Page 1 of 42

Purpose

1. This paper was prepared to provide the EAG with information about defining and

measuring child poverty.

2. This paper has informed the direction and recommendations of the EAG’s Solutions to

Child Poverty in New Zealand: Issues and Options Paper for Consultation. These are

preliminary findings, and a final report will be published in December 2012. The findings

in this paper do not necessarily represent the individual views of all EAG members.

3. The EAG wish to acknowledge the members of the Secretariat for their work on this

paper. The EAG also wishes to thank various external experts for their assistance,

including Denise Brown, Dr Tony Burton, Dr Kristie Carter, Bryan Perry and Dr Fiona

Imlach Gunasekara. The findings and recommendations in this paper do not necessarily

reflect the individual views of these experts or their organisations.

Introduction

4. The Expect Advisory Group (EAG) on Solutions to Child Poverty has been asked by the

Children’s Commissioner to provide advice on how to reduce child poverty in New

Zealand and mitigate its effects. This Working Paper outlines the EAG’s approach to

defining and measuring poverty, and contains a series of recommendations for policy

development in this area. In particular, it highlights the desirability of having several

inter-related measures of poverty, including measures of severity and persistence. These

are designed to provide insights into the differing dimensions of poverty, as well as

highlighting the potential relevance of different policy approaches and instruments. The

Paper also outlines proposals for a series of child-poverty related indicators (CPRIs).

These are designed to help monitor the causes and consequences of child poverty.

5. This Working Paper should be read in conjunction with related EAG Working Papers on: a)

international approaches and comparisons; b) child poverty reduction targets; and c) a

proposed legislative framework for poverty measurement, target setting, monitoring and

Working Paper no.1:

Defining and Measuring Child

Poverty

August 2012

Page 2 of 42

reporting. Also of high relevance is a background paper prepared for the EAG by Statistics

New Zealand on poverty measurement.

6. If New Zealand is to develop policies to reduce the extent, severity and persistence of

child poverty, it is necessary to define poverty, provide measures to distinguish the poor

from the non-poor, and then determine why those deemed poor have an unacceptable

standard of living. Suitable ways of measuring poverty are also required in order to

determine the impact of government policy and socio-economic change, to ascertain the

immediate and longer-term consequences of that poverty, to determine which groups in

society are more likely to be poor in order to target and tailor appropriate policies, and to

develop indicators that permit the monitoring of anti-poverty strategies.

7. Levels of well-being, income and standards of living exist on a continuum; they do not

readily fall into neat, clearly defined categories. Accordingly, determining whether a

particular household, family or child is ‘poor’ or ‘rich’ involves making a judgement. Such

judgements will reflect a variety of ethical and other considerations, including the

economic, social and cultural context. The realism and acceptability of any particular

definition and measures of poverty can thus be expected to vary somewhat between

societies and over time. Plainly, different definitions and measures will classify different

groups of people as being ‘poor’ or ‘non-poor’. Moreover, the afflictions of poverty are

not necessarily overcome by moving over a particular poverty threshold, and some

classified as ‘poor’ will not suffer from adverse social outcomes due to resilience, the

ability to draw upon assets or borrowing, or the short timeframe over which poverty is

experienced.

8. This Working Paper is structured as follows. First, it outlines the EAG’s recommended

definition of child poverty. It then outlines why the measurement of poverty is important.

Following this, the Paper summarises the suite of poverty measures and related CPRIs

being proposed by the EAG. The remainder of the Paper outlines in more detail the

nature of, and rationale for, each of the proposed poverty measures and CPRIs.

Defining Child Poverty

Recommendation 1:

Child poverty should be defined as:

Children living in poverty are those who experience deprivation of the material

resources and income that is required for them to develop and thrive, leaving such

children unable to enjoy their rights, achieve their full potential and participate as

full and equal members of New Zealand society.

Page 3 of 42

Rationale:

9. Child poverty needs to be defined clearly, precisely and in a manner consistent with

recognized international approaches. This is essential, not merely for clarity and

rigour, but also to ensure that policy makers can identify and implement appropriate

solutions, and subsequently evaluate success in achieving their desired poverty-

reduction targets. Equally, consistency with widespread international practice is

critical for enabling robust cross-country comparisons.

10. The EAG’s proposed definition recognises that poverty is a critical determinant of well-

being, but is not the sole component. It also recognises that a poverty definition

should translate into measureable elements: deprivation of material resources can be

measured through surveys of hardship and financial constraints on the ability to

purchase necessities; likewise, income can be measured from existing official statistics.

11. The recommended definition of child poverty adds three components to a general

definition of poverty: the enjoyment by children of their human rights, the fulfillment

of their potential, and their full membership of society. As children live in families, the

measurement of child poverty is determined within the context of the family unit. It is

the level of family resources, and their allocation between competing ends and family

members, that determine the level of resources going to children. The level of

resources impacts on child outcomes, both directly in terms of food and other

expenditure on necessities such as housing quality, and indirectly in terms of the

child’s health outcomes and educational attainment. Further, the definition affirms

that children should be given the opportunity to achieve their full potential – both for

their own future well-being and for the economic and social well-being of society.

Without a recognition of, and emphasis upon, human rights, the philosophical basis for

reducing inequalities in childhood is less secure. As a result, there is a risk that

inequalities will not be properly addressed and poor children will not be able to

participate fully in society.

12. The emphasis on children being able to ‘participate as full and equal members of New

Zealand society’ reflects the philosophy enunciated four decades ago by the Royal

Commission on Social Security (1972). According to the Royal Commission:

“The community is responsible for giving dependent people a standard of living

consistent with human dignity and approaching that enjoyed by the majority,

irrespective of the cause of the dependency” (p.65).

The Commission went on to argue that one of the central objectives of social

assistance programmes should be:

Page 4 of 42

“to ensure, within limitations which may be imposed by physical or other disabilities,

that everyone is able to enjoy a standard of living much like the rest of the community,

and thus be able to feel a sense of participation in and belonging to the community”

(p.65).

13. The proposed definition of child poverty is consistent with the approaches adopted by

many other OECD nations, which include both low income and material deprivation

(see EAG Working Paper No 4). Accordingly, the definition will facilitate cross-national

comparisons concerning the level and dynamics of child poverty, including its severity

and persistence.

14. The EAG recognises that the pursuit of child well-being (broadly understood) is of vital

importance, but this wider objective is not the primary focus of the Group. Likewise,

the EAG recognises that there are non-material forms of poverty – such as a poverty of

spirit. But again, these are not the primary focus of the Group.

Reasons for Measuring Child Poverty

Recommendation 2:

The government should measure and report levels of child poverty on an annual basis.

Rationale:

15. The annual measurement of child poverty is essential for the following reasons:

To provide reliable data for policy purposes, including the setting of targets for

reducing child poverty;

To track changes in child poverty over time;

To determine the household groupings where children are more likely to be

poor (e.g. the number and age of children, workforce status, ethnicity, and

housing tenure) in order that assistance be directed to those in greatest need;

To determine the appropriate mix of cash and in-kind assistance to reduce

current and future levels of child poverty;

To determine the adequacy of family assistance and benefit levels to alleviate

child poverty;

To evaluate the effectiveness of policy measures to reduce child poverty;

To ensure that children in persistent and severe poverty receive the greatest

level of attention by policy makers;

To enable comparisons with child poverty levels in other comparable

jurisdictions;

To assess the impact of major economic, demographic and social changes on

child poverty; and

Page 5 of 42

To provide a basis for holding governments to account for their policy changes

on the level and impact of child poverty.

Measures of child poverty: The need for a suite of poverty measures and child poverty-related indicators

Recommendation 3:

There should be a suite of measures to capture different aspects of child poverty. A

minimum of five separate types of measures are required: a fixed-line income measure; a

moving-line income measure; a material deprivation measure; a severe poverty measure;

and a measure of the poverty persistence. These core measures should be supplemented,

as appropriate, with other relevant data, such as the geographical distribution of poverty

and the inter-generational transmission of poverty.

Recommendation 4:

There should be a series of child poverty-related indicators (CPRIs).

Rationale:

16. Our definition of poverty emphasises full participation in society and fulfilment of

potential. To ensure this happens we propose that a range of well-established child

poverty-related indicators (CPRIs) in five key domains also be assessed: education, health,

social inclusion, disability, and child quality of life (see later in this Working Paper). This

will allow policy-makers, governments and the public to know whether improvements on

the five proposed measures of poverty actually translate into real-world benefits across

these five important areas.

Proposals in summary:

17. The EAG is recommending that the government adopt a comprehensive approach to the

measurement of child poverty and poverty-related outcomes. In summary, the following

package of measures and indicators is proposed (see also Table 1):

1) There should be a measure of income poverty. This should be based on the

proportion of the population with an equivalent disposable household income

below a specific income threshold (i.e. 60 percent of the median), with the level of

disposable income being based on market income after adjusting for direct

taxation and social assistance benefits, but not for housing costs (i.e. a before

housing costs (BHC) measure); similarly, there should be a measure based on

disposable income after housing costs (AHC) have been subtracted (with the

income threshold being adjusted for average housing costs).

Page 6 of 42

2) The income threshold (of 60 percent of the median equivalent disposable

household income) should be adjusted in two separate ways to take account of

different economic parameters:

a. first, the income threshold should be maintained at the existing level in real

terms for up to 10 years (i.e. adjusted for inflation but not for changes in

average incomes); this is a fixed-line or constant-value income measure; and

b. second, the income threshold should be adjusted for changes in median

income of the population; this is a moving-line measure.

3) There should be a material deprivation measure, or a measure of material

standards of living, based on the proportion of families/children that ‘go without’

a given number of items due to financial constraints.

4) There should be measures that capture the intensity, depth and severity of

poverty, in particular:

a. a measure based on those children who suffer both material deprivation

and income poverty; and

b. a measure of how far on those in poverty are below the income poverty

threshold; this would assess the average level of the 'poverty gap' for those

in income poverty.

5) There should be measures of poverty persistence, covering both income and

material deprivation that capture the length of time that individuals are in

poverty. This will require a longitudinal survey following the same individuals over

a period of years; such a survey can show whether any poverty is transitory,

occasional or persistent. Persistent poverty has the most deleterious impact on

life outcomes, and is often characterised by both income and material deprivation

through time.

6) The current geographic measure of deprivation should be continued.

7) There should be a series of child poverty-related indicators (CPRIs), as described

above and detailed later in the Paper.

8) Wherever possible, disaggregated data should be provided with respect to age,

family size and composition, work status, housing tenure and ethnicity.

9) Additionally, there could a case for developing some further measures of poverty

dynamics to assess poverty levels over the life cycle of individuals (and their

families) and the degree to which poverty is transmitted from one generation to

the next ( i.e., inter-generational poverty).

Page 7 of 42

Table 1: Recommended suite of child poverty measures

Type of measure Thresholds and other features Data sources Other comments 1 Income, fixed-line

(anchored/constant value)

60% of the annual median equalized household disposable income, AHC and BHC; current reference year is 2007;

adjusted annually for inflation

Household economic survey (HES), annual

The reference year should be updated every 10 years, or sooner if certain trigger points are crossed

2 Income, moving-line

60% of the annual median equivalised household disposable income, AHC and BHC; adjusted annually changes in median household income

HES, annual

3 Material deprivation

Based on an index derived from the questions relating to material well-being contained in the HES. A child should be regarded as experiencing material deprivation if the household in question has a material well-being index (MWI) score that puts them in levels 1 or 2 (out of 7).

HES, ideally annual

Child-specific questions about ownership and social participation should be developed, and either included in HES or another suitable survey instrument

4 Severe poverty Two measures: 1) the first should be based on a combination of the moving-line income measure and the proposed deprivation measure. Children in severe poverty would be those living in households who fall below both the recommended moving-line income measure and the recommended deprivation measure; 2) the second should be designed to measure the ‘poverty gap’, which refers to the dollar gap between the moving-line income measure of poverty and the median income of the poor as a proportion of the moving-line measure

HES, ideally annually

5 Persistent poverty Two measures: 1) the first should be based on the recommended moving-line income measures; 2) the second should be based on the recommended material deprivation measure. Under both measures, the threshold for poverty persistence should be set for those living in households who experience poverty for at least three of the previous four years

Either become part of the HILDA survey or develop a new longitudinal survey like SoFIE

Rationale for the overall suite of child poverty measures:

18. The recommended suite of child poverty measures and child poverty-related indicators

are designed to capture different aspects of child poverty and its effects, thus providing a

comprehensive understanding of the nature, dynamics, severity, persistence, impacts and

Page 8 of 42

implications of child poverty. The recommended poverty measures are all consistent with

a range of criteria that can be used to help guide the selection of such measures (e.g.

reliability, the provision of meaningful information, the potential for continuity over time,

the capacity to enable cross-country comparisons, non-exclusivity, parsimony, cost-

effectiveness, etc.) (see, for instance, Cabinet Social Equity Committee, 2001). Specific

justifications for the various proposed measures and indicators are outlined in the

remainder of this Working Paper.

The need for both income and material deprivation measures of child poverty

19. No single measure of child poverty, whether based on household income or material

deprivation, is adequate for policy purposes. Both types of measures are necessary;

they both provide different insights into who is poor, as well as the extent, severity

and persistence of that poverty; importantly, too, they function to inform different,

but inter-related, policy solutions.

Income-based measures

20. Income-based measures of child poverty are an indirect measure of poverty, not

necessarily related to an adequate standard of living. The income threshold is based

on disposable income (market income less income tax plus social assistance benefits),

adjusted for family size and composition. A variety of different thresholds can be

calculated depending upon the preferred level of adequacy of the standard of living,

and these different thresholds can also indicate the severity of the poverty. The impact

of policy variables – such as minimum wages, income taxes and cash assistance – on

poverty levels can be easily monitored, and all of these variables are amenable to

direct policy change.

21. However, income-based poverty measures suffer from various limitations. These

include:

survey-based income data are not always reliable (e.g. earnings may be under-

reported and income-based measures cannot capture all the on-going

fluctuations in earnings experienced by households);

household incomes do not always reflect the real level of resources available

because they fail to include savings and debts; nor do they always provide a

reliable proxy for the real resources available to the children within the

household;

income measures do not take into account the various forms of in-kind

assistance provided to low-income households (e.g. subsidized health care and

early childhood education services);

Page 9 of 42

the equivalence scales used to calculate a poverty rate from household income

data involve subjective judgements about the different patterns of need in

households of different sizes; and

income-based measures do not take into account the fact that families vary in

their capacity to manage and prioritise their finances; thus, for any given level of

household income, the material living standards can vary substantially.

22. Despite these constraints, for most low-income households with dependent children,

the current level of income is a reasonable indicator of the level of resources that they

can use for current expenditures because in most cases they are unable to draw upon

past savings or asset accumulation – as they lack such resources.

Material deprivation measures

23. Material deprivation measures provide a more direct indication of child poverty than

income-based measures, being determined by the achieved standard of living or outcome

of past and current spending patterns. In other words, they are an outcome measure,

based on the standard of living actually achieved, rather than what is potentially

achievable from just current income. Such measures thus incorporate the ability to use

assets, or borrow, to maintain current consumption standards, and recognise the impact

that necessary additional expenditures, such as the costs of disability and health care, can

have on other consumption items.

24. Material deprivation measures are based on the number of consumption items that are

foregone due to income constraint, not choice. They are very useful as they provide a

realistic perspective on what it feels like to be poor, how a poor child’s life is constrained

by the lack of certain essentials, and what specific items poor families are going without

compared to their peers. Many of these forgone items indicate how children may not be

able to achieve their full potential due to lack of access to health and dental care, or how

overcrowding can reduce their ability to study.

25. However, like income-based measures of child poverty, material deprivation measures

also have certain limitations:

any evaluation of child material deprivation requires the specification of

different kinds of possessions, services and opportunities that are seen as

normal and/or essential in a contemporary context (e.g. relating to nutrition,

clothing, health care, educational opportunities, recreational opportunities, etc.)

and the development of a composite deprivation index. There is room for debate

about what particular items should be included in such an index, and whether

and how such items should be weighted. Nevertheless, in practice, different

material deprivation indices generate broadly similar types of results.

Page 10 of 42

likewise, there is scope for debate how the poverty line should be determined

on the basis of such an index (e.g. how many different types of deprivation are

required before a child can be said to be living in poverty – two items, three

items, four items?);

material deprivation measures are partly subjective; they are based on

responses to pre-set survey questions; the results are also influenced by the

respondents’ interpretation of the questions and the types of questions that are

asked;

further, assessments of child material deprivation based on survey data may not

be fully reliable due to inaccurate reporting (e.g. some parents may not wish to

acknowledge their level of deprivation).

26. Notwithstanding such limitations, material deprivation measures have a number of

strengths. For instance, they resonate better than income measures of poverty with

politicians and the public, since their implications are often easier to grasp; they provide a

vivid description of life in poverty; and they highlight the proportion of children missing

out on things which really matter for their current and future development (e.g. having

only two meals a day increases the likelihood of hunger, which can reduce the ability to

learn and have both short and long-term adverse health outcomes). Such measures may

also point to the need to consider a different set of policy instruments from those based

on income measures, especially in the provision of in-kind services to overcome particular

consumption constraints such as health care, education and housing quality. However,

many consumption constraints, such as lack of food, are due to a shortfall of income (or a

misallocation of income).

The wider picture

27. International poverty comparisons have generally been made in terms of household

income, although a new set of comparative material deprivation indices are being

developed. The income measures can show whether differences in poverty levels are due

to an inadequacy of market income or the effectiveness of the tax and benefit systems in

reducing the level of poverty based on market incomes. However, when GDP per capita

differs significantly between countries, the standard of living actually achieved at any

income-based threshold is not comparable, and a material deprivation indicator then

provides a better indicator of the enforced lack of consumption items.

28. In summary, there is a good case for using both indirect and direct measures of child

poverty and not placing undue reliance upon any single measure. Both types of measures

have an acceptable degree of validity and both can usefully inform policy, especially over

the split in cash versus in-kind assistance. In particular, having both types of measures

enables policy makers to compare and contrast the results generated from different

measures and assess the impact of policy changes to reduce child poverty from several

Page 11 of 42

different perspectives. This will ensure a richer and more complete understanding of the

dynamics of poverty and provide a better basis for assessing policy effectiveness. It is also

consistent with well-established, best practice measurement principles emphasising the

value of multiple-indicator assessment.

The need for both moving-line and fixed-line poverty measures

29. There is a strong case for having both fixed-line and moving-line income measures – that

is, having an income measure that, except for the CPI, is adjusted infrequently (e.g. every

10 years or so) and an income measure that is adjusted annually. Both measures provide

a different perspective on the level of child poverty and how it is changing over time.

30. Having a fixed-line measure enables policy makers to assess what proportion of children

were below the same poverty line (in real income terms) at different points in time (and

thus whether the rate of child poverty, as measured by this particular threshold, is

improving, deteriorating or remaining the same). Likewise, having a moving-line measure

enables policy makers to assess what proportion of children were below a poverty line

that closely reflects current societal living standards and expectations.

31. It is important to emphasize that the fixed-line and moving-lines measures are both

‘relative’ to the standard of living in New Zealand: they differ simply in terms of how

often they are updated to reflect changes in living standards.

32. The major influence on moving-line poverty is the change in the degree of distributional

inequality, as economic growth is incorporated into the poverty measure itself. The

incidence of poverty on the fixed-line measure can be reduced by economic growth; but

where there is economic growth those who remain poor on a fixed-line basis have

standards of living that are falling further behind the majority of the population.

The need to measure poverty severity and persistence

33. There is good evidence to suggest that the impact of poverty on child outcomes is greater when the degree of poverty is severe and/or when it is persistent, especially if transferred from one generation to the next. Without measures of severity, persistence and inter-generational transfer, it will be more difficult to design appropriate anti-poverty initiatives that will allow children to achieve their potential. Note, however, that as the achievement of potential is both a current and future event for children, it will be more challenging to evaluate the effectiveness of specific anti-poverty policy initiatives.

The measurement of child poverty and the issue of housing costs

Recommendation 5:

Both the fixed-line income measure and the moving-line income measure should be

based on equivalised disposable household income (i.e. adjusted for family size and

composition). Additionally, both measures should be calculated on two separate bases:

Page 12 of 42

a. Using disposable income, without taking any account of individual differences in

expenditure levels, especially housing costs – income poverty before housing costs

(BHC);

b. Taking housing costs into account by: a) adjusting household disposable income

for each household’s spending on mortgages, rent, and rates; and b) adjusting the

poverty line, by deducting an estimate of average housing costs from the income

threshold (AHC).

The rationale for using both BHC and AHC measures:

34. Because housing costs are difficult to alter in the short term and can comprise a

significant portion of family income, an income measure after housing costs (AHC)

provides a good measure of the level of resources available for other necessary spending,

and thus the extent of deprivation. Income before housing costs (BHC) shows the level of

resources available to a household, irrespective of how the household decides to allocate

its budget.

35. The AHC measure can show the impact of home ownership, mortgage payments and rent

on income poverty rates, with those in rental properties or taking out a first home

mortgage more likely to have lower net disposable income, thereby increasing the risk of

income poverty and deprivation. While home ownership may be a long-term rational

choice for the parents, the resultant shortage of current disposable income may have

adverse short-term impacts on the amount of resources available for expenditure on

children. Nevertheless, households can, and do, change their housing expenditure by

either doubling-up on accommodation (with the concomitant result of overcrowding and

poor health outcomes), or shifting to places with cheaper rents (often outside the major

urban centres, where there are often fewer job prospects so that households tend to be

locked into low incomes).

36. AHC poverty rates are required as expenditure on housing varies significantly between

households, and bears only a partial relationship with income, so that those on the same

equivalent disposable income may have quite different net disposable spending options.

AHC is closer to a living standards approach – it takes out the major asset item which has

an independent influence on living standards compared to disposable income. There are

significant differences in BHC and AHC poverty rates. For instance, in households

containing children, the moving-line BHC poverty rate in 2010 was 22.4 percent, whereas

the AHC rate was 26.2 percent. This difference points to the impact of above average

spending on rent and home purchase. By contrast, the rates for those aged 65+ were 40.2

percent and 25.3 percent respectively, reflecting a higher degree of home ownership and

consequentially low housing expenditures. The Ministry of Social Development (MSD)

uses an ad hoc method of developing an AHC poverty threshold, subtracting 25 percent

Page 13 of 42

off the BHC threshold to take account of average housing costs, and adjusting each

household’s income by its housing expenditures.1

37. Housing costs are a major component of household expenditure. Movements in housing

costs are often different from those of the consumer price index and median income.

Housing costs vary by income level, age of head of household, component of housing

expenditure and housing tenure type. For instance, between 1999 and 2010, the Housing

Affordability Index (average house prices as a percentage of average incomes) rose from

19.4 percent to 25.7 percent, the proportion of households spending 30 percent or more

of their income on housing costs increased from 16 percent of households in the bottom

income quintile in 1988 to 33 percent in 2007, and for those not owning their own

dwelling this proportion increased from 33.8 percent to 39.1 percent (Perry 2011,

Preston 2012). These changes will have affected the AHC poverty rate, but not the BHC

rate.

38. For policy purposes, both BHC and AHC are needed. The BHC measure shows the level of

resources going into the household and thus permits analysis to be made as to whether

the cause of poverty is inadequate market income or insufficient net transfer income.

BHC measures also enable international comparisons to be made that are not possible if

only an AHC measure is employed. AHC poverty rates show the level of disposable

income after housing costs, and thus the extent to which households have housing costs

higher than average. The policy variables are the level of housing assistance, and in the

longer-term, an increase in the relative supply of good quality accommodation in order to

reduce relative house prices and rents.

The Fixed-Line Income Measure

Recommendation 6:

The fixed-line income or constant-value measure of child poverty should be established in

a base year at 60 percent of annual median equivalised disposable household income

with the base poverty level adjusted annually for inflation.

Rationale:

39. The use of 60 percent of annual median household income on a BHC basis is consistent

with much international practice, especially the European Union, although UNICEF

reports on child poverty rates at 40 percent, 50 percent and 60 percent. The 60 percent

1 NZPMP used a different method of adjusting for housing costs by taking average housing costs from the

poverty threshold, rather than 25 percent. NZPMP also took out of the data set those who declared self-employed losses, or whose expenditure was three times their income: this reduced the data set by 4 percent, but made little difference to the overall poverty rate, although there was a reduced incidence for households where the ‘head’ was aged 30-50.

Page 14 of 42

threshold, BHC, was also validated in New Zealand by research undertaken as part of the

New Zealand Poverty Measurement Project in the early 1990s. The OECD uses 50 percent

of median equivalent disposable household income. In New Zealand, however, the

relatively small sample size and thus the numbers in household categories of particular

interest who fall below that standard mean that the New Zealand results for sub-sections

of the population are not statistically reliable (see Perry, 2012). Accordingly, there is little

option but to use a 60 percent threshold. For the reasons outlined above, the fixed-line

income measure should be calculated on both a BHC and AHC basis.

40. Adjusting the baseline only for movements in the CPI (and not economic growth) means

that policy changes (e.g. the Working for Families package) can be directly evaluated as to

the impact on current incomes and poverty levels without needing to isolate other

economic change variables.

41. The relevant data for generating a fixed-line measure are currently available, with 2007

being the most recent reference year. Income data, based on the Household Economic

Survey, are currently being produced annually. Although detailed expenditure data are

only collected every three years, housing expenditures are collected every year. The

Household Economic Survey is used as it is the only data source where individual income

data is converted into equivalent household disposable income by using Treasury’s

TaxWel. (TaxWel is a programme that changes individual market income into household

disposable income using the current income tax and benefit parameters, including family

assistance. The programme assumes that the legal tax incidence and benefit receipt is the

actual tax/benefit incidence.) An inflation adjustment is made based on movements in

the CPI.

Recommendation 7:

The reference year for the fixed-line measure should be adjusted every 10 years, or at any point within the 10-year period if the measure exceeds 70 percent of annual median equivalised net household income or falls below 50 percent of the median.

Rationale:

42. The purpose of a fixed-line measure is to provide policy makers with information on

whether child poverty is improving or deteriorating over periods of time as judged

against a particular reference year. If the reference year is adjusted too frequently, the

utility of any fixed-line measure will be undermined. Against this, if the reference year is

held constant for very long periods (e.g. 20-30 years), there is a risk that the data being

provided by this measure will be of diminishing policy relevance. This is because average

living standards, commodities available for consumption (or required for schooling, etc.)

in order to achieve a child’s potential, can be expected to change substantially over

several decades (i.e. assuming normal rates of economic growth). Hence, child poverty

measures based on a reference year set several decades earlier will fail to take adequate

Page 15 of 42

account of current societal living standards and expectations. With these considerations

in mind, updating the reference year every 10 years arguably provides the desired degree

of both stability and relevance.

43. Sudden and unforeseen economic (or policy) shocks (both positive and negative) can

have a significant impact on income distribution and income levels over a short period of

time. In these circumstances, adjusting the fixed-line measure only at 10 yearly intervals

may not be prudent. There is thus a case for requiring the fixed-line measure to be

updated more frequently if particular trigger points occur. The suggested trigger points

are when the fixed-line measure exceeds 70 percent of the median equivalised

disposable household income or falls below 50 percent of the median.

The Moving-Line Income Measure

Recommendation 8:

The moving-line measure of child poverty should be set at 60 percent of annual median equivalised disposable household income and adjusted annually.

Rationale:

44. A moving-line measure of child poverty focuses on the relativity with current median

household incomes. It provides policy makers with useful information on the proportion

of children living in households whose incomes fall below a particular threshold based on

contemporary standards of living. It thus usefully supplements a fixed-line measure and

gives a more rounded view of how income distribution patterns are changing. The EU

uses a 60 percent moving-line approach, and thus the results are directly comparable.

45. In periods of rapid economic fluctuations, the moving-line based on median income can

give unexpected trends in the incidence of poverty. Much of the difficulty arises from the

fact that New Zealand Superannuation (NZS) is adjusted by average earnings, and trends

in average earnings can differ from trends in median earnings. In a boom, the median

tends to be based on a low-to-median income worker, whereas in a recession the median

is based on a low-income worker or a person on benefits with some additional earnings.

In a recession, NZS rises relative to the median, resulting in fewer aged 65+ living in

poverty, and a lower overall poverty rate. In a boom, NZS falls relative to the median,

resulting in more aged 65+ living in poverty and a higher overall poverty rate. For

children, the consequence is that in a boom there are a smaller proportion of children

who are poor, providing a misleading impression of the impact of a boom on child well-

being. The constant-value measure shows the expected trends in the incidence of poverty

over the economic cycle.

Page 16 of 42

46. To illustrate, Figure 1 shows the trends in poverty (for the whole population) between the

early 1980s and 2011 in New Zealand on both a fixed-line (or constant value) basis and a

moving-live basis (after housing costs), while Figure 2 shows the trends for child poverty.

Figure 1: Proportion of whole population below selected thresholds (AHC): fixed-line

(CV) and moving-line (REL) approaches compared

Source: Perry (2012).

0%

10%

20%

30%

40%

1980 85 90 95 00 05 10 2015

HES year

Pro

po

rtio

n o

f p

op

ula

tio

n i

n l

ow

-in

co

me

HH

s Constant value (CV) or 'fixed line' thresholds are

based on the BHC median in a reference year. The

current reference year is 2007. Up to 2007, the

reference year was 1998.

60% REL

50% REL

60% CV-98

60% CV-07

Page 17 of 42

Figure 2: Proportion of children below selected thresholds (AHC): fixed-line (CV) and

moving-line (REL) approaches compared

Source: Perry (2012).

Material deprivation measures of poverty

Recommendation 9:

A measure of material deprivation should be included as a major part of the proposed

suite of child poverty measures. This should be based, at least in the interim, on a

deprivation measure derived from the questions relating to material well-being

contained in the Household Economic Survey (HES). Under this approach, a child should

be regarded as experiencing poverty if the household in question has a material well-

being index (MWI) score, based on the number of consumption constraints, that puts

them in the zone of hardship (i.e. levels 1 and 2 out of 7 living-standards levels).

Recommendation 10:

Child-specific questions should be developed and either included in HES or another

suitable survey instrument.

0%

10%

20%

30%

40%

50%

60%

1980 85 90 95 00 05 10 2015

HES year

Pro

po

rtio

n o

f c

hil

dre

n i

n l

ow

-in

co

me H

Hs

Constant value (CV) or 'fixed line' thresholds are

based on the BHC median in a reference year. The

current reference year is 2007. Up to 2007, the

reference year was 1998.

60% REL

50% REL

60% 98 CV

60% 07 CV

Page 18 of 42

Rationale:

47. As noted earlier, material deprivation measures vividly convey to the public the

circumstances facing many children in poor households and why these circumstances are

socially and morally unacceptable. Detailed work has been undertaken in New Zealand on

the development of material deprivation measures, especially by the MSD (see Perry,

2009, and Appendix 1). An Economic Living Standards Index (ELSI) developed by MSD

(using 40 items in the full version, and 25 items in its ‘short-form’) has been superseded

by a material well-being index (MWI) within the Household Economic Survey (HES). Until

very recently (2006-07 to 2011-12), the HES had the 25 ELSI short-form items in it. As of 2

July 2012, the HES 2012-13 has a new set of 29 non-income measure items, including the

24 needed for the MWI.

48. On the basis of ELSI, seven categories (or levels) of living standards were delineated – i.e.

levels 1 to 7. Those in the bottom category (level 1) were deemed to be experiencing

‘severely restricted’ living standards or living in ‘severe hardship’, while those in level two

were viewed as having ‘restricted’ living standards or experiencing ‘significant’ hardship

(see Perry, 2009, p.45). By contrast, those in level 7 were deemed to have ‘very good’

living standards. For a variety of reasons, the top of level 2 can be regarded as a relevant

threshold for determining ‘hardship’ or ‘material deprivation’. This material deprivation

threshold corresponds to a person having six or more deprivations out of a possible 16. In

2008, the population (not child) hardship rate was about 12 percent on this basis. Setting

the material deprivation threshold at this point does not imply that those in higher-living

standards levels never experience any hardship, but the degree of hardship is typically

much less than those in levels 1 and 2 (see Perry, 2009, p.46).

49. Provided the level of household income is collected along with the MWI measures, the

MWI will furnish important additional information on whether the appropriate policy

response should involve the provision of cash assistance, voucher-type assistance or in-

kind benefits. For instance, if children are foregoing the consumption of food, then the

appropriate policy instrument is more likely to be cash, whereas an inability to obtain

health care, dental treatment or live in inadequate accommodation may well point to the

need to expand voucher-type or in-kind assistance. Children living in income-poor

households may not face deprivation on various MWI measures because parents are

ensuring that their children are not going without. On the other hand, households may

make non-child centred decisions, so that the children are deprived even if income is

adequate. Secondary poverty of this nature is difficult to measure and harder to address.

Possible policy responses may include education campaigns or the provision of free

school meals or other child-related in-kind benefits.

50. The material deprivation measure for children should use a mix of standard (general or

generic) questions of households and separate child-specific questions informed and

answered by children, where age appropriate. It is important to recognize that children

Page 19 of 42

are capable of providing valid and potentially unique information about their experience

of poverty (e.g. shame and/or humiliation). Options to provide some child-specific

questions in measures of deprivation include:

i. the addition of child-specific items to HES on an annual basis;

ii. the addition of child-specific items to HES on a periodic basis (e.g. every third

year);

iii. the creation of a separate child index using child-specific questions;

iv. the use of administrative, education, health and other relevant data to

supplement current HES data; or

v. the use of the former living standards survey which had child-specific data.

(Currently, it is not intended for this survey to be restored.)

51. The items in a material deprivation index will need to be adjusted from time to time to

reflect changing living standards and technologies (with new commodities coming onto

the market, etc.). After all, many of yesterday’s luxuries eventually become today’s

necessities -- especially for children if they are to avoid falling behind at school (e.g.

home-based computers) or are being ostracised by their peers if they do not have an up-

to-date consumption item.

Recommendation 11:

In addition to the inclusion of the questions needed for the material well-being index

(MWI) in HES (conducted by Statistics New Zealand), MSD should conduct a more

extensive survey of living standards every four years, with the results being linked to the

more limited survey undertaken by Statistics New Zealand.

Rationale:

52. Statistics New Zealand already has an annual survey on incomes and a limited number of

non-monetary indicators, using the accepted HES sampling framework. Every three years

HES also asks detailed questions about expenditure patterns. It would be cost-effective to

combine the proposed new MSD survey with the HES. Against this, having a large MWI

survey could potentially compromise the original intentions of HES, and may result in

greater resistance to participating in the survey. But living standards are less likely to alter

rapidly than incomes, so a detailed MWI would not be required every year to monitor

trends. Rather, a four-year timeframe for more extensive MSD surveys would be

sufficient.

Page 20 of 42

Severe Poverty Measures

Recommendation 12:

The severity of child poverty should be measured. This should be based on a combination

of the moving-line income measure and the proposed deprivation measure. Children in

severe poverty would be those living in households who fall below both the

recommended moving-line income threshold AND the recommended deprivation

threshold.

Recommendation 13:

There should also be a ‘poverty gap’ measure. This should be calculated on the basis of

the dollar gap between the moving-line income measure of poverty and the median

income of the poor as a proportion of the moving-line measure.

Rationale:

53. As previously noted, there is a strong case for having a measure of the severity of child

poverty. For instance, a severe poverty measure may permit a more precise method for

targeting resources as part of an anti-poverty strategy.

54. There are a number of ways that such a measure could be generated. One option would

be to set the severe poverty measure at 50 percent of annual median equivalised net

household income. This is the measure of severity used in Britain. But as noted earlier,

there are significant data reliability issues with respect to a 50 percent measure in New

Zealand. Accordingly, this is not a prudent option. A second approach would be to use the

average per person-in-poverty poverty gap measure. A third option is to set a severe

poverty measure using a measure of material deprivation that is more exacting than that

proposed in Recommendation 10. But this would place sole reliance on deprivation

measures and ignore considerations of household income. A fourth option would be to

use a combination of income and material deprivation measures, as used in Ireland.

55. In the view of the EAG, the simplest approach would be to combine the recommended

moving-line measure and the recommended deprivation measure. This would generate a

measure of the proportion of children in households experiencing both low incomes and

material deprivation. In our view, such a measure would provide a reliable indicator of

severe poverty. Currently, the evidence suggests that less than half of those children

deemed to be living in poverty on the basis of the recommended moving-line measure

are in severe poverty (i.e. around 7-10 percent, depending on whether the threshold

selected to measure deprivation is two or more items on the NZiDep scale or three or

more items) (see Imlach Gunasekara and Carter, 2012).

Page 21 of 42

56. One concern with the recommended approach is that it creates two groups of children in

poverty: those in severe poverty and those in less severe poverty. (Those in less severe

poverty would be those who satisfied one or other of the income and material

deprivation measures, while those in severe poverty would be those who satisfied both

the income and the material deprivation measure). There is a risk under this scenario that

the needs of those in less severe poverty will be downplayed or ignored. It may be

politically tempting, for instance, to focus only on those in less-severe poverty in order to

show that the issue of child poverty is being addressed, or conversely, to focus only on

those in severe poverty, neglecting those in less extreme, but nonetheless poverty-

stricken circumstances. However, any measure of severity generates such a risk.

57. The poverty gap indicates the degree to which household income falls below the income

poverty threshold. The further the household income is away from the threshold, the

more severe the poverty, and the greater the cost to the government in eliminating that

income poverty. Due to fiscal constraints, or labour market incentive effects, policy

changes may not be sufficient to lift all of the target group over the income poverty

threshold, resulting in low poverty reduction effectiveness (see Table 2). However, for

those remaining in poverty, the severity of their poverty may have been substantially

reduced, and the poverty gap reduction effectiveness is usually far larger than that based

on poverty incidence: it is thus a useful measure of the impact of policy change.

Poverty persistence measures

Recommendation 14:

There should be two measures of the persistence of child poverty as part of a suite of

child poverty measures, the first based on the recommended moving-line income

measures and the second based on the recommended material deprivation measure.

Under both measures, the threshold for poverty persistence should be set for those living

in households who experience poverty for at least three of the previous four years for

income-based measures and Statistics New Zealand short-form MWI (or in MSD’s long-

form MWI).

Rationale:

58. Measuring the persistence of child poverty is necessary because there is good evidence

showing that longer periods of poverty more adversely affect children’s outcomes and

life chances than temporary or intermittent periods of poverty. This includes educational

and health outcomes. Persistent poverty when children are young is particularly

damaging.

Page 22 of 42

59. The proposed threshold for poverty persistence – namely, living in poverty for at least

three of the previous four years – is consistent with the measure of poverty persistence

used in Britain under the Child Poverty Act 2010.

60. The data, when combined with other socio-economic information, will also show routes

into and out of poverty. Combining income and deprivation measures will provide

insights into whether temporary shortfalls of income have any long-term adverse effects

on child well-being, as well as showing the cumulative impacts of low income on material

deprivation.

Recommendation 15:

Options for enabling the measurement of poverty persistence should be actively explored

by the government and appropriate funding should be allocated to enable the required

longitudinal surveys to be conducted.

Rationale:

61. Unfortunately, with the discontinuation of the Survey of Family Income and Employment

(SoFIE), there will be no longitudinal data set available in New Zealand for assessing the

persistence of poverty. This gap needs to be rectified as a matter of priority. There are a

number of potential options. One of these would be for New Zealand to become part of

the Household, Income and Labour Dynamics in Australia (HILDA) survey. This is likely to

cost at least several million dollars per annum. Another option would be to develop a

new SoFIE-type survey, but with the cohort refreshed regularly. This option is likely to be

more costly, as well as more time consuming to implement, than the first option. Either

way, however, measures of the persistence of poverty are unlikely to be available for

some years (due to the inevitable lags in the process). A third option would be to ensure

that the existing longitudinal studies undertaken in Dunedin, Christchurch and Auckland

continue to be funded. The ‘Growing up in New Zealand’ study, undertaken by the

University of Auckland, is of particular relevance for the monitoring of child well-being

post-2010. However, these studies will not produce the kind of data necessary for a long-

term assessment of poverty persistence amongst children.

The Presentation of Data on Income Poverty and Material Deprivation

Recommendation 16:

Information on the prevalence of income poverty should be presented on the incidence

of poverty at both market and disposable income thresholds, using the ‘fixed-line’ and

‘moving-line’ approaches, as well as BHC and AHC. Data on the effectiveness of the tax

and benefit systems in reducing the incidence of poverty, and its severity as measured by

the poverty gap, should be presented. Information on the structure of poverty, or the

Page 23 of 42

proportion of the poor in various sub-categories of poverty, is required as it provides

different information for targeting of resources (see, for example, Table 2).

Table 2: Income poverty measures: Moving-line, 60 percent of median household

income, before housing costs, 2007

Market Income

Incidence %

Disposable Income

Incidence %

Poverty Incidence

Effectiveness %

Structure Disposable

Income %

Poverty Gap Effectiveness

%

All people 25.9 18.8 27.4 100.0 79.0

All children 29.6 22.1 25.3 27.8 71.9

Child, couple 22.4 15.2 32.1 11.3 67.8

Child, sole parent

74.8 63.2 15.5 16.5 78.9

All adults 24.9 18.8 28.9 72.2 82.5

Adults 18-64 16.1 13.6 15.5 46.8 55.0

Adults 65+ 72.7 40.7 44.0 25.4 90.5

Notes: The incidence of poverty is measured by the proportion of the total population (or particular sub-groups) who are below the poverty threshold. Market income relates to all sources of market income – earnings, dividends, interest, rent, etc. Disposable income is market income adjusted by the receipt of social security benefits, including child assistance and New Zealand Superannuation. The poverty incidence effectiveness column refers to the extent to which direct taxes and benefits reduce the incidence of market income poverty. The structure of poverty refers to the percentage of the total poor who fall into each separate household category. The poverty gap effectiveness is the extent to which direct taxes and benefits reduce the severity of poverty as measured by the poverty gap; this refers to the dollar gap between the moving-line income measure of poverty and the median income of the poor as a proportion of the moving-line measure. Source: Stephens et. al. (2007).

Rationale:

62. For a variety of reasons, not least for policy purposes, it is important that data on income

poverty be disaggregated and presented on the basis of a range of characteristics,

including household type, family size, age, work-force status, housing tenure and

ethnicity. This is already the case to a significant extent (see, for instance, Perry, 2012),

but the importance of having such data needs to be underscored.

63. Likewise, data are needed showing the differing levels of material deprivation across

household type, family size, age, housing tenure, ethnicity and so forth (see Perry, 2009,

pp.49-64). Table 3, based on relatively recent work by Perry (2009), outlines the types of

Page 24 of 42

questions that can be asked in order to assess levels of material deprivation. It also

highlights which particular types of deprivation (or ‘lacks’) have been included in the

various measures that have been developed, including the material well-being index.

Table 3: Indicators of Material Deprivation

Endorsements Index composition

Item description ‘Have’ EL ELSI-SF FRILS DEP MWI

Ownership (have, don’t have and enforced lack) % %

1 Phone 99 <1 -

2 Washing machine 98 1 - - -

3 Two pairs of shoes in a good condition and suitable for you daily

activities 92 5

4 Ability to keep main rooms adequately warm 91 7 -

5 Suitable clothes for important or special occasions 90 7 -

6 Home computer 83 7 - -

7 Contents insurance 76 12

A meal with meat, fish or chicken (or veg equiv) at least each 2nd

day 93 - - -

A good bed - - -

Social participation (do, don’t do and enforced lack)

8 Presents for family/friends on special occasions 91 6

9 Space for family to stay the night 84 7 - -

10 Family/friends over for a meal at least once each few months 81 5 -

11 Visit hairdresser at least once every three months 62 12 - - -

12 Holiday away from home at least once every year 62 24

13 Night out for entertainment or socialising at least once a fortnight 49 18 - - -

14 Overseas holiday at least once every three years 42 39 -

Page 25 of 42

Endorsements Index composition

Item description ‘Have’ EL ELSI-SF FRILS DEP MWI

Economising (not at all, a little, a lot) – to keep down costs to help in paying for (other) basic items

15 Not picked up a prescription 88 4 -

16 Stayed in bed to keep warm 81 7 - - -

17 Postponed a visit to the doctor 72 11

18 Gone without or cut back on fresh fruit and vegetables 66 10

19 Continued wearing worn out clothes 49 18 - -

20 Spent less on hobbies or other special interests than you would like 49 21 -

21 Do without or cut back on trips to the shops or other local places 46 15 -

22 Put off buying new clothes as long as possible 33 30 -

Buy cheaper cuts of meat or bought less meat than you would like 39 27 - - -

Put up with feeling cold 64 10 - - -

Postpone or put off visits to the dentist 54 26 - - -

Delay replacing or repairing broken or damaged appliances 65 12 - - -

Global self-ratings

23 Adequacy of income to cover basics of accommodation, food,

clothing, etc n/a n/a - - -

24 Material standard of living n/a n/a - - -

25 Satisfaction with material standard of living n/a n/a - - -

Freedoms/Restrictions

When buying, or thinking about buying, clothes or shoes for yourself,

how much do you usually feel limited by the money available? (4

point response from ‘not limited … very limited)

n/a n/a - - -

$300 spot purchase for an ’extra’ – how restricted? (5 point

response from ‘ not restricted … couldn’t purchase’) n/a n/a

- - -

$500 unexpected unavoidable expense on an essential – can you pay

in a month without borrowing? (yes/no)

81

(yes)

19

(no) - - -

Financial strain >1

Behind on utilities in last 12 months? (not at all, once, more than

once) n/a 11 - - -

Behind on car registration, wof or insurance in last 12 months? n/a 9 - - -

Housing problems (no problem, minor problem, major problem) major

Dampness or mould n/a 12 - - -

Heating or keeping it warm in winter n/a 17 - - -

Notes: 1 EL = ‘enforced lack’ (= ‘do not have/do because of the cost’ or ‘economise a lot’ to keep costs down for other basics). 2 Have = ‘have or do’ for ownership and social participation items, and economise ‘not at all’ for the economising items. 3 The ‘Endorsement’ figures are from the 2008 Living Standards survey. 4 Indented items are the new ones for the MWI – they are not in ELSI-SF, although three of them are in the full ELSI. 5 Starting with HES 2012-13, all 24 MWI items plus 5 others are in the HES, replacing the 25 ELSI short-form items. Source: Perry (2012).

Page 26 of 42

64. Tables 4 and 5 highlight the nature and extent of material deprivation across different

income groups. Using a different set of questions, Table 6 shows the proportions of

various household types that cannot afford particular consumption items due to income

constraints. For instance, 18 percent of sole parent households had to postpone visits to

the doctor, but only 8 percent of those aged 65+.

Page 27 of 42

Table 4: The day-to-day experience of children in low-income households compared

with that of their better- off peers: proportions of financial stress and hardship items

by AHC income decile (%), LSS 2008

Population household income decile

(AHC) 1 2 3 4 5 - 6 7 - 8 9 - 10

Proportion of children in each population

decile 13% 13% 7% 13% 22% 19% 14% 100%

Low

income

Just

above

usual

pov

lines

Middle

income

Above

avg

income

High

income All children

Could not pay an unexpected expense of

$500 within a month without borrowing 58 52 34 16 15 5 2 25

Parent(s) borrowed money from family or

friends to meet everyday living costs

[more than once in the last year]

42 44 27 11 12 6 2 19

Household received help in the form of

food, clothes or money from a

welfare/community organization such as a

church or foodbank [more than once in

last year]

20 20 9 3 3 2 1

8 (>once)

14 (once or

more)

Parent(s) reported EL of a meal with meat,

fish or chicken at least each second day 10 5 2 2 2 0 0 3

Dampness or mould is a major problem 32 30 23 13 17 9 9 17

EL for keeping the main rooms of the

house adequately warm 16 18 9 12 7 2 2 9

EL of home computer 30 25 22 16 7 4 4 8

Child(ren) went without music, dance, art,

swimming, or other special interest

lessons because of the cost [a lot]

20 14 15 6 7 2 1 9

Do not have a separate bed for each child 23 13 11 7 6 2 1 8

Do not have enough bedrooms so that

children over 10 of the opposite sex are

not sharing a room

30 27 15 16 16 7 5 17

Visits by parent(s) to the doctor for

themselves postponed [a lot] to keep

down costs

27 29 22 12 12 10 4 16

Postponed child visits to the doctor to

keep down costs [a lot] 3 7 3 5 0 0 0 2

Note: Three types of survey questions lie behind the information reported in Table 6.1: - Enforced lacks (EL) – the respondent reported wanting the item but not doing / having it because of the cost - Economising behaviour – respondent reported restricting consumption of a particular item [a lot] to keep costs

down to help with the purchase of other basic items Do not have an item or have a major problem with a specific item. Source: Perry (2012).

Page 28 of 42

Table 5: Children’s restrictions by DEP score of their family, LSS 2008

All 0 1 2-3 4-5 6+

Distribution of children across the DEP scores 100 41 18 18 10 12

Average number of children per family 2.2 2.3 2.5 2.7 2.7

Enforced lacks of children’s items

friends to birthday party 6 - - 5 9 31

waterproof coat 8 - 2 8 11 39

separate bed 5 - - 3 13 20

separate bedrooms for children of opposite sex (aged 10+) 8 2 3 6 14 24

all school uniform items required by the school 5 - - 2 9 19

Economising ‘a lot’ on children’s items to keep down costs to enable other basic things to be paid for

continued with worn out shoes/clothes for the children 8 - - 5 15 39

postponed child’s visit to doctor 2 - - - 5 13

did not pick up prescription for children 1 - - - 3 7

unable to pay for school trip 3 - - - 6 17

went without music, dance, kapa haka, art, swimming, etc 9 2 4 8 18 37

involvement in sport had to be limited 8 - 4 6 17 32

Multiple deprivation

4+ of the 11 children’s items above 6 - - 2 11 35

5+ of the 11 children’s items above 4 - - - 7 29

6+ of the 11 children’s items above 3 - - - 2 24

Children’s serious health problems reported by respondent

serious health problems for any child in the last year 28 22 25 31 35 43

Enforced lacks reported by respondent in child’s family

keep main rooms warm 9 - 3 8 18 37

meal with meat , fish or chicken at least each second day 3 - - - 6 18

cut back or did without fresh fruit and vegetables (‘a lot’) 14 - - 15 32 63

postponed visit to doctor (‘a lot’) 14 - 4 18 38 65

one weeks holiday away from home in last year 33 14 28 42 52 73

home computer 8 3 6 8 13 25

internet access 9 - 7 9 18 28

Housing and local community conditions

overall physical condition of house (poor/very poor) 7 - 3 7 15 28

difficult to keep house warm in winter (major problem) 22 9 13 27 38 58

dampness or mould (major problem) 17 5 13 18 37 49

crime or vandalism in the area (major problem) 11 6 6 11 13 31

Source: Perry (2009, p.25).

Page 29 of 42

Table 6: Material Deprivation Questions and Levels of Constraints, by Household Type

Economising Total

%

Two parents

%

One parent

%

Elderly

%

Elderly Māori

%

Less/cheaper

meats

23 28 52 36 62

Older clothes 10 11 30 12 30

Postponed

doctor visit

8 9 18 8 21

No glasses 5 6 11 10 24

Not got

prescription

2 3 7 2 10

Kids share

bedroom

- 8 17 - -

Financial Problems

Borrowed

money

14 13 27 1 7

Can’t pay

utilities

10 12 36 2 11

Relied on

charity

5 6 21 0.5 6

Accommodation Problems

Dampness 19 20 19 - -

Plumbing 11 11 12 - -

Roof 12 13 9 - -

Source: Stephens (2007).

Supplementary Poverty Measures

65. Additionally, there is a case for employing and developing some further measures of

poverty dynamics to assess poverty levels over the life-cycle of individuals (and their

families) and the degree of inter-generational poverty. For instance, the life-cycle of

Page 30 of 42

relative affluence and poverty varies as people progress through their life: as people

move into work their incomes rise and many enjoy relative affluence, but when they have

children a period of relative poverty may ensue; then their children leave home giving

greater affluence; in due course people retire and their incomes fall again. This life-cycle

perspective provides a basis for pensions and child assistance to buffer adversity at

specific points during the life course. However, changes in family formation and

dissolution have altered the ‘traditional’ life pattern, with sole parenting and family

dissolution more common, and more likely to increase the level of child poverty.

66. The degree of cross-generational persistence of poverty has a significant influence on

future child outcomes when children become adults. The early literature showed that

parental income had only a limited influence of the later outcomes of children, indicating

that the income distribution was one of chance and taking of opportunities. More recent

US literature, however, indicates a much higher correlation between parental and child

incomes. Alleviating child poverty now will also influence the future incidence of poverty.

67. Longitudinal surveys are required to provide the required information. New Zealand has

two excellent longitudinal surveys, both started in the 1970s, with a substantial amount

of data on children as they develop. However, they were not designed with poverty as

the main focus. Overseas studies have shown that about half of those currently on low

incomes grew up in households where incomes were low. Life chances are thus not

equal, so that parental circumstances may have a significant bearing on a child achieving

its potential.

68. We also believe that the current geographic measure of deprivation should be continued.

This measure, based on Census-mesh blocks, shows that areas with a high proportion of

the population who are unemployed, sole parents, on low incomes, or living in rented

properties are deemed to be deprived (Salmond, et. al. 2006). Geographical measures of

deprivation can provide information for targeting area-based services. This could include

information on policy decisions relating to: additional resources for low-decile schools, to

offset the inequalities of starting points into the formal education system; the extra

provision of, and subsidies, for primary health care; and the location of integrated social

services, including whānau ora.

Official collection and monitoring of the measures of poverty

Recommendation 17:

The measures of child poverty recommended by the Expert Advisory Group should either

be reported as part of the official statistics provided by Statistics New Zealand or

mandated in legislation for reporting by an appropriate government department, such as

the Ministry of Social Development, or a designated agency.

Page 31 of 42

Rationale:

69. It is vitally important to have robust and accurate measures of child poverty. Without

such measures it is not possible to ascertain whether, and to what extent, policy

initiatives to reduce child poverty are being effective; nor is it possible to assess trends

over time or compare New Zealand’s performance with respect to child poverty with that

of other comparable jurisdictions.

70. The current approach to the production of child poverty statistics in New Zealand is not

satisfactory. In particular, the production of the relevant data is heavily reliant upon the

preferences and funding priorities of a single government department – MSD – and the

dedication of a very small number of officials. This does not imply any criticism of the

quality of the poverty work undertaken by MSD. On the contrary, there is a great deal to

commend. But it is important to highlight that the current policy framework entails

significant risks and vulnerabilities. In the view of the EAG, it is not appropriate for such a

vital area of measurement, analysis and reporting to be so dependent on ad hoc

arrangements or the personal interest and goodwill of a few departmental officials.

71. There are pros and cons of having official, rather than non-official, poverty measures. The

advantages of official poverty measures include establishing authoritative standards in

terms of the nature, format, and timing of such measures, and thus having legitimate,

credible and durable measures. Against this, poverty measures are seen by some as

subjective; making them ‘official’ will not change this. While there is a movement by

many nations to develop more robust and standardized poverty measures (e.g. across the

European Union), to date there is no internationally agreed set of poverty measure for

New Zealand to adopt or adapt.

72. If it is determined that poverty measures should not form part of the suite of official

statistics produced by Statistics New Zealand, then there should be legislation enacted, as

in Britain, specifying the nature of the child poverty measures that should be produced

annually. Such legislation should allocate the responsibility for the production of such

data to a particular government department, such as MSD (or possibly the Families

Commission).

73. Statistics New Zealand has prepared a background paper for the EAG on the options with

respect to poverty measurement. This includes the option of Statistics New Zealand

producing a suite of official data but referred to as ‘indicators of low income’ (not

poverty). Internationally, it has been recognised that any non-official poverty measures,

such as those produced by MSD, or Statistics New Zealand ‘indicators of low income’,

quickly become regarded as quasi-official by the media, welfare agencies and the public.

74. Good reporting of child poverty data does not guarantee that governments will develop

or implement appropriate anti-poverty policies. But the annual provision of information

on child poverty will ensure general media coverage and public interest in the topic.

Page 32 of 42

Ministers can thus be held partially accountable for trends in child poverty, receiving

appropriate bouquets and brickbats for child-centred policies. As was shown in the

1990s, following the benefit cuts, if the government does not monitor trends in poverty,

then some other organisation will do so. It is also recognised that governments can only

have a partial impact on trends in child poverty. Other social and economic changes that

are outside the direct control of the government may have positive or adverse impacts on

child poverty (e.g., the overall state of the economy, due to external events such as the

recent financial crisis, or a changed incidence of sole parenting).

Child Poverty-Related Indicators

Recommendation 18:

A series of child poverty-related indicators that reflect the causes and/or consequences

of child poverty should be developed and incorporated into the monitoring framework.

Rationale:

75. Our definition of poverty emphasises full participation in society and fulfilment of

potential. To ensure this happens we propose to assess a range of recognised child

poverty-related indicators (CPRIs) in five key domains: education, health, social inclusion,

disability, and child quality of life. This will allow policy-makers and the public to know

whether improvements on the poverty measures actually translate into real-world

benefits in these five important areas

76. Tightly defined poverty measurement help avoid conflating poverty with a number of

closely-related antecedents and consequences (CPRIs). Such CPRIs are, however,

enduring ‘signatures’ of exposure to poverty, and just as birds of a feather flock together,

so do poverty and a range of life opportunity indicators. Here we have been careful to

recognise the importance of maintaining conceptual clarity between measure(s) of

poverty (i.e. income and material deprivation) and a range of known poverty correlates.

77. By separating our poverty measures from a range of child-poverty-related indicators we

aim to ensure construct (and ‘political’) validity. This approach has the following

advantages:

i. it provides for ease of communication and comprehension;

ii. it ensures conceptual clarity, and allows mapping of multiple, interacting

pathways that can lead from poverty to negative life outcomes. This will facilitate

the testing of ‘causal’ relationships in a life-course framework, and allow for more

fine-grained analyses to understand better the mechanistic processes linking

poverty with poor life outcomes;

iii. the latter will identify novel intervention opportunities;

Page 33 of 42

iv. it allows for the monitoring of ‘real-life’ impacts of policy change and

interventions on child poverty; and

v. it is cost-effective by using currently available measures of CPRIs, as well as

identifying additional data needs.

78. The CPRIs should cover five key domains:

i. Education (e.g. ECE participation, school-readiness, primary/secondary school

achievement, truancy, skills training);

ii. Health (e.g. well child /primary care enrolment, SUDI, disease rates with a

socioeconomic gradient, teen pregnancy, oral health, mental health);

iii. Social inclusion (e.g. housing quality (including dampness, over-crowding,

insulation), housing mobility in 1st-3rd decile; number of working family members,

whānau-community integration, sole versus shared parenting);

iv. Disability; and

v. Child Quality of Life (capturing the child’s perspective).

79. Almost all of indicators already exist (see Table 7). However, several are not currently

available or readily accessible (i.e. some of the social inclusion indicators, child

perspectives). A combination of scientific parsimony and pragmatism should guide the

final selection of the key indicators in each domain. Specifically, indicators should be

chosen to capture large segments of the variance in the outcome of interest (e.g.

education achievement and health), with the number of indicators restricted to those

providing incremental predictive validity (i.e. they add something meaningful).

80. A tabulated list of potential ‘candidate’ CPRIs is reproduced in Table 7 (with permission).

The background, rationale for selection, and information regarding robustness of each

measure can be found in Craig et al. (2007). This framework has several advantages: (i) it

capture multiple dimensions of child well-being known to be related to child poverty; (ii)

the systems for data collation, preparation and reporting have been proven; (iii) the

ecological validity is high in so much as the indicators assessed are relevant to multiple

government ministries; and (iv) the framework adopts a life-course perspective which

specifies the developmental epoch for which data is available.

81. Other potential CPRIs have also recently become available (e.g. ‘ambulatory sensitive

(avoidable) hospitalisation’ via the Quality and Safety Commission, 2012) and could be

included.

82. Importantly, multiple CPRIs should operationalise each of the five key domains described

because single source information is comparatively weak. This multi-source data can be

reduced into single metrics (i.e., a single score for each domain). Thus, what initially

appears to be highly complex can be readily reduced to straightforward and easily

Page 34 of 42

understood composite indices via standard data aggregation procedures. Of course, if

and when policymakers require, disaggregation can occur to highlight policy impacts on

specific CPRIs.

83. As noted above, some measures that operationalise social inclusion and the child

perspective may require new data collection. The specific requirements will be outlined

following a critical review of existing New Zealand datasets.

Conclusions

84. The continued existence of child poverty in New Zealand, especially when it is severe

and persistent, represents a major challenge for decision-makers. Child poverty not

only impacts on the current life of the child, but also their ability to achieve their

potential when they become adults. The results of continued high rates of child

poverty can be indicated by higher rates of poverty-related health effects from poor

housing and an inability to access health care, poorer educational achievements and

an increased risk of social and financial exclusion.

85. The first step in developing policies to reduce child poverty is to measure the extent,

severity and persistence of such poverty. Good measurement enables the monitoring

of trends through time as well as evaluation of the effectiveness of policy responses.

Care must be taken, of course, not to assume that policy developments (or a lack

thereof) are the cause of changes in child poverty. After all, many social and economic

factors affect poverty levels. Nevertheless, measuring child poverty is a crucial

ingredient in any effective anti-child poverty strategy.

86. As outlined in this Working Paper, the EAG recommends that a suite of inter-related

child poverty measures be introduced. This suite should embrace measures of both

low income and material deprivation, and measures of the severity and persistence of

child poverty. These core measures should be supplemented, as appropriate, with

other relevant data, such as the geographical distribution of poverty and the inter-

generational transmission of poverty.

87. Various indicators related to child poverty are also recommended. These outcome

indicators, or CPRIs, are required in their own right, and should be published

irrespective of the child poverty measures we are recommending. These indicators can

help show change in the causes and consequences of child poverty, and how child

poverty can lead to poor life outcomes.

88. It is critically important that consistent and reliable data relating to these measures

and indicators are maintained and reported over time. A variety of options as to which

government department ought to undertake such a task have been suggested. As

Page 35 of 42

argued in a separate EAG paper, our preference is for such responsibilities to be

codified in legislation.

Page 36 of 42

Table 7: From the New Zealand Child and Youth Health Monitoring Framework

5 1

0

15

2

0

Historical Context

Macroeconomic & Policy Environment

5 1

0

15

2

0

Cultural Identity

Enrolments in Kura Kaupapa Māori

Economic Standard of Living

*Restricted Socioeconomic Resources

Children Reliant on Benefit Recipients

*Household Crowding

Young People Reliant on Benefits

Education: Knowledge and Skills

Participation in Early Childhood Education

*Educational Attainment at School Leaving

Senior Secondary School Retention Rates

Stand-down/Suspension/Exclusion/Expulsion

Service Provision and Utilisation

*Primary Health Care Provision and Utilisation

5 1

0

15

2

0

Nutrition, Growth and Physical Activity

*Breastfeeding

*Overweight and Obesity

Nutrition

Physical Activity

Substance Use

*Exposure to Cigarette Smoke in the Home

Tobacco Use in Young People

Alcohol Related Harm

5 1

0

15

2

0

Total Morbidity and Mortality

*Most Frequent Admissions and Mortality

Whānau Well-being

Family Composition

Perinatal - Infancy

*Low Birth Weight - SGA and Preterm Birth

*Infant Mortality

Well Health

*Immunisation

Hearing Screening

*Oral Health

Page 37 of 42

5

10

1

5

20

Safety

*Total and Unintentional Injuries

*Injuries Arising from Assault

CYF Notifications

Family Violence

Infectious Disease

*Serious Bacterial Infections

Meningococcal Disease

Rheumatic Fever

Serious Skin Infections

Tuberculosis

Gastroenteritis

Respiratory Disease

*Lower Respiratory Morbidity and Mortality

Bronchiolitis

Pertussis

Pneumonia

Bronchiectasis

Asthma

Chronic Conditions

*Diabetes and Epilepsy

Cancer

Disability

*Disability Prevalence

Congenital Anomalies Evident at Birth

Blindness and Low Vision

Permanent Hearing Loss

Mental Health

Callers to Telephone Counseling Services

Mental Health Inpatient Admissions

*Self-harm and Suicide

Sexual and Reproductive Health

*Teenage Pregnancy

Sexually Transmitted Infection

Note: *Indicators included in the Top 20 for DHB reporting purposes (Table extracted from Craig E, Jackson C, Han DY, NZCYES Steering Committee. Monitoring the Health of New Zealand Children and Young People: Indicator Handbook. 2007. Auckland: PaediatricSociety of New Zealand, New Zealand Child and Youth Epidemiology Service).

Page 38 of 42

References

Atkinson, A. (1989) Poverty and Social Security Hemel Hempstead: Harvester Wheatsheaf.

Ballantyne, S., Chapple, S., Mare, D., & Timmins, J. (2004) ‘Triggering movements into and out

of child poverty: a comparative study of New Zealand, Britain and West Germany’, Social Policy

Journal of New Zealand, 23, 83-96.

Cabinet Social Equity Committee (2001) ‘Measurement of Hardship: Core Measures Regime’,

Wellington, 6 August.

Carter, K. and Imlach Gunasekara, F. (2012) ‘Dynamics of Income and Deprivation in New

Zealand, 2002-2009: A Descriptive analysis of the Survey of Family, Income and Employment

(SoFIE)’, Public Health Monograph Series No 24, Department of Public Health, University of

Otago, Wellington.

Craig, E., Jackson, C., Han, D.Y., NZCYES Steering Committee (2007) Monitoring the Health of

New Zealand Children and Young People: Indicator Handbook. Auckland: Paediatric Society of

New Zealand, New Zealand Child and Youth Epidemiology Service.

Duncan, G., Huston, A. and Weisner, T (2007) Higher Ground: New Hope for the Working Poor

and Their Children. Russell Sage.

Imlach Gunasekara, F. and Carter, K. (2012) ‘Dynamics of Income in Children in New Zealand,

2002-2009: A Descriptive analysis of the Survey of Family, Income and Employment (SoFIE)’,

Public Health Monograph Series No 28, Department of Public Health, University of Otago,

Wellington.

Nolan, B. and Whelan, C. (2007) ‘On the Multidimensionality of Poverty and Social Exclusion’, in

Jenkins, S. & Micklewright, J. (eds.) Inequality and Poverty re-examined Oxford: Oxford

University Press.

Office of the Deputy Prime Minister (2012) ‘Better Public Services Results: Targets and Public

Communication’, Cabinet Paper, 25 June.

Orshansky, M. (1965) ‘Counting the Poor: another look at the Poverty Profile’, Social Security

Bulletin, (28).

Perry, B. (2009) Non-income measures of material well-being and hardship: first results from

the 2008 New Zealand Living Standards Survey, with international comparisons Wellington,

Ministry of Social Development, Working Paper 01/09.

Perry, B. (2011) Household incomes in New Zealand: Trends in indicators of inequality and

hardship, 1982-2010 Wellington, Ministry of Social Development.

Page 39 of 42

Perry, B. (2012) Household incomes in New Zealand: Trends in indicators of inequality and

hardship, 1982-2011 Wellington, Ministry of Social Development.

Preston, D. (2012) ‘Are New Zealand Housing Prices still Overvalued’, paper presented to the

New Zealand Association of Economists, Palmerston North.

Royal Commission on Security (1972) Report on Social Security in New Zealand Wellington,

Government Printer.

Salmond, C., King, P., Crampton, P., & Waldegrave, C. (2006), ‘NZiDEP: A New Zealand index of

socioeconomic deprivation for individuals’, Social Science and Medicine, 62(6), 1474-85.

Stephens, R. (1989) ‘Issues in the Measurement of Poverty and Living Standards’, Discussion

Paper #48, Department of Economics, Victoria University of Wellington.

Stephens, R & Waldegrave, C. (2007) ‘Poverty Measurement and Policy’, paper presented to

the Social Policy Association Conference, Bath.

Treasury (2012) ‘A descriptive analysis of income and deprivation in New Zealand’, Wellington,

4 May.

UNICEF (2012) Measuring Child Poverty Florence, Innocenti Research Centre, Report Card 10.

Page 40 of 42

Appendix 1: The state of play for measures of material hardship (deprivation) in New Zealand

Prepared for the Children’s Commissioner’s Expert Advisory Group

Bryan Perry, Ministry of Social Development

2 July 2012

Deprivation measures are becoming more common in the more economically developed nations. The EU has adopted a 9-item deprivation index as one of its Tier 1 official indicators. Individual countries in Europe and elsewhere have developed or are developing their own indices for use in monitoring material hardship. For example, in Canada, the 10-item Ontario Deprivation Index has been developed through a partnership between community groups and Statistics Canada.

The impetus for the new approach came from the work of Peter Townsend in the UK in the late 1960s and 1970s, although his most well-known application of the approach was as a means of establishing or legitimising an income poverty line. Since then, the methodology has been expanded and refined for use in its own right to develop indices of material hardship or deprivation.

One of the advances is the use of national sample surveys to get empirical evidence as to what the public considers to be ‘necessities’ and ‘essentials’. This is particularly well developed in the UK through the Breadline Britain work and its successors led out of Bristol University, and in the EU through a special 2007 Eurobarometer survey and subsequent analysis. The socially-perceived necessities are things that ‘no one should have to go without, that everyone should have’, according to the majority of respondents (often >50%, sometimes >80 or 90%). Alternatively they are items which the majority say are ‘absolutely necessary / necessary’ rather than just ‘desirable’.

The construction of indices has gone in three directions:

(a) A common approach is to use a list of socially-perceived necessities, based on the survey information noted above. Sometimes there are 30 or so items used. They are usually ‘enforced lacks’ because of shortage of money rather than just ‘lacks’ per se. A ‘sensible’ threshold is set and changes over time are monitored.

(b) A second approach recognises that the necessities etc. above come from different domains (e.g. food, clothes, heating, housing issues, access to medical care, and so on) and that there is no a priori rationale for lumping them all together. Factor analysis is used to identify sub-sets of items that load well onto different underlying or latent variables. Usually one of these latent variables is a fairly obvious ‘generalised deprivation’ domain, and these items are used to create a deprivation index. Again, a ‘sensible’ threshold chosen (e.g. 3 or more of 9 enforced lacks) and changes over time monitored. The Irish championed this and still do (Nolan, Whelan, et al).

Page 41 of 42

(c) A third approach builds off the second, but includes extra items that enable some ranking of those above the hardship zone, rather than just leaving them as an undifferentiated mass – in other words, an effort is made to discriminate among the large group in the ‘getting by to comfortable to very well off’ range. This approach also recognises that many of those who have one or two deprivations (out of 9 or 10, say) also have some non-necessities. When people are in very tight circumstances very few follow a strict linear hierarchy of purchases from absolutely essential through to desirable but non-essential. There are quite rational mental health reasons for doing this (e.g. go without some food and clothes and heating to be able to keep the Sky subscription going for cheap entertainment and taking the mind off the stress of hardship).

This third approach (c) is the one followed by MSD for the ELSI measure and now also for the material well-being index (MWI ) which replaces ELSI (ie MWI is ELSI-mark 2). In this case, there is no simple ‘4 missing out of 12’ or similar. An MWI score is created and a ‘sensible’ hardship threshold is chosen (cf income poverty threshold). The process for selecting the threshold usually involves looking at the 60% of median income poverty figures, but it also uses calibrations based on the way the number of deprivations rises very steeply at the bottom end. Once a threshold is selected, the key then becomes how rates change over time. Different thresholds can be used for sensitivity analysis.

[Note that some approaches of the (b) type do use items that are not essentials, narrowly conceived, but unlike (c) there is no deliberate attempt to build an index that can differentiate across a much wider range of living standards.]

ELSI and MWI levels

For deprivation indices ((a) and (b) above), the hardship threshold can be set at, say, 3 or more enforced lacks of essentials out of 12, or similar. For the full-spectrum indices like ELSI and MWI, each household or person is given a score, based on their responses to questions about both necessities and non-necessities. For presentational purposes, MSD groups the scores into 7 categories representing different ‘levels’ of material well-being. Those with scores that put them into Levels 1 and 2 are considered to be in hardship. See Perry (2009) “Non-income measures of material well-being and hardship” for more detail on this, especially pp.45-48.

Where are we at in NZ as of 1 July 2012?

1. The MWI (24 items) has replaced ELSI (40 items for full version, and 25 items for ‘short-form’). To date, the HES has had the 25 ELSI short-form items in it (2006-07 to 2011-12). Starting today, the HES 2012-13 has a new set of 29 non-income items, including the 24 needed for the MWI. My formal paper on all this is due in 2013. Statistics New Zealand are OK with the MWI on the basis of the documentation I have provided to date.

2. I am in the process of creating a deprivation index (type (b) above) out of the 29 items. From my past experience with these types of measures (that is, (b) and (c)), if one selects thresholds such that N% are identified as in hardship on both the deprivation index and on ELSI/MWI, then (i) the sub-popln relativities are about the same on both, and (ii) over time the MWI type index shows more change in measured hardship than does a ‘pure’ deprivation index, as it takes account of the relative retreat from non-essentials by the

Page 42 of 42

‘near-poor’ as hard times hit. I hope to have a draft of that index ready to test with peers by December 2012.

3. I have created an index for HES 2007 to 2011 using some of the current 25 NMIs in the HES. I have done some preliminary analysis on monitoring trends from 2007 to 2011. It shows increasing child deprivation from 2009 to 2011. That is, the technology works OK, as this is precisely what one would expect to happen in a time of recession and low economic growth. It also works for the ELSI (short-form). I hope to have these results published in an Appendix to the mid-August Household Incomes Report (HIR) so that people can start using the findings.

4. I have created a ‘severe deprivation’ or ‘severe poverty’ measure using income and deprivation together. I am still refining this. I hope to have it too in the HIR next month, but it’ll be touch and go as to whether I’ll have it sufficiently tested and tidy in time. If I don’t, then my plan is to prepare a short note on it and perhaps have it as a late Appendix in the web version of the HIR (tbc).2

International comparisons?

When the 2008 Living Standards Survey (LSS) was being designed, I was in touch with the EU analysts who were creating their first EU official deprivation index. This enabled us to include in the LSS all the candidate items that the EU were considering using for their index. Thus, by late 2009, we had replicated the EU index from a New Zealand survey, and were able to rank New Zealand among the European nations using a deprivation index, including doing sub-population comparisons. The index was the best the EU could do with the data available, but the researchers and others were very aware that they needed a much better one.

The EU are now working on an enhanced index based on new items from their 2009 survey. It will be a deprivation index of type (b) with the smallest hint of (c) in it. Unfortunately, we will not be able to replicate it from the current 29 items in the HES. Once the EU have settled on their index items, my plan is to approach Statistics New Zealand to see if I can get a small HES change to accommodate this. I imagine that we’ll have all but one or two of the EU’s chosen items already in the 29 items in the HES.

UNICEF has recently published EU comparisons using a child deprivation index made up in the main of child specific items. This uses data from the 2009 EU survey mentioned above. The 2008 LSS has most of these child items but not all, so we cannot do a proper comparison using a child deprivation index of this type.

2 The Irish refer to this as a ‘consistent poverty’ approach, as the methodology is consistent with the definition

of poverty often used, namely ‘the exclusion from the minimum acceptable way of life in one’s own society because of inadequate resources’.