Section 70A and Children

This work was one of two papers cooperatively developed with Oranga Tamariki. The partner paper, “How Do Welfare and Tax Settings Affect Children’s Involvement with Child Protective Services?” can be found at https://orangatamariki.govt.nz/research/latest-research/

In the New Zealand welfare benefit system, the benefit received by a sole parent is reduced for each dependent child for whom they do not seek child support, subject to some exemptions.

The benefit is reduced by between $22 and $28 per week for each such child.

In October 2017, the incoming Government said that it intended to remove the section 70A benefit reductions that apply when a sole parent supported by benefit does not seek child support. This research brief aimed to support future policy development by addressing the following questions:

• How are children affected by section 70A reductions?
• How might removal of section 70A reductions impact on children affected by reductions?
• How else could claims for child support be encouraged?

At the end of June 2018, the benefit deductions affected an estimated 2.3 percent of all children in New Zealand. The proportion of New Zealand children who were ever in families affected was much larger. An estimated 11 percent of all children were in a family affected by section 70A benefit reductions at some time by age six. Children already at high risk of persistent poverty and adverse childhood experiences are disproportionately affected.

A developing evidence base suggests that outcomes for some of the children affected are likely to be being harmed by loss of family income associated with the reductions. Recent studies from overseas suggest a causal link between family incomes and care and protection service contact. More broadly, a developing body of international research shows that lower family incomes have a negative causal impact on child development.

Possible mechanisms for encouraging child support claims in the absence of benefit reductions include a policy of passing on child support to parents on benefit, which could boost claims and the amount of child support paid and received, while contributing to poverty reduction, and improved facilitation, by increasing awareness and supporting the claims process. The full benefits and costs of these approaches could be explored further.

How are children affected by section 70A reductions?

At the end of June 2018, 25,500 children were in families affected by section 70A reductions (9,500 of these children – one-third – were not themselves the subject of a deduction).

The 25,500 children who were in families affected at this date make up an estimated 2.3 percent of all children in New Zealand.

The proportion of New Zealand children who were ever in families affected is much larger. Among children born in 2010-2011, an estimated 11 percent of all children ever present in New Zealand by age six were in a family affected by section 70A benefit reductions at some time.

One-quarter of the children ever affected by reductions were affected for three or more of their first six years.

The proportion affected at any given month-end was highest in early childhood.

Section 70A benefit reductions disproportionately affect children already at high risk of persistent poverty and adverse childhood experiences.

Children in families affected were more likely to come to the attention of the care and protection system.

How might removal of section 70A reductions impact on children affected by reductions?

A developing evidence base suggests that outcomes for some of the children affected are likely to be being harmed by loss of family income associated with the reductions.

Recent studies from overseas suggest a causal link between family incomes and care and protection service contact.

More broadly, a developing body of international research shows that lower family incomes have a negative causal impact on child development. Evidence of a causal link is strongest for cognitive, social, and behavioural development, and for school achievement.

This evidence base suggests that section 70A benefit reductions are not in the best interests of the children affected, and that removal of reductions could improve their outcomes.

How else could claims for child support be encouraged?

Removal of section 70A benefit reductions could result in a behavioural response by parents receiving benefit – fewer might make a claim for child support without the threat of reductions acting as an incentive, and this might lead to lower incomes once families leave benefit.

Possible mechanisms for offsetting this effect and encouraging child support claims in the absence of benefit reductions include:

• a policy of passing on child support to parents on benefit, which could boost claims and the amount of child support paid and received, while contributing to poverty reduction.
• improved facilitation, which could potentially support a policy of passing on child support by increasing awareness and supporting the claims process.