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