Purpose
We looked at how incomes changed in the first year following implementation of the package. We estimated that over half of all families with children received Families Package payments in its first year, with an average increase in payments for recipient families of $55 per week.
This study could not be undertaken until well after implementation, so that we could count the extra income that families could receive as a lumpsum after the end of the first tax year. It does not capture the full income gains from the Families Package because Best Start and the paid parental leave extension were not fully implemented in the first year, and the Winter Energy Payment was paid for a shortened period.
Methodology
Our analysis is focussed on estimating how many families received Families Package payments, and how much their incomes changed.
When calculating how incomes changed, we incorporate any offsetting negative effects on income from other payments. This captures the effect on income of payments being:
- disestablished (as was the case with Parental Tax Credit)
- potentially reduced in value as a result of the new and increased payments (as was the case with Temporary Additional Support).
We do this to ensure the results capture the full impact of the policy changes. We use respondents from the June 2018 quarter of the Household Labour Force Survey (HLFS) to provide us with a sample of families with children at around the time the Families Package was introduced. The HLFS also lets us identify the ethnic groups of family members.
The definition of a family group we use is broadly analogous to that used in the tax and income support systems, being one or two parents (or caregivers in a parent role) with children under the age of 18. Parents and caregivers aged 15 or over are included. We add to this sample any couples or single people who did not have children at the time they responded to the survey, but appear to have been expecting a first child.
This sample of families is then weighted to represent all New Zealand families using HLFS weights that have been re-calibrated to Household Economic Survey (HES) benchmarks for 2018/19.
This approach is adopted due to difficulties with using the HLFS weights for the purpose of estimating the population of families.
For our sample of families, we compare administratively recorded income in two ninemonth periods:
- July 2017 to March 2018 (just prior to the first of the Families Package changes on 1 April 2018)
- July 2018 to March 2019 (when all the changes had been introduced or were phasing in).
Importantly, these estimates of the number of families affected and average income gains differ in nature from the TAWA estimates because they look at the change in actual income from one period to the next for a sample of families. In contrast, the TAWA estimates compare simulated incomes for a sample of families in the same time period.
Other points of difference are discussed in the final section of this paper. Income data is derived from Inland Revenue and MSD administrative data sources as described in Wilson and McLeod (2021). Where income is unable to be disaggregated at a finer level than the tax year in the source data,6 it is assigned proportionately to our period of interest (i.e. three quarters of the total tax year’s income is assigned to the July to March period of each year). Income from Working for Families tax credits is assigned to the period in which the entitlement fell, regardless of when the payment was made.
In some cases, a link to the IDI cannot be established for an individual or family in the HLFS. In other cases, a link is established but no income data is identified for the respondent. We exclude families from our study if a) either parent in a family is not able to be linked to the IDI, or b) both parents are able to be linked to the IDI but neither has income data. This results in approximately five percent of HLFS families with children being excluded from our sample. Weights are adjusted to correct for this exclusion in the re-calibration process described in Box 1. All income is adjusted for inflation and presented in 2019-dollar values.
Key Results
- 332,700 families, over half of all families with children, are estimated to have received income from the Families Package in 2018/19
- these 332,700 families received an average of $55 more a week from Families Package payments in 2018/19 than in 2017/18
- our $55 estimate takes into account the loss of income due to flow-on effects on Temporary Additional Support entitlements
- families who received Families Package payments in 2018/19 had a six percent increase in average gross and net total income between 2017/18 and 2018/19
- the six percent increase is similar in percentage change terms to the average income gains from 2017/18 to 2018/19 for families that did not receive Families Package payments – because of gains in employment income for this second group of families
- strong growth in employment income between 2017/18 and 2018/19 will have resulted in lower first-year numbers of recipient families and smaller average payments from the Families Package than were expected prior to its implementation
- three quarters of the increase in average Families Package income for families receiving payments came from Family Tax Credit and Accommodation Supplement
- the next largest gains were from paid parental leave and In-work Tax Credit, while Best Start, the Winter Energy Payment and Orphan's Benefit / Unsupported Child Benefit contributed smaller amounts to the overall average gains
- more than two thirds of families with a Māori or Pacific parent or caregiver are estimated to have had income from the Families Package in 2018/19, compared with just under half of families without a Māori or Pacific parent or caregiver
- the increase in Families Package income for recipient families varied across ethnic groups, with an average gain of $66 per week for families with a Pacific parent or caregiver, $59 per week for families with a Māori parent or caregiver, and $51 per week for families without a Māori or Pacific parent or caregiver.