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Dr Muriel Newman

Has Welfare Reform Gone Far Enough?

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CC_rebuildThere is a real problem with welfare when a country that has more than 11 percent of its working age population dependent on benefits, has to import unskilled labour. Statistics show net migration to New Zealand is at a 10 year high. In the year ending February, 96,900 people came into the country – a rise of 13 percent – while departures fell 20 percent to 67,800. Auckland was the most popular destination with a net gain of 13,700, and Canterbury was the second most popular destination, with a net gain of 5,100 migrants – many of whom were labourers going to Christchurch for the rebuild.

With an estimated 67,000 Kiwis aged 15-24 not in any form of education, training, or work, political reporter Duncan Garner has asked “Why on Earth are we importing builders to a country already facing a serious shortage of housing stock, when we could be training up young people here to do the work? We need to get these young Kiwis off their backsides and into apprenticeships. I’m not suggesting that every beneficiary currently claiming the dole doesn’t want to work – but we all know there are plenty who’ll do anything to not get a job”. Duncan suggests the answer is a policy change: “If you refuse to go into some form of trades training you don’t get the dole”.[1]

First, some statistics. As at December 2013, there were 321,000 people receiving a main welfare benefit.[2] In terms of duration, 98,000 had been on a benefit for less than a year, and 223,000 for more than a year. In terms of ethnicity, 136,000 identified as NZ European, 108,000 as Maori, 24,000 as Pacific Islanders, and 52,000 as ‘other’. And in terms of age, 63,000 were aged 18-24, 97,000 were 25-39 years, 99,000 were 40-54 years, and 62,000 were 55-64 years.

With regards to the three main benefits, 130,000 were in receipt of Jobseeker Support – 71,000 were ready for full-time work of at least 30 hours a week, while 59,000 (formerly on the Sickness Benefit) had health or disability issues but were expected to return to full or part-time work.

There were 77,000 sole parents receiving Sole Parent Support – 43,000 had dependent children under the age of 5 years and were not expected to work, while 34,000 had children aged 5-13 and were expected to be available for part-time work of at least 15 hours a week.

There were 92,000 people receiving Supported Living Payments (formerly the Invalid Benefit) – 84,000 with health conditions or disabilities that would preclude full-time work, and 8,000 carers.

In looking at these figures, while the global financial crisis significantly expanded our welfare rolls, the growing economy is now increasingly providing job opportunities for the unemployed. The problem, however, is that for too many New Zealanders, welfare has become an entrenched way of life.

New Zealand’s dependency problem was exacerbated by Helen Clark’s Labour-led Government. During their administration they relaxed welfare rules to make it easier to get onto a benefit – and harder to get off. In particular, they removed the work test requirement on sickness beneficiaries, and as a result, a flood of the unemployed became too sick to work. They removed the stand down requirement for the Domestic Purposes Benefit so sole parents who were tired of working could quit their job one day and go onto the DPB the next. They then extended the availability of the DPB so sole parents did not need to re-enter the workforce until their youngest child was 18 years old.

Under Labour, only a minority of welfare recipients – those on the Unemployment Benefit – were required to look for work.

Given the overwhelming evidence that long term welfare dependency is not only bad for the health of families, but is dangerous for children, National has now introduced a comprehensive set of reforms to tighten up welfare and ensure it will lead to employment for those capable of working.

Full time work requirements are now in place, not only for the unemployed, but also for people with short term health and disability issues, widows, and sole parents whose youngest child is fourteen years or older. And part time work requirements are in place for beneficiaries with more serious health and disability issues, as well as for sole parents with children aged from 5 to 13 years old.

The requirement for job seekers to re-apply for their benefit each year is resulting in thousands of people quitting the system because they are already working. The need for beneficiaries to clear outstanding arrest warrants – or have their benefits suspended – has resulted in thousands of warrants being cleared.

Beneficiaries are required to take up offers of suitable work or training – including temporary or seasonal work – or their benefit will be stopped (or reduced if they have dependent children). Similarly, if they do not take and pass a drug test when required by a potential employer or training provider, their benefit will be stopped or reduced.

The requirement for beneficiaries, who should be looking for a job, to notify authorities if they intend to travel overseas – or have their benefit stopped – resulted in 21,000 benefits being suspended last year. More than 1,750 people had their benefits suspended for multiple unauthorised trips.  During that same period, there were 13,000 authorised overseas trips.

Parents on welfare are expected to meet social obligations – to ensure their children are enrolled with a GP, that their Well Child health checks are up to date, that three and four year olds are involved in early childhood education, and five and six year olds attend school.

There are new requirements for 3,000 teenage parents to become involved in money management with specialist youth providers who ensure their bills are paid directly, and that grocery money goes onto a payment card – that can’t be used for cigarettes or alcohol – leaving $50 for discretionary spending.

Some 9,000 young people who were not in education, training or employment, have been connected to Youth Services, and 63 percent are now engaged in education.

The new work obligations on sole parents that require them to look for part-time work when their youngest child turns five, and fulltime work when they turn 14, has resulted in an increase in the number of sole parents who have found jobs – up from 9,715 in 2009 to 12,772 last year. Under the new rules, any solo parent who has another baby while on a benefit will be required to undergo work testing when the baby is a year old, with their work obligations determined by the age of their next youngest child. The policy is expected to apply to an estimated 4,700 parents a year.

The Minister of Social Development, Paula Bennet, says every week more than 1,500 people move off welfare into work. That’s fantastic, but is it enough? Are the reforms sufficient to ensure people take up those stepping stone jobs that they may not want to do in the long term, but that need to be done either by New Zealanders or by imported labour?

This week’s NZCPR Guest Commentator is Lindsay Mitchell, a welfare researcher who shares our concern about whether the welfare reforms introduced by National have gone far enough to reduce long term benefit dependency:

“The only emphatic success in reducing beneficiary numbers that I am aware of in the developed world came after the introduction of time-limits in the United States. Under Bill Clinton the federal government made it illegal for states to use federal funds to support Temporary Assistance for Needy Families (TANF) clients for more than 60 months. Individual states could impose stricter limits if they wished or use their own public funds to extend limits.

“As well as requiring time-limits the federal government capped what they would pay for TANF which has slowly reduced its value. At the same time housing subsidies and food stamps are available to cushion the impact. But people are discouraged from getting into a situation where they need to apply for this type of assistance. This may well be one of the reasons the teenage birth rate is now falling – the greatest reduction is amongst the poorest ethnic groups.”

The welfare reforms Lindsay has mentioned were the brainchild of Tommy Thompson, the former Governor of Wisconsin – a dairy state of 4 million people in northern USA. In the early nineties, Governor Thompson instigated a series of reforms aimed at lifting 100,000 sole parents out of entrenched poverty through work. At the heart of his proposals – which resulted in a remarkable 90 percent drop in the number of sole parents on benefits during the time he was governor (1987-2001) – were two important requirements.

First and foremost, welfare recipients were intensively case managed and supported – with childcare assistance, budgeting advice, help with addictions and mental health issues, CV preparation, transportation, and so on – to overcome their particular barriers to work. They were required to ‘turn up’ each working day to a job centre to engage in training and other activities designed to instil in them the disciplines and habits of the 40-hour-a-week workplace.

Secondly, time limits were introduced for the able-bodied to create a sense of urgency – a two year time limit on continuously receiving a benefit, and a five year lifetime limit.

These changes motivated beneficiaries to take up jobs. In particular, having to turn up each day to a job centre made them realise they could turn up each day to work and make more money. Time limits were treated like savings in the bank – something to be reserved for times of genuine need.

With these key incentives in place, welfare rolls tumbled, and the policies were picked up by President Clinton to become federal law.

When National was proposing their welfare reforms, I argued in favour of combining the sole parent benefit with Jobseeker Support to ensure that anyone contemplating single parenthood clearly understood that if they went onto a benefit they would be expected to get a job and become the breadwinner for their family. Unfortunately over the years, the DPB had created an expectation that it was the responsibility of taxpayers to fund sole parents to raise children through to adulthood. Given the negative impact that long term benefit dependency has on children raised in sole parent households, that myth needed to be comprehensively dispelled.

Benefit reform papers released under the Official Information Act, show that Treasury had also recommended that all DPB clients should be included in a work focussed benefit: “This new benefit would provide a clear signal that, while in some cases people would be exempt from work (eg sole parents with a youngest child under 3) there is a general expectation that the Work Focussed Benefit clients would move into work.”

New Zealand remains one of the only a handful of countries that have a separate benefit for sole parents. It has led to some of the highest sole parent poverty rates and the worst child abuse rates in the OECD. Isn’t it time that child advocates – like the Children’s Commissioner – started focussing on this? Shouldn’t they be recommending further reforms to fast-track sole parents off welfare and into employment, so they can build a better future for themselves and their children?



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1. Duncan Garner, Unemployed should be forced to work
2. Ministry of Social Development, Benefit Fact Sheet