Two-thirds of a cheer for “Save the Children”

Save the Children has recently been quoted regarding their findings on “severe child poverty”, which is rising. Indeed, it was increasing before the recession and, according to the charity’s estimate, 1.7m children are affected.

As usual, one could debate forever and a day the meaning of a term such as “severe child poverty”. Anti-poverty initiatives have a preference for strong language. This puts some critics off, because they believe terms invoking images of extreme hardship should be reserved for describing the type of misery one finds in the Third World, or in past centuries. For the campaigners this is tantamount to “denying poverty”.

So let’s leave semantic issues completely aside for a moment: I believe Save the Children’s severe child poverty (SCP) indicator makes a lot of sense, and their accompanying policy paper provides a valuable contribution. They identify worklessness, disability and lack of savings as risk factors, and find a geographical concentration of child poverty in London. These findings deviate somewhat from the ones provided by the more common indicators of relative and absolute poverty.  

They do so because SCP is a combined measure of consumption and income. It identifies a household as poor when it lacks at least two items out of a pre-defined basket of essential goods. Additionally, income must be below 50% of the contemporary median.

SCP can identify a number of things which income-based indicators miss. Firstly, it includes information about income dynamics. If you lose your income today, you will not suddenly be poor tomorrow. Your fridge, computer and furniture will not suddenly evaporate. Also, while worklessness may not always compare so badly with low-paid work on a snapshot measure, over time it does. Maybe that is why the paper makes a strong case for poor parents’ (re-)integration into the labour market, instead of simply calling for higher unemployment benefits. Secondly, SCP captures regional price differences. It is not misled by the higher nominal incomes in the South East. Thirdly, SCP can reflect unobservable variables, which can make households with identical incomes enjoy vastly different living standards.

The only criticism I have is that there seems to be a certain knee-jerk reaction to call on the government for “urgent action”. Is the lack of progress in recent years not a reason to suspect that the state-centric approach to poverty alleviation has met its limits?

I wonder if we make too sharp a distinction between ‘children’ and ‘grown-ups’. It is said that about 20 per cent of children leave school without being able to read, write or do arithmetic properly. Those children who have problems at school may also prevent others learning. Might not they, their families and other school children all benefit if some children, perhaps from about the age of 14, were allowed — even encouraged — to get real more or less full-time jobs? They and their families might not be so poor, they could learn suitable attitudes towards the world of work, and teachers and children remaining in schools would be more likely to learn in a less disruptive environment.

DRM makes an excellent point. There is also a strong moral argument against compulsory schooling.However, one unhelpful lesson for many children entering low-paid work (especially those whose parents were on benefits) would be that up to 85p out of every pound earned would be lost in deductions to the household’s housing and council tax benefits. Unless they had a low time preference and could see the potential long-term advantages of gaining new skills, they could be left with a strong message that they would be just as well off staying at home on the dole (particularly when work-related travel costs etc. are factored into the calculation).

It should be no surprise that if you increase the financial ‘rewards’ for unemployment (which is another way of saying, reduce the financial disbenefits) you tend to increase the amount of unemployment. It is true that the ‘poverty trap’, as it currently exists, is very hard to escape from. It seems to have arisen because policitians favour the short-term consequences over the longer-term consequences of their policy in this area. Would it be possible to treat each member of a household as a separate person for income tax purposes?I am also conscious that ‘non-academic’ children often have low self-esteem; which might be overcome by a real, if maybe rather humble, job.

People are treated separately for income tax purposes but not for benefit purposes. This creates the worst of all worlds which the transferable tax allowance proposal is designed, to some extent, to counter.

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