Poor people cigareets and booze

The myth of how families in poverty spend their money

Jess Berentson-ShawTax and WelfareLeave a Comment

OPINION: It’s not true that if giving cash to the poor means they will just spend it on “booze and ciggies”, writes Jess Berentson-Shaw.

“And they say to budget your money, save your money – how can you do that when they don’t give you the help and support you really need? And you need to go somewhere else where you’re gonna pay triple the amount of money back for the little bit of money you need to help with you and your family.”

This is some of Ofa’s story, a woman who is employed caring for New Zealand’s elderly, while also trying to care for two young children on her own. She told her story to the Auckland City Mission in 2014.

Ofa’s reality is the same reality that many of New Zealand’s poor face – she just needs more money. Money for the basics and for the enriching educational experiences that would help her children thrive and succeed. She will try and get the money wherever she can, to cover her family’s basic needs in the short-term. But fundamentally Ofa and her children are trapped in a cycle of poverty that only a sufficient income can take them out of. What Ofa and other families like her in poverty need right now is more cash, no strings attached.

In 2016, the Morgan Foundation will release the findings of our investigation into families and children in poverty in New Zealand. In our previous article we discussed our simple conclusion: that we should give them money.

Of course the response from middle New Zealand will be predictable: if we give the poor money they will spend it on alcohol and cigarettes. This is a myth. Instead we know that when the poor are given money they use it to improve their children’s lives.

Firstly, we know that the poor and the wealthy spend their money in much the same way, and all parents try and prioritise their children’s needs.

For example Statistics New Zealand reports that rich or poor, New Zealanders spent the same proportion of their weekly income on alcohol: about 2 per cent. That means rich people actually spend more on grog than poor people do: for the poorest that is $8 a week and the richest around $41. Those in poverty actually spend more of their weekly income on food compared to the wealthy: 18.4 per cent versus 15.3 per cent.

To give context to these figures, we can also look at what parents say about their income and spending. Almost all parents from low income groups in New Zealand who were spoken to in a recent study “mention that their primary motivation is to do the best for their children”  but that they needed to prioritise spending on the basics (food, transport, accommodation). Going without to cover these basics was common.

We all hear anecdotes of a poor person deciding to buy cigarettes instead of bread at the shop counter. Some people will always make poor decisions, but this is not the norm for families in poverty.

Look to the international research too. When the child poverty reduction strategy was enacted in Britain, single-parent families received about £30 extra a week. Researchers at the London School of Economics looked at how poor families spent that extra cash, and the results were surprising.

The extra cash was used to close the spending gap on children – low-income families spent more on their children and household items, in particular clothing, footwear, books, and holidays – approaching the levels higher income families spent on theirs. Not only that but spending on alcohol and tobacco reduced.

Conversely we see that when parents are given money and pushed into work, the money doesn’t get used to buy extra items for their children; they only cover the additional work costs they have.

Why is this result so surprising? Because we’ve become so certain that child poverty is caused by bad parents that we can’t countenance the possibility that poverty might actually be solved by money.

Parenting is a tough job, and most parents are doing their best for their kids as the research shows.  Poor parents are (mostly) not bad parents. When faced with the stress and financial constraints of poverty, most of us would struggle.

In our final article on Tuesday, we will look at the real reasons poverty causes so many children to suffer – most notably how poverty related stress affects families and children. This helps us understand why cash payments to the poor are the most effective policy intervention we have right now for improving children’s lives in Aotearoa New Zealand.

Read Next: Bad parenting is not the reason for child poverty

The myth of how families in poverty spend their money was last modified: October 13th, 2016 by Jess Berentson-Shaw
About the Author
Jess Berentson-Shaw

Jess Berentson-Shaw

Dr Jess Berentson-Shaw is a science researcher working for the Morgan Foundation. Jess holds a PhD in Health Psychology from Victoria University. Jess has over 10 years’ experience working on applying science and evidence to public policy. She worked on improving the use of science in public health practice in NZ, before working as a Research Fellow at University College in London, where she researched how doctors and clinicians translate scientific evidence into their clinical practice. While in the UK she also developed a national data collection system, which was used to determine what factors contribute to poor outcomes for women and babies during pregnancy and birth. On her return to New Zealand she directed a research group that specialised in the independent evaluation and application of research and science to health policy and practice. Jess loves science and what it can do to make the world a fairer place.