Why This Is Important

Income and wealth can affect education outcomes in a number of ways. Income has a direct impact on the affordability and accessibility of those education services which charge fees or if transport and other costs are significant.

Higher income and wealth provides access to a wider range of life experiences and to resources that can support learning.

Poverty increases the likelihood of poor nutrition and other health problems, housing transience, unstable parent and caregiver relationships, negative peer group influences and other factors known to impact on educational achievement.

Poverty during the early years of childhood can be particularly detrimental, with negative educational effects persisting at least into the middle years of schooling, even when family incomes improve. The relationship between income and education outcomes is not linear - increases in household income have significantly greater impacts on education outcomes for children in low-income families than outcomes for children in high-income families.

Indicator

Children living in low income households

Numerator:
The number of dependent children aged under 18 years who were living in economic family units receiving an equivalent income, net of housing costs, below the low-income threshold, from the New Zealand Income Survey, by year (the two low-income thresholds used for this indicator is 60% of the 2007 median equivalent disposable family income net of housing costs adjusted for CPI, and 60% of median disposable family income net of housing costs as it changes year by year).
(Data Source: Statistics New Zealand)

Denominator:
The total number of dependent children aged under 18 years from the New Zealand Income Survey, by year.
(Data Source: Statistics New Zealand)

Interpretation Issues

This measure uses economic families as the base unit of analysis. An economic family is a group of co-resident people whose financial affairs are common or have been merged to the extent that the people concerned are substantially interdependent. An individual not part of such a group is considered to constitute an economic family in its minimal form.

An economic family unit is operationally defined as a:

• financially independent single adult: not in a de jure or de facto marriage, and not caring for dependent children
• sole-parent family: financially independent single adult (not in a de jure or de facto marriage), and caring for one or more dependent children
• couple: couple (in a de jure or de facto marriage) not caring for dependent children
• two-parent family: couple (in a de jure or de facto marriage) caring for one or more dependent children

The household categories incorporate the concept of dependent children rather than just children. A child is a person of any age who usually resides with at least one parent (natural, step, adopted, or foster), and who does not usually reside with a partner or child(ren) of his or her own. Statistics NZ defines a 'dependent child' as a child aged under 18 years and not in full-time employment.

Housing costs have been apportioned to economic family units. Account was taken of the housing costs of the economic family unit by subtracting its housing costs from its after-tax income. The resulting amounts were inflation adjusted using the CPI for all groups excluding housing.

Adjustment for family size was made by means of a per-capita equivalisation process based on the Revised Jensen Equivalence Scale. The resulting amount - Household Equivalised Disposable Income (HEDY) - can be regarded as an income-based proxy measure of standard of living. The HEDY is the metric on which the low thresholds are specified.

Changes over the period 2001 to 2011 have been tracked in terms of the proportion of economic families with HEDY values below 60% of the median HEDY in 2007 adjusted for CPI, and in terms of the proportion of economic families with HEDY values below 60% of the median HEDY as it changes year by year. These definitions mean that the measure is based on both constant-value and moving-value benchmarks.

Until 1998 the New Zealand income survey was conducted every year. Since 1998 the survey was conducted only in 2001, 2004, 2007, 2008, 2009, 2010 and 2011. Some issues with aspects of the 2008 income data have been identified and therefore the 2008 figures have been omitted.