15 Dec 2020

Number of children living in poverty likely to rise because of Covid-19

2:14 pm on 15 December 2020

The number of children living in poverty is expected to increase because of Covid-19.


A briefing to Child Poverty Reduction Minister Jacinda Ardern says the economic downturn is likely to plunge more families into hardship. Photo: 123.rf

The just-released briefing to Child Poverty Reduction Minister Jacinda Ardern says prior to the pandemic, the government was broadly on track to meet the three-year and 10-year child poverty reduction targets.

But the economic downturn is likely to plunge more families into hardship, across the various measures of child poverty, despite the actions taken by the government in response to Covid-19.

Material hardship rates are expected to "rise strongly", as this measure is particularly sensitive to economic changes, the briefing said.

On the after housing costs measure, child poverty rates are also likely to increase, as reduced employment and earnings negatively affect households already at the lower end of the income scale.

On the before housing costs measure it is less straightforward, the briefing said, as this will depend in part on how Covid-19 affects median incomes.

The pandemic is also expected to have both short- and long-term negative effects on the wellbeing of children, young people and their whānau, the briefing said.

"The exact nature of these effects are somewhat uncertain at this point in time, but are likely to be significant and wide-ranging, despite measures taken to date," the briefing said.

"They include the impact of job losses and reduced earnings on child poverty and wellbeing, increased anxiety and mental distress, financial and family stress, increased social isolation, and long-term effects on the education and employment of young people.

"The most severe negative effects are likely to be felt by those already disadvantaged."

Benefit numbers expected to grow further

The Ministry of Social Development (MSD) expects the number of people on the jobseeker benefit to hit almost 280,000 by January 2022.

It has told Social Development Minister Carmel Sepuloni that while Covid-19 support measures have helped soften the initial impact of the pandemic on unemployment, more people are likely lose their jobs in the coming months.

At the moment, there are about 205,000 people receiving the main unemployment benefit.

According to Treasury, the unemployment rate is not forecast to hit its peak - at 7.8 percent - until the March 2022 quarter.

MSD said 18 to 34 year olds have been severely impacted by the economic shock, because they generally have lower skill levels and more casual jobs.

There has also been an increase in the number of jobseekers aged 50 or over.

MSD bracing for higher demand

MSD said it was preparing for increasing demand for its services, as the full impact of the pandemic on the economy is felt.

"We anticipate our current clients will continue to face pressure due to Covid-19.

"There are also new groups of New Zealanders who have had little or no previous interaction with MSD services who may be experiencing significant economic hardship for the first time, or are likely to as unemployment rises, and will be seeking our assistance."

As financial pressure built up from the economic downturn, demand for support and services to manage debt was expected to grow substantially, MSD said.

That was because 'backed up' household debt, like mortgage repayment and utility bills from payment holidays and deferrals, would need to be repaid, officials said.

MSD also expected there could be higher demand for family violence services, "as there is a risk that levels of violence may increase as financial pressures build up from the economic downturn".

The pandemic also increased housing stress on lower- to middle-income households, and vulnerable people continued to be pushed out of the housing market.

"This can be seen in the increase in the number of people on the public housing register and a sharp increase in the number of households accessing emergency housing special needs grants," MSD said.

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