Thursday, September 18, 2014

ELECTION 2014: Where to with welfare?

Written for and published at the NZ Centre for Political Research.

ELECTION 2014: Where to with welfare?

In the last six years National has done more to address working-age welfare dependence than Labour did in the prior nine. However their reforms shouldn’t be overcooked. Describing them as a “useful start” in his recent autobiography, Don Brash was spot on.

A Labour supporter would reject my opening statement on the basis that numbers on the unemployment benefit took a nosedive over their incumbency. Absolutely true. Work and Income put enormous effort into those on an unemployment benefit and Labour luckily oversaw a good economic patch (their responsibility for which was probably as genuine as National’s for the GFC).

But chronic welfare dependence, a crippling social and economic issue for New Zealand, lies in the other main benefits:  pre-reform they were the DPB and Sickness/Invalid benefits combined.

To their lasting credit, in 2009 National set up the Welfare Working Group, and from there, commissioned the Taylor Fry actuarial work which exposed where long-term reliance is concentrated. The revelation that teen parents and other young beneficiaries entering the system at 16 or 17 would stay there the longest was no surprise to me.

Through the early 2000s, although only 2-3 percent of the DPB total at any given time were teenagers, between a third and a half had begun there as teenagers. I’d been arguing throughout Labour’s administration that average stays on welfare were much longer than government issued figures. Point-in-time data produces much longer averages than data collected over a period of time, but it suited Labour to use the latter data to minimise average stays. To understand this statistical phenomena imagine a hospital ward with 10 beds. Nine are occupied year around by chronically ill patients; one is occupied on a weekly basis. At any point-in-time 9 patients had an average stay of 12 months and one an average stay of one week. But calculated over the year, 85 percent of total patients had an average stay of just 1 week. Equate this to spells on welfare and you can see how long-term dependence can be minimised.

Here is the huge difference between National and Labour.

National looked for what Labour had denied.

Their discovery has led to a radically different approach to youth and young parents. Intensive mentoring and income management have seen the numbers of young people on welfare plummet. The teenage birth rate has been falling since 2008, and as virtually all single teen parents go on welfare, benefit dependency levels have consequently fallen. The reforms must be playing some part. How much is probably unquantifiable.

Teen parents on benefit

With the inflow into the benefit system stemmed, future reductions in every associated negative outcome can be expected. That means fewer childhood health and educational non-achievement problems; fewer youth criminal apprehensions and convictions; and lower prison populations.

It is especially telling that there are no promises from Labour or the Greens to undo this new regime.
In fact Labour has advocated more income management. Their 2014 ‘Social Development’ policy paper advocates, “…allow[ing] income management to be used as a tool by social agencies where there are known child protection issues and it is considered in the best interests of the child, especially where there are gambling, drug and alcohol issues involved.”

This endorses National’s intention – given another term – to extend income management to other beneficiaries who are not providing basic necessities of their children.

Unfortunately, though, that is where the accord ends.

Without religiously spelling out which party is responsible for which policy, the road ahead under a Labour/Green/Internet-MANA government would likely involve:

1/ Paying the parental In Work Tax Credit (IWTC) to out-of-work parents.

The Greens have disguised the extension of this tax credit as:
“A new Children’s Credit that will give an extra $60 a week to families currently missing out, at a cost of $400 million a year.”
Unsurprisingly this isn’t a popular policy amongst some of their own and Labour’s low-income constituents who are working hard for the extra payment.It was Clark and Cullen who created the IWTC. That the Greens and Labour now want to destroy the margin between parental income from employment and income from a benefit demonstrates how much further left this group would be.

2/ Restoring the Training Incentive Allowance (TIA) to career beneficiary students who have become addicted to studying and want the taxpayer to fund their PhDs. 

Minister for Social Development, Paula Bennett, abolished the TIA and moved the funding into efforts to get younger people to achieve lower level qualifications. Treasury advised that use of the TIA led to longer stays on welfare.

3/ Lifting abatement-free thresholds to $150 weekly on every benefit. 

This is ostensibly to allow beneficiaries to earn more from work while not losing benefit cash thereby encouraging part-time work. In fact it makes it is much more difficult for individuals to get off the benefit because the combination of benefit and work pays more than work alone.

4/  Under the guise of solving child poverty, paying people on welfare far more for producing babies  – eg Labour’s Best Start policy.

Higher benefits increase the rate of unmarried births, already a major source of child poverty.

5/ Raising minimum wages.

Internet-MANA have outbid both the Greens and Labour with a promise of $18.80 hourly (ditto the Maori Party).

While not strictly a ‘welfare policy’ the Left say this move will make work more viable (ignoring the moral case for employed independence) and ease childhood poverty. Yet in their recently published book Child Poverty in New Zealand left-leaning Professor Jonathan Boston and economist Simon Chapple discussed lifting minimum wages/ implementing a living wage and concluded:

“In short, the living wage proposal, whether implemented via an increase in the statutory minimum wage or through voluntary actions in particular sectors or industries, will do little to solve child poverty in New Zealand.”

This is primarily because most people on the minimum wage aren’t parents. Additionally, the authors accept that the resulting higher unemployment will push more people into or back to the benefit system.
Broadly speaking then, a government made up of Labour, the Greens, and Internet-Mana (with the possibility of support from the Maori Party and/or NZ First) would redistribute billions more and almost certainly increase dependence on state welfare.

A quick trip down memory lane will remind us of what welfare has achieved:
  • A huge increase in sole parent families with dependent children from around 3% in the 1970s to 30% today.
  • A horrible legacy for people made redundant in recessions like that of the early 1990s. Unlimited welfare let people languish and develop more than just joblessness. The constant debate in the United States is whether their time-restricted unemployment benefits should or shouldn’t be extended for this reason.
Which brings me to 2 major problems which no party (bar ACT) is talking about:

The Invalid Benefit (now the Supported Living Payment) continues to grow in numbers

A recent MSD report states:
” A higher than expected rate of transfer to Supported Living Payment is also occurring from both Jobseeker – HCID and Sole Parents.”

Back in the 1960s around 1 percent of the population was ‘permanently’ incapacitated. That now stands at over 3% – small percentages but large absolute numbers.

Supported Living Payment

The single largest reason for incapacity is psychological and psychiatric conditions. The recent spate of tragic violence, repercussions and earlier threats to Work and Income staff are almost certainly due to mental ill health. (In 2009, people on an Invalid  Benefit made up the majority of those allocated to the Remote Client Unit because they had been trespassed for violence or aggression.)

The late 1980s policy to close psychiatric institutions and support mentally ill people within the community was very well-intentioned but has wrought new problems which politicians seem to be ignoring.

Children are being added to an existing benefit at an even greater rate than pre-reform

National’s early sole parent work-testing policy intended to reduce this habit but has thus far failed. Female beneficiaries – particularly Maori – continue to have babies when they are already unemployed and without independent means to raise their children. In the six months ending March 31, 2006, 5854 children aged under one were added directly to a benefit. In the same period prior to March 2014 the number increased to 6634 – a 13% rise.

And many thousands more will become benefit-dependent by the end of their birth year.

The ACT Party, promising continuing support to a National government, seeks to address these deeper problems with the following policy:

“Introduce a life-time limit of 5 years for support under the Sole Parent programme (as the US did in the nineties), and a life-time limit of 3 years for support under the Jobseekers Benefit, with “income management” (as currently applies to those on the Youth Payment and Young Parent Payment benefits) when those limits are reached.”

The advantage of such a regime is expectations are clear and simple. Limits would incentivise people to save up entitlements rather than simply defaulting to (currently) open-ended benefits.

As it stands many workless rural communities rely heavily on welfare. Work-testing is somewhat meaningless. People can remain in these small towns generation after generation. Ironically the only recent leader who has verbalised this problem was Helen Clark when her government introduced a policy to prevent people on the dole from moving into these ‘dead’ areas. As touched on earlier though, that administration was far more conservative and centrist than a new Left government would be.

Every election the Greens use children to promote robbing Peter to pay Paul. This time Labour has joined in. Both refuse to recognise that the easy quick fix of transferring greater sums into non-working homes will make people more dependent and inevitably, poorer. The prospect is depressing and frightening.

The alternative is National gaining a third term and the opportunity to cement in the reforms that are working and reappraise any that aren’t.  With the support and influence of ACT and possibly the Conservative Party (Colin the-best-welfare-program-is-a-job Craig) who share strong family, small government values, much more could be possible.

ODT: 53,000 16-20 year-olds on a benefit

This must be a typo - a collosal one.

According to the ODT under the headline

Young on benefits targeted

Paula Bennett said,

''Our target of a 40% reduction of young people on benefit is a bold one but 53,000 young people aged between 16 and 20 on welfare is too many for a country with prospects like ours.''
I don't have exact comparable data but I do know that at March 2013  only 2,415 16-19 year-olds were on either a Youth or Young Parent Payment.

MSD benefit fact sheets show at June 2014 there were 49,889 18-24 year-olds on a benefit.

Some further digging turns up a different quote, this from Radio NZ:

At present, there are 53,000 people aged under 24 on the benefit and Ms Bennett said that can be reduced by 40 percent.

That makes more sense.

Readers of the ODT will be getting altogether the wrong impression. The bulk of the 53,000 referred to will be aged 21 and older.

(To be fair to the ODT it's possible the Minister gave them the wrong information. The quote is very specific.)

Monday, September 15, 2014


There have been so many polls I missed the Colmar Brunton poll that has ACT on 1.2%.

That'll do it. I feel I can safely give them my party vote without wasting it.

I recall too the 2005 election when ACT's support plummeted to a level that delivered only two MPs - Rodney Hide and Heather Roy. I think that is ACT's very core support and will turn out again (conservative Banks repelled too many).

Though when I think about it I am not into law and order tough talk, and sit on the fence over Maori and privilege. But ACT has the best welfare and tax policies.

Ran into a young guy campaigning for Chris Bishop yesterday and promised him the candidate vote. What I have come to appreciate about John Key is his connectedness to globalisation and his excitement about where it can take NZ.

Labour is the past. I think they will be overtaken by the Greens. The old socialist, unionist, brother's keeper stuff isn't relevant. The child poverty and inequality focus has backfired for the left because most thinking people see a country that provides opportunity and a strong safety net.

Tariana Turia is gone. I like what I've seen of Te Ururoa Flavell and think the Maori Party have a much better grip on what Maori need than Mana, so even briefly considered giving them my party vote. But, no, I'd like to see what Seymour and Whyte can build together.

Here's a speech Whyte delivered yesterday:

ACT will hold the balance of power after the election on Saturday.
In every poll taken last week, ACT has gone up. Not in every poll published last week mind you but in every poll that was taken last week.
In the latest Colmar Brunton poll – the most reliable of the pollsters – ACT is on 1.2%.
Our messages are getting through. We are winning support. 1.2% (28,000 votes) means I will be elected as a list MP, giving ACT two MPs and allowing John Key to be Prime Minister again without the “help” of Winston Peters.
In a week’s time ACT will be in a position to give the country three more years of stable Centre/right government.


Sunday, September 14, 2014

More people rely on government transfers

Statistics NZ released Census data about personal (15 years+) and family incomes last week. Income is gross and relates to the year prior to Census night.

Here are some cut and paste highlights (or lowlights perhaps).

- The only sources of personal income to experience an increase between 2006 and 2013 were 'NZ superannuation or veterans pension' (2.0 percentage point increase) and 'other government transfers' (0.9 percentage point increase). 

-  12.7 percent of men and 19.4 percent of women received personal income from 'other government transfers'. This higher rate for women was partly accounted for by the domestic purposes benefit (90.0 percent of recipients were female) and 'other government benefits, payments, or pension' (75.4 percent were female).

- Auckland region has highest proportion of adults who receive personal income of $15,000 or less
In Auckland, the local board areas with the highest proportion of people having an annual income of $15,000 or less were:
•  Mangere-Otahuhu (42.2 percent)
•  Otara-Papatoetoe (40.1 percent)
•  Great Barrier (37.5 percent). 

- In 2013 compared with 2006, for people in the 15–19-year age group:
•  median personal income from all sources dropped 74.2 percent – from $3,100 to
•  the proportion stating they had no source of income increased – from one-quarter
(28.8 percent) in 2006, to almost half (43.8 percent) in 2013
•  employment decreased 30.9 percent – from 136,980 (47.2 percent) employed part-
or full-time in 2006, to 94,596 (33.7 percent) in 2013. 

- At some time in the 12 months ending 31 March 2013:
•  25.1 percent of families received income from an 'other government transfer' (up
from 23.2 percent in 2006)
•  17.5 percent of families received income from NZ superannuation or veterans
pension (up from 14.8 percent in 2006) 

- Over half of one-parent families receive an annual income of $40,000 or less In 2013, the percentages of families receiving a family income from all sources of $40,000 or less were:
•  24.7 percent for couples without children
•  60.6 percent for one-parent families
•  10.2 percent for couples with child(ren).

Saturday, September 13, 2014

Not the time to change direction

Listening to Hekia Parata yesterday talking about the increasing secondary school achievement of Maori and Pacific Island youth, I wondered how much this is influencing the dropping teen birth rate. Perhaps more than the welfare reforms?

Figure 2: Percentage of school leavers with at least an NCEA Level 2 qualification or equivalent, by ethnic group (2009 to 2013)

Earlier in the week I posted about the halving of 16 and 17 year-old sole parents dependent on welfare since 2008. It's not simply  because they aren't receiving benefits. It's because there are far fewer of them.

I asked Statistics New Zealand for data relating to births to 16 and 17 year-olds which arrived the same day. Good response time.


Interesting (but possibly insignificant) that the birth numbers (very broadly-speaking) decline under National governments and increase under Labour.

What is known is prisons are full of offenders who were born to very young mothers (or are subsequent births to her). They have been neglected or abused, and subsequently spent time in state institutions or foster care growing up. They are on a path to prison from birth.

So the dropping adolescent birth rate will also dovetail well with the working prisons and more rehab services policy, plus Anne Tolley's new approach to gangs. There is every reason to expect a drop in crime and prison populations.

Without getting overly excited  I wonder if, in time, we will be able to look back to 2008 and pinpoint it as the year NZ really began to get breakthrough on inter-generational social problems that have plagued some parts of the country and some parts of society for a very long time.

(After watching Dark Horse last weekend, an insight into gang life in Gisborne which depicted some kids escaping though the reality weighs that many more do not, I want to believe change is afoot.)

Friday, September 12, 2014

Compelling words from MSD Chief Executive

I found the speech from Brendan Boyle, the CE of MSD, at the Ashburton service yesterday, and re-produced at the MSD website, quite compelling.

Here is an excerpt:

Those who do this work also need to be safe.
Their families should not have to fear that they will not return home at the end of the day.
In the days, weeks and years ahead we will continue to think about, and learn what we can from what happened.
I take my responsibility for this seriously.
I will be asking myself, over and over, what more could I have done?
I know others are doing the same thing, and that at times we feel as if we are searching in darkness.
I’ve heard it said that it is better “to light one candle than to curse the darkness”.  We are looking for those points of light, those things we can learn from what has happened. 
Every action we take so that in the future staff will be safer will be a tribute to Leigh, and Peggy, and all victims of this terrible act.
But while we look for lessons, we cannot ignore the darkness.
We must not hesitate to condemn, utterly, the evil that occurred in the Ashburton office that day.
We may in time learn to what extent it was a result of social conditions, or medical issues, or psychological processes, or an act of will, or all of these.
But the victims – those who have died and those who must live with these memories – bear no responsibility for what has happened.
By seeking concrete actions for the future we honour the victims, and we push back against the darkness.
Already, our people are reflecting on what has happened and, putting aside their shock and anger, concentrating on what this means for us and our relationship with clients.
We respect those who need our services.
I see indications that we will be stronger in our expectations of mutual respect.
We will not be less tolerant but we will be more willing clearly to say what cannot be tolerated.

Thursday, September 11, 2014

Cunliffe's criticism over-eager

CPAG point out Key's statistical blooper on child poverty last night.

Mr Key said of the 260,000 children defined as in poverty, 11 percent are in working families while 75 percent are in benefit-based families.'

These figures are completely wrong, says CPAG spokesperson Professor Innes Asher. The Ministry of Social Development's Household Incomes Report key findings say:
Poverty rates for children in working families are on average much lower than for those in beneficiary families (11% and 75% respectively), but 2 out of 5 poor children come from families where at least one adult is in full-time work or is self-employed.

Key memorised the numbers accurately but their context incorrectly. An NCEA marker would give him points for being half right.

And Cunliffe milks it...

John Key is so out of touch with the working poor in New Zealand he underestimated the number of children in poverty by more than 70,000, Labour Leader David Cunliffe says.
“During last night’s leader’s debate, John Key said 11 per cent of children in poverty are in working families. However, figures from the Ministry of Social Development show that figure is 38 per cent.
“The National Party Leader has convinced himself that it is mainly beneficiaries who are living in poverty.
“Sadly the reality is that under his Government a new generation of working poor has emerged.

...rather too eagerly

Also according to MSD figures: 2004, of all children identified as poor, around half were from households where at least one adult was in full-time paid employment

-   - in 2007, this proportion had dropped to just over a third
So the "working poor" pre-dates National's most recent term.

The important things to note about children in working families living below the 60% median household threshold (some on a mix of benefit and wages) are these children tend to be in temporary rather than chronic 'poverty', and not experiencing 'deprivation'.

A major National success story

During last night's debate, John Key made a crucial point during the minimum wage brawl. He described how, when they looked at the unemployed aged 30-39, they found X percent (I think he said half - fill in the blank if you remember) had started in the benefit system as teenagers. That is why he doesn't want to see high minimum wages shut teenagers out of the labour market launching them onto a long-term career on the dole.

This has been  a strong focus for National  this term. Keeping young males and females out of the system from the outset. And it relates to some OIA data I received yesterday.

Looking at sole parents (mostly females) I wanted to track the numbers since 2008. But changes to benefit categories make it impossible to quantify with publicly available statistics eg When the DPB was replaced by Sole Parent Support some beneficiaries were transferred onto Jobseeker Support, those with children aged 14 and older.

So I asked MSD how many sole parents were on any benefit in 2008, 2011 and 2014 (June quarter).
Knowing they would provide working age numbers (18-64) I also asked for sole parents aged 16-17.

The results are graphed below. 18-64 year-olds follow an expected pattern - up during the recession. Though it should be noted that today the numbers are lower than after the economic boom period up to 2008.

Most interestingly though, the 16-17 year-old numbers have just plummeted. Across all ethnicities! Exactly what National wanted to achieve. And it's not a the result of more 16-17 young parents being denied assistance. The teenage birth rate is also tracking down quite significantly.

This development cannot be overstated in importance. It means fewer children at risk of ill-health, under achievement, neglect or abuse, disaffection and drop-out, ending up in state care, and ultimately convictions and imprisonment - all most common among children with very young parents.

It represents a break in the inter-generational cycle of social dysfunction. Truly good news.