The Level of Financial Assistance to Families with Dependent Children: A Comparative Analysis

In 1992, a comparison study using a model-family methodology found New Zealand to be one of the least generous countries in the OECD in terms of offsetting the additional costs of children. Targeting meant that low-income families did comparatively better, but were still below the OECD average. Since the time of that study, the level of the Family Support Tax Credit has been increased and an in-work benefit, Child Tax Credit, has been introduced. However, other countries, notably the United States, Australia and the United Kingdom, have also increased their level of family assistance, linked to explicit statements on the removal of child poverty. This paper updates the earlier study to July 2001, covering 18 OECD countries, based on eight income levels and nine family types (single and two-parent families, with one to three children of differing ages). New Zealand is still seen as a laggard in this analysis, even on low incomes, after taking account of universal and targeted child assistance, child tax credits, and the additional expenditures that result from dependent children for health and dental care, education, housing and childcare compared to singles and couples without children. This lack of financial assistance is seen as a major factor contributing to the high level of poverty among families with dependent children and to poor child outcomes.