Consider again the US reforms:

The welfare reform of 1996 replaced the old Aid to Families with Dependent Children (AFDC) with a new program named Temporary Assistance to Needy Families (TANF). The key to welfare reform’s reduction in dependency was the change in the funding structure of AFDC.

Under the old AFDC program, states were given more federal funds if their welfare caseloads were increased, and funds were cut whenever the state caseload fell. This structure created a strong incentive for states to swell the welfare rolls.

When welfare reform replaced the old AFDC system with TANF, this perverse financial incentive to increase dependence was eliminated. Each state was given a flat funding level that did not vary whether the state increased or decreased its caseload.[1]

With this in mind, it is possible to envisage a similar exercise in New Zealand, taking matters a step further. If Work and Income New Zealand were i) regionalised and ii) privatised, with an initial flat government funding allocation based on its current caseload, the new operator would be incentivised to reduce beneficiary numbers, with the excess funding treated as profit. The funding contract would then be periodically renegotiated based on the caseload at time of negotiation. The change would obviously need to be accompanied by the legislative reform already outlined – time limits, new qualifying criteria, and so on.

Regionalisation (or tribalisation for that matter) allows for competing operators and increased efficiencies. The model could include urban Maori authorities.

Of course, the risk for the private operator is covering increasing demand between contracts. But the operator has protection from this scenario with the new eligibility rules. They also have an opportunity to provide profit-making employment or childcare services. Key here is flexibility and innovation at a local level unachievable under the present, no-incentives, state-run monopoly.

Flying some mana aute (kites)  

Outside of this proposal a handful of other ideas are worth mentioning.

Partial privatisation

Grandson of Sigmund Freud, Sir David Freud, a key welfare adviser to Gordon Brown, recently defected to the Conservative Party, where he will take a front bench position. His ‘big’ reform idea is for private companies to be paid a significant amount of money to keep former beneficiaries in a job for a minimum of three years. The employer receives nothing if they fail. Freud has calculated that an employer could be paid as much as £62,000 (NZ$158,500) per beneficiary and sees this as a way of letting the market, rather than the state, decide who can be on welfare. Entrepreneurs would have an incentive to seize the opportunity to provide large-scale employment opportunities for typically difficult-to-employ groups, for example, Bangladeshi women.[2] Again, such a scheme would present opportunities for Maori entrepreneurs. There is no reason why this idea couldn’t be incorporated with my earlier proposal.

Loans instead of benefits

There is a view, which I have heard expressed more than once, that all income support should be by way of repayable loans. Certainly beneficiaries in this country do borrow from Work and Income New Zealand, some to a significant and problematic degree. But these loans are on top of their basic entitlements.

Loans may work for people who expect to resume earning or receiving support elsewhere – those temporarily incapacitated, between jobs or relationships. They might also prove an effective disincentive for the young never-partnered single parent. If she wants to spend her early years being a stay-at-home mum then she can borrow in the same way that a student borrows. Not a very lucrative prospect.

However, in respect of those who are genuine invalids from birth or become invalided at a later point, their call on the state for ongoing support is warranted, a sentiment that surveys show members of the public support.

Private banks would not lend to people with little or no prospect of repayment, for obvious reasons. To make loans the only form of income support would generate a mountain of bad debt. If the burgeoning student and child support debts were Taranaki and Ruapehu, income support debt would be Everest.

Interestingly, and unsurprisingly, there is no social security system that operates with loans as a basis for all assistance. Perhaps though, accompanied by tax relief, part of the current social welfare budget could be effectively reduced through some adoption of loans. Such an idea might fall nicely into an ‘opting-out’ scenario -– which brings me to another worthy ‘kite’.

Opting-out

This is the proposal of Australian think-tank, the Centre for Independent Studies. Briefly, people should be allowed to opt-out of the public health and welfare system in return for commensurate tax relief and assuming an obligation to finance their own needs privately. This idea has recently been championed in New Zealand by the architect of the 1980s economic reforms, Sir Roger Douglas. It is an idea that resonates with people of means. However, as Maori collectively consume almost as much ‘social benefits in cash’ as they pay in tax,[3] this option may not be a reality in the near future. Indeed, such a strategy adopted nationally could pose real problems in raising enough funds to cover future social security needs. Again, it might be feasible if, and only if, dependency is reducing.

In reality there is nothing preventing a mix of all of these ideas forming a new and improved safety net.

Summary

In prioritised sequence my recommendations are as follows:

·      replace the DPB with temporary assistance only;

·      replace state-funded unemployment benefits with private unemployment insurance;

·      tighten eligibility for sickness and invalid benefits;

·      consider assistance-in-kind and income management as stop-gap measures only;

·      consider privatising income support delivery to improve efficiency and incentives and allow for Maori ownership;

·      consider empowering employment entrepreneurs, and increased use of loans and opting-out as features of a future safety net system.

But what about the recession?

There is an understandable view that now is a bad time to be talking about reforming welfare. On the contrary: there is no bad time to be trying to reform welfare.

If increasing resources are going to be needed for unemployed people, an effort to reduce dependency on other benefits is doubly urgent.

Traditionally, when unemployment rises, so do numbers on the other main benefits. During the period 1986–90, numbers drawing a sickness benefit rose 105 percent and drawing the DPB, 52 percent.[4] The numbers rise, in part, as an indirect result of growing unemployment. Families break up, sometimes because of the stress of unemployment but also because they want to maximise entitlements. People seek reclassification on to better paying benefits as the prospect of re-employment becomes increasingly remote.

This must be prevented, especially as the labour market is dynamic. For instance, during 2008 the part-time workforce grew by almost 4 percent while the full-time labour force was static. It is an ill-wind that blows nobody any good. Part-time jobs are better than no jobs and ideal for DPB mums returning to the work force.

If the government is genuinely keen to create jobs, the kind of entrepreneurial initiative David Freud proposes would be a better use of taxpayer funds than subsidising reduced productivity through shortened working weeks.

There is apparently a serious shortage of private childcare in New Zealand, yet we have about 50,000 DPB women being paid and housed to look after just one child. There is a job creation opportunity going begging.

It seems to me that a recession calls for more hands on deck – not fewer.

Above all, it is a matter of utmost urgency that the government does everything in its power to discourage newcomers into the system. Too many have been apathetically defaulting to, or actively choosing, welfare for too long. That is not how a bona fide safety net operates.

Conclusion

There can be no doubt that Maori have, at times, been treated unfairly, patronised, exploited, duped and marginalised. We live, though, in times of reconciliation and reparation. New Zealand has established an unmatched record in this endeavour. Despite this, some Maori academics and politicians continue to blame past deeds for present depression and deviancy, thereby handing ‘victims’ a passport to languish. Teaching blame is the antithesis of teaching aspiration. Negligent leaders have told Maori that the Pakeha world owes them a living in the same way that radical feminists told women the male world owed them one. Resentful dependence is thus perpetuated.

Some ambiguously promote more benefits and higher payments[5] while simultaneously acknowledging the dangers of handing out easy money for no effort. Others have come closer to grasping the nettle but have not carried sufficient political clout to make reform a reality.

In terms of welfare policy, we stand at a crossroads. Either Maori will insist on finding their own ‘solutions’, which could inadvertently lock in further addiction and dysfunction, or the government of the day will continue to pursue a one-policy-for-all approach. If some Maori determine a need to find solutions rooted in traditional concepts, such as tribal committees, these must be purely transitional. Running the lives of beneficiaries as if they are children, in order that the real children get to school and learn independence through education, should be no more than a stop-gap.

In the long run, this is the only approach that will further Maori aspirations. We must not seek to be separate peoples. I would go further. In my experience, Maori do not reject the helping hand of Pakeha if the help, be it material, practical or emotional in nature, is offered generously not high-handedly, condescendingly or self-servingly. To remove government from a near-monopoly on welfare provision, more individuals will need to get involved at an intimate level. We need to do a lot more than pay lip service to the process of mentoring.

Once much was talked about ‘breaking the cycle’. Now the phrase seems to have faded from use as generation after generation has proved stubbornly immune to the efforts of social workers, case managers and the opportunities presented by a strong economy. That is because welfare payments of the existing kind disrupt the natural order of social structures and human incentives: the greater the level of welfare, the greater the disruption.

Despite global economic uncertainty, current conditions continue to allow for bold policy moves. (Indeed, it may transpire that global conditions demand those moves.) Employment opportunities still abound. It gets progressively easier to avoid unwanted pregnancies and premature parenthood. Maori females have unprecedented access to education and careers, as do Maori males.

The time is ripe for Maori to make welfare reform as important as pursuing Treaty settlements. The gains for Maori society as a whole would be far greater in the long run.

---