral health, and an increased chance of becoming dependent on alcohol. Critically, moving out of poverty by adulthood, otherwise known as upward social mobility, does not appear to mitigate or reverse the long-term damage associated with childhood disadvantage. Worse, the negative consequences go well beyond the physical realm, and include leaving school early and without qualifications, being unemployed in later life, and falling into an intergenerational cycle of early parenthood and disadvantage.

Much of this is established scientific fact. But this report also points forward, reminding that in the previous recession, recovery of employment and incomes among families with young children was slow.

In the seven years after the last recession, and despite overall rising employment, some 30 per cent of children were in families that depended for at least three years on benefit income. A remarkable 54 per cent were reliant at some point. By age 7 in 2000, 20.8 per cent had spent five of their first seven years of life reliant on a benefit recipient, with 6.1 per cent reliant for their entire first seven years.

Data from 2003-4, a period of rising employment, showed that these families suffered extensive hardship, affecting areas as basic as attending the doctor, school outings, adequate rainwear, access to books, and involvement in sports.

While predictions, especially those involving the future, are notoriously frail, it seems highly possible that this situation will be repeated. Before the recession, one in five children was already relying on benefits. Those numbers are likely to rise and stay elevated for some time.

This would have serious consequences. In current policy, benefits have been allowed to sink to low levels against average wages. This was partly to encourage return to the workforce while the labour market was expanding. Increases in Family Support only recouped losses resulting from the benefit not being inflation adjusted.

But at the same time, as a 2008 Ministry of Social Development report shows, prices of core family items have recently risen faster than inflation and average wages: housing, energy, transport and "credit services".

Housing was especially affected. As MSD's 2009 Household Incomes Report showed, "child poverty rates rose from 2007 to 2008, after falls from 2001 to 2007 ... because housing costs rose sharply from 2007 to 2008, especially for low-income [households]."

In other words, child poverty rates were already rising before the recession impacted in late 2008, especially among benefit families. The accommodation supplement, however, still sits at 2005 levels.

Moreover, current policy settings mean that children in families receiving benefit support are not eligible for the Working for Families "In Work Tax Credit". They face not just loss of work income. They also lose at least another $60 a week of income support.

The labour market, economists agree, remains soft, and unemployment is likely to continue rising through into 2010.

This also means people are finding it harder to get off other benefits and into work: so that the numbers moving off the DPB, also a low-replacement-rate benefit, are falling too. Meanwhile, unemployment is rising among those least likely to cope well with parenthood - young people with few or no qualifications.

The study is in its first year. Its results, relying on latest data in some cases nearly a year old, are already suggesting consistent rises among vulnerable populations in diseases usually linked to social disadvantage, such as respiratory illness.

What this infers is that short-term savings or misjudged incentives may represent false economies in the longer term, both for those paying for them, and especially for those they are supposed to protect and nurture.

Professor Richie Poulton is co-director, National Centre for Lifecourse Research, University of Otago. Dr David Craig is at the department of sociology, University of Auckland.