Wage Increases Outpace Income Support for Children

Families in low-paid work with three children would have received up to $1900 more over the last two years if income support for children automatically kept up with wages, according to new research from the Child Poverty Action Group.

Since 2018, the Government has not increased payment rates for "Working for Families", the key income support programme for children, yet it treats income support for adults differently, automatically increasing main benefits and New Zealand Superannuation in line with wages every year.

"Income support for children is poorly adjusted for inflation, unlike income support for other age groups," says report co-author Caitlin Neuwelt-Kearns. "We should treat children at least as well as other age groups, when it comes to vital income."

If Working for Families rates increased in line with wages, then three-children families in low-paid work would be receiving up to $27 more per week in the current year to June, while three-children families not in paid work would receive nearly $22 more a week, researchers found. 

"These are reasonably significant amounts for low-income families, particularly when food prices are increasing, and rents have ballooned at the same time," says report co-author Susan St John. "The lack of wage indexing is likely to contribute to families missing out on things like digital access, school trips and camps, and doctor visits for older children." 

The researchers also found the 2018 Families Package increase to Working for Families payments was only equivalent to a 10-year catch up to wage movements for many families. "One-off increases such as the Families Package don’t make up for a lack of wage indexation in previous years," says Neuwelt-Kearns. "Erosion relative to wages is adding to the financial pressure on families, which can lead to high-interest debt."

Among other recommendations, Child Poverty Action Group is calling for the Government to automatically increase Working for Families payments every year to keep up with wage increases, as it already does for payments for adults, such as main benefits and NZ Superannuation.

"Ensuring income support for children doesn’t erode relative to wages is only a small step but a necessary one to ensure livable incomes for children," says Neuwelt-Kearns.

Around 6 out of every 10 children in New Zealand receive income from "Working for Families" which is the Government’s key income support programme specifically for children.

Read the report here: Caitlin Neuwelt-Kearns and Susan St John (2021). Ensuring Adequate Indexation of Working for Families. Child Poverty Action Group NZ