Wednesday, August 6, 2014

Theoretically indisputable

The definitive (according to Children's Commissioner Russell Wills) book on child poverty in New Zealand (called Child Poverty in New Zealand) landed gently on my desk recently. Written by Jonathan Boston from the University of Victoria and Simon Chapple, currently with the University of Otago but who has previously worked for the OECD, it is a reasonably lengthy work.

The first few chapters traverse well-established ground. However when the reader gets to chapter 6, the plot seems to unravel. The authors point out that there is very little social research done in New Zealand to underpin, monitor or evaluate our social assistance policies. This is especially pertinent under the current government where hard data is increasingly being replaced by Paula Bennett's 'common sense'.

However, chapter 6 is infused with a sense of moral panic centred on the fact that women (because it is women who are perceived to be the problem) might be out of the workforce caring for children for months or years at a time. This is more difficult terrain for men working with statistics because each one of those data points is a woman with a complex life juggling competing interests, caught in a matrix of political and financial pressures over which she has little control. It takes a great deal of analytical and narrative skill to avoid creating the perception that these mothers are to blame for their own predicament. One is left with an uneasy sense that this has not been achieved.  

The language is telling: New Zealand has a "passive" employment strategy for parents; a benefit is a "subsidy"; complexity in the benefit system means people may be "reluctant to change their behaviour and gain more employment" (note this is a benefit design issue, not a behaviour issue); and, incredibly, "parental (ie women's) re-entry into the labour market should be supported where it is developmentally appropriate for the child...this developmentally appropriate point lies somewhere between three and four months of age and when the youngest child is aged three." 3-4 months?? And note the use of the word 'support'. This suggests women with young children will be, um, supported. The reality of the work-first policies implicitly endorsed by the authors is that there is almost no support but a lot of grief for failure to comply with petty job-seeking and social obligations.

The section that stood out for its behaviouralistc quackery was this (p. 131): 
The payment of welfare benefits to families who do not work creates a number of potential issues. Firstly, as it guarantees income to people not in paid employment, including those with children, it creates incentives not to work. While theoretically indisputable, much debate surrounds how large this effect is in practice...
Theoretically indisputable. What does that even mean?  In the real world of beneficiary bashing the distinction between the creation of an incentive and the assumption that people will respond to that incentive is blurred. In a theoretical world where poor women with children will behave in ways that maximise their utility, the line is assumed not to exist. In a policy world where the utterances of economists are often taken as evidence, the use of the term 'indisputable' will have perverse and unintended political consequences. As academics, the authors need to be clear about what is indisputable: the theory, the creation of the incentive, or its effect.    

There is evidence from New Zealand that this effect - if it exists at all - is probably quite small. The best predictor of beneficiary numbers is the state of the economy, and the unemployment rate in particular. Now it's true, as First Dog on the Moon cogently points out, that some people would rather stay home than work but given benefit payment rates in New Zealand this is likely a fairly small number.  There are no doubt poor Pavlovian Mums - and even households - who allocate scarce family labour to child-rearing in order to obtain a benefit. However, the question I would ask in relation to such behaviour is how did we manage to create such a crap social economy that these incentives make sense?

In the 1970s and 80s benefit payment rates were relatively much higher than they are today but the numbers on benefits was very low because we had full employment. In 1991 Ruth Richardson decided she was going to incentivise beneficiaries to work and slashed benefits. Did the ungrateful poor get off their chuffs and find jobs? No. Because there were very few jobs available. Unemployment peaked at 11% in 1991 and had only drifted down to 9% by 1996. The immediate, long-lasting and socially devastating impact of the benefit cuts was a dramatic increase in child poverty (a point the authors concede). There is no evidence the benefit cuts changed anyone's behaviour.

This work not only overlooks the fact that before mothers can re/claim their place in the workforce appropriate work needs to be available for them but to suggest there is a theoretical case for them not to do so is a political statement; one that denies zero-hours contracts, no guarantee of a minimum income, and uncertain hours. With respect to your undoubted good intentions, you're not in Chicago now, gentlemen.

But wait! There is a glimmer of market-making hope. Because all these mums will be back in the workforce when their children are very young, someone will need to care for them. Someone at the local daycare. Someone who will be paid to do the same job a mother does for free. It is theoretically indisputable that, in terms even an economist would understand, this is a perverse outcome.  

I am familiar with the work of Messers Boston and Chapple, and I do not doubt they are on the side of good. They routinely contest policy that impoverishes children, and do so in this book. What makes Spider's blood boil is that their tools are inadequate for the difficult and complex job of addressing the concept of childcare as 'work' in its own right, and how this might be supported. Rather, they create opportunities for political actors (many of whom they may disagree with) who, divorced from the financial trials and moral quandries of poverty, truly are incentivised, self-interested rational maximisers. That is a shame for us all.