Ending child poverty

In pointing out that it is failing to meet its child poverty targets, the Joseph Rowntree Foundation reminds us that the government can't even do simple things.
The thing is, it should be technically  easy to abolish child poverty, on the government's preferred measure. This is because this measure is relative - below 60% of median equivalized income. Setting benefit rates and tax credits  to create a guaranteed income of 61% of median income would therefore solve the problem.
And this can be done quite cheaply. The IFS has estimated that it would cost only £4.3bn - 0.3% of GDP - to meet the government's target of halving child poverty by 2011. It's cheap because many families are only slightly below the poverty line, so a few pounds would lift thousands out of poverty, as defined.
So, how can there be a problem? There are two answers that aren't as powerful as thought:
1. Low pay. However, because marginal withdrawal rates are so enormous, higher pay would do little to relieve poverty, except insofar as a few pence might be sufficient to lift some people over that 60% threshold.
2. Take-up rates for tax credits are low. However, it seems that this is mainly because richer households don't take the money. Table 4 of this pdf shows that, among families on less than £10,000 a year, the take up rate is close to 100%.
Instead, the reason for the failure of policy is given away in table 4.5 of this pdf. It shows that a child in a family where no-one works has a 78% chance of being in poverty, compared to just a 2% chance if s/he is in a family where the parents work full time.
The government's response to this has been to encourage people into work. Whilst this worked during the post-1997 economic upswing, its effectiveness has since stalled.
Which raises the question. Could it be that a good way to reduce child poverty is simply to increase out-of-work benefits?
Or is it that the "target" of cutting child poverty is in fact a lower priority than creating incentives to work (if we are being generous to the government) or stigmatizing the unemployed?

Comments

[Pierluigi Rotundo]

I think there are many factors causing poverty, but we have to change our point of view, passing from DONATE to HELP GROWING. This is the only way to solve the problem in the long term.

Pierluigi Rotundo

[dreamingspire]

And who has taken those jobs that the currently workless parents should have been taking? Evidence in the media (and in person) suggests the economic migrants, who may have no children, may have children with them, or may have children left at home with relatives. They come from countries where families appear to stick together, several generations of them. They have a better work ethic, we hear. They probably export wealth, by sending money home. Some social study work is needed, perhaps indicating that we cannot solve this problem by fiscal means. (And now we hear that there is an economic crisis in Poland: not enough workers.)

[donpaskini]

Yes, higher out of work benefits are needed to hit the 2010 target for reducing child poverty. But there is a link here to low pay. At present, employers pay a lot of people less money than they need to live on, and then the government tops up their incomes through tax credits. If employers raised wages, then the government would be spending less on topping up the incomes of the low paid, hence more money for out of work (or universal) benefits. Net result is a shift in income from the bosses to the low paid workers.

[Matt Munro]

Couple of random thoughts -

If you equalise all incomes below 60% of median, then you disincentivize working families who earn close to that level. Why would they carry on working for what is a state guaranteed income ?

Instead of equalising pay by topping up through tax credits why (oh why) don't the government just increase personal tax allowances

Is the 60% figure realistic ? Are children really in poverty if their household income is 15k ? The major expenses of having kids (food and clothes) are cheaper in real terms than ever, other major costs (housing and utilities) are fixed irrespective of family size. The children of "the poor" get many things free (school meals, school transport, healthcare, etc) that the working populance pay for. Our definition of poverty seems to include things that only a generation ago were considered luxuries by many.

Employers aren't gonna raise wages any time soon, not with the pool of slave, sorry flexible immigrant labour, that's pouring into the country.

[reason]

(And now we hear that there is an economic crisis in Poland: not enough workers.)

That is not an economic crisis - that is part of the solution.

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