Whyte on poverty

Jame Whyte writes at the NZ Herald:

There is no poverty in New Zealand. Misery, depravity, hopelessness, yes; but no poverty.

The poorest in are the unemployed. They receive free medical care, free education for their children and enough cash to pay for basic food, clothing and (subsidised) housing. Most have televisions, refrigerators and ovens. Many even own cars. That isn’t poverty.

We spend well over $35 billion a year providing welfare, free education and free medical care.

Why then do we keep hearing that more than 20 per cent of children live in poverty? Those who tell us this do not mean by “poverty” what most people do. They have a statistical definition: you live in poverty if your household’s income is less than 50 per cent of the national median (after tax and housing costs, and adjusted for the number of adults and children in the household).

For example, the Herald recently published an article by Susan St John, spokeswoman for the Child Poverty Action Group, that claimed 220,000 children live in poverty because they “fall under the stringent 50 per cent after-housing-costs poverty line”.

Alas, the measure is not stringent; it is ridiculous. It means, for example, that doubling everyone’s income would have no effect on the amount of poverty in New Zealand. Our incomes would all remain the same percentage of the median.

The more wealthy people who migrate to NZ means the more people are defined as being in poverty!

Poverty, when defined as a percentage of the median income, is something that only socialism can solve. The only way to have fewer people in poverty is tax the wealthy more and give more money to those on lower incomes.

Yet lowering incomes might reduce poverty. If the median income fell, then those on the or benefit would find their unchanged incomes closer to the median.

Communist counties have very few people in poverty by this definition, as everyone is equally poor.

Using this definition, a 2014 report claimed there is more child poverty in Japan than in Hungary and more in the United States than in Greece. This at a time when the Greek economy was in tatters, was running at 27 per cent and masses of Greeks were queuing for handouts at soup kitchens.


Worse, the measure disregards consumption that people do not pay for with their own money. Consider two 10-year-old boys who live in the same quality of house, attend the same school, visit the same doctor when ill, wear the same brand of tracksuit and so on. Their material wellbeing differs in only one respect. Whereas Jimmy’s parents give him $20 a week in pocket money, Timmy’s give him only $10. Should we conclude that, since his disposable income is only half of Jimmy’s, Timmy is a pauper?

Suppose the housing, schooling and so on that they both receive are worth $200 a week, and that both spend all their pocket money. Then Jimmy consumes $220 a week and Timmy consumes $210. Though Jimmy’s disposable income is double Timmy’s, he is only 5 per cent better off.

The same goes for households. A large portion of their consumption is not paid for from their disposable incomes. Education, healthcare and housing are all in this sense free. Differences in disposable income exaggerate differences in consumption. Yet poverty is a matter of consumption.

Excellent points. This is why I think the best definition of poverty in NZ is whether people are in material hardship, as measured by whether they can afford hings such as shoes for their kids.

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