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Dr Muriel Newman

Comprehensive Welfare Reforms Now Underway

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Welfare reform Minister
The welfare reforms that came into force this month have been described as the biggest changes to the benefit system since the original Social Security Act was passed into law in 1938. The underlying generosity of that scheme – which created a wide range of assistance measures including the Sickness, Invalids’, Unemployment, Emergency and Widows’ Benefits – is attributed as helping to keep Labour in power until 1949.

At the time critics complained that by increasing the range of benefits and the size of the bureaucracy, Labour’s “cradle to the grave” welfare system was not only too expensive, but it would make New Zealanders overly dependent on state handouts.

Those warning were prophetic.

Over the years our welfare rolls burgeoned – especially once the stand-alone Domestic Purposes Benefit was introduced in the early seventies. Pushed by feminists as a way of enabling women to raise their children independent from men, the DPB incentivised family breakdown – undermining marriage and creating widespread fatherlessness.

New Zealand now has one of the highest rates of sole parenthood in the world – especially amongst unskilled women who have come to regard the DPB as a viable lifestyle option. According to the 2006 census, 25 per cent of all children and 43 per cent of Maori children lived in sole parent families in New Zealand, compared to the OECD average of 16 per cent.1

The number of women receiving the DPB, who keep on having more children, has continued to grow – up from 3,300 in 1997 to 4,800 in 2010, making up 7.5 percent of all babies born in New Zealand that year. By last November, almost 30 percent of all women on the DPB had given birth to another child at least once since 1993. Of the women who had a new baby last year while on the DPB, 59 percent were Maori, even though Maori made up only 22 per cent of women who gave birth in the year to March.

The basic problem with welfare was the design of the system: based on rights without reciprocal obligations, welfare soon became a dependency trap – too easy to get on, and too hard to get off. As a result, generations of able-bodied families became trapped in an underclass, where no-one had jobs, education was discouraged, relationships were transient, violence and abuse were commonplace, and drugs and booze were prioritised over food and medicines for the children. Tragically, for many of the children, being brought up in such homes meant that they too repeated the cycle of dependency.

Anyone seriously researching welfare could not help but see how broken the system had become. During my nine years as a Member of Parliament, I relentlessly pushed for reform. Around the world, other countries had recognised the welfare trap and were much better than New Zealand at supporting the vulnerable in society, without creating intergenerational dependency and harming children.

In a sobering report produced last year, Auckland University researchers found that five out of every six children who were abused or neglected before they were five years old, lived in families on welfare. The rate of abuse was ten times higher for children living in families dependent on benefits than for children whose parents had never been on welfare. In addition, most non-accidental child deaths in New Zealand occur in dysfunctional families on welfare.

Last year the Ministry of Social Development’s principal health adviser, Dr David Bratt, described the health risk of entrenched welfare as being greater than most dangerous jobs. He called welfare “an addictive, debilitating drug with significant adverse effects to both the patient and their family – not dissimilar to smoking”. He has likened the health risks of long-term welfare dependency as being equivalent to smoking 10 cigarettes a day.2

In 2007, in a State of the Nation address, then Leader of the Opposition John Key, who had grown up in a family that relied on state support from time to time, signalled his intention to tackle the problem of intergenerational welfare dependency and the growing underclass:

As New Zealanders, we have grown up to believe in and cherish an egalitarian society. We like to think that our children’s futures will be determined by their abilities, their motivation and their hard work. We want all kids to have a genuine opportunity to use their talents and to get rewarded for their efforts. That’s The Kiwi Way.

There are streets in our country where helplessness has become ingrained. There are streets of people who believe they are locked out of everyday life. The worst are home to families that have been jobless for more than one generation; home to families destroyed by alcohol and P addiction; home to families where there’s nothing more to read than a pizza flyer; home to families who send their kids to school with empty stomachs and empty lunch-boxes…

These are tough problems – very tough problems. But I have no intention of being a Prime Minister who tackles only the easy and convenient issues. I don’t pretend I’ve got all the solutions. But I can tell you that dealing with the problems of our growing underclass is a priority for National, both in opposition and in government.3 

John Key has made good on his promise to address New Zealand’s dependency problem. In 2010, he established the Welfare Working Group to undertake a comprehensive review of our welfare system, and he is now methodically implementing many of their recommendations.

This new tranche of reforms consolidates all of the old benefits into three new categories – Jobseeker Support for those actively seeking and available for work, Sole Parent Support for sole parents with children under 14 years of age, and a Supported Living Payment for people significantly restricted by sickness, injury or disability.

For some beneficiaries the changes will extend their work requirements and will require them to undergo drug testing, since over 40 percent of jobs now advertised with Work and Income require applicants to be drug-free. Anyone with outstanding arrest warrants is expected to clear them within 38 days or face losing their benefit. Sole parents of young children have new obligations – to ensure that they are enrolled with a doctor, get their Well Child checks, engage in early childhood education, and, if they are of school age, attend school.

The new welfare system takes an “investment approach”. The actuarial valuation of the lifetime cost of all beneficiaries (based on expected benefit durations before the reforms began) was $78 billion, with sickness and invalid beneficiaries accounting for 54 percent of the cost, sole parents 38 percent, and the unemployed just 8 percent. The new system focuses assistance on beneficiaries who are capable of working but are likely to stay on welfare in the long term unless they get help.

A priority group is the 58,000 people who had been on a sickness benefit, but have now been moved onto Jobseeker Support. This group will be in a “work-focussed case management” stream, a new intensive programme for up to 85,000 beneficiaries who face significant barriers to employment.

A trial programme that was piloted in 24 Work and Income offices around the country since last October has produced some exceptional results. The intensive case management of 10,000 hard-core beneficiaries has resulted in 6,000 leaving the benefit system – over half had found jobs and the rest were no longer meeting eligibility requirements and had cancelled their benefits.

The majority of the unemployed will be in a “work-search” stream, and the balance of beneficiaries will be in a “general case management” stream. 

The new medical certificates that doctors will need to sign if a patient is sick will now focus on identifying a person’s capacity for work and the barriers they face to employment. There is also a change for those who were on the old Invalids’ Benefit – now a Supported Living Payment. While the basic criteria, that they are unable to work for 15 hours a week and are expected to remain in that situation for the next two years hasn’t changed, those who are capable of participating in some form of work activity are being encouraged to explore such possibilities in order to identify any supports they would need to be able to work.

Under the old system, New Zealand’s welfare rolls had continued to expand, largely because the majority of beneficiaries were not subjected to any form of work testing or proper scrutiny. In those conditions welfare fraud and abuse flourished. 

Things have now changed. Work tested beneficiaries on Jobseeker Support are required to turn up for an annual interview and as a result, tens of thousands of beneficiaries have already removed themselves from the welfare rolls rather than risk being caught for benefit fraud. Extensive data-matching between government departments is now underway and in the last six months, more than 3,000 cases of benefit fraud were uncovered totalling $34 million.

Then there is “soft” fraud: people who turn up for job interviews looking unkempt or wearing pyjamas; people who smoke more dope to claim an addiction and an exemption from work testing and drug testing requirements; women who get pregnant to avoid work; people who exhibit such a bad attitude that no-one in their right mind would ever want to employ them.

It is to address these sorts of issues that some countries have introduced time limits on welfare for the able bodied – say a two-year limit on the continuous use of welfare with a five-year lifetime limit – to ensure there are proper incentives in place for beneficiaries to want to find work.

While the lack of availability of jobs is a significant factor affecting the ability of the unemployed to move off welfare at the present time, it is worth noting that many industries – including agriculture – are finding it very difficult to attract workers and are having to look at importing labour from overseas. It appears that many Kiwis no longer want to work on farms, which seems a ridiculous state of affairs for an agricultural nation – especially as farm life would give young people in particular, an excellent start in the workplace.

This week’s NZCPR Guest Commentator is welfare reform advocate Lindsay Mitchell, who has worked tirelessly over the years to expose the problems with the welfare system, and has helped to create the present climate for change:

“Politically National has the balance just right – for now. The new Sole Parent Support is still too generous in terms of how long a person can rely on the taxpayer. For a young, potential sole parent, five years before being asked to look for as little as 12 hours work a week, and 9 more before being expected to work full-time, is still a reasonably comfortable prospect. Other countries – the United Kingdom and Australia – have been more stringent in making their single parent benefits less attractive. The United States, of course, introduced time limits, a debate New Zealand still needs to have.

“All in all though, National has enhanced its prospects of re-election with the reforms so far, and that is of paramount importance. Otherwise, there is a very real danger of Labour returning to power and, as it did after 1999, undoing worthwhile changes National has made. Or even expanding welfare, if buckling to Green demands.”

In a truly compassionate society, welfare should be available to provide a helping hand to those in need, but for the able bodied, the system must provide a pathway back to independence from the state. New Zealand’s welfare system is finally moving in this direction. Only time will tell how successful it will be.

This week’s poll asks:

In principle, do you support the concept of time limits for welfare?

Click HERE to see the results