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Lindsay Mitchell

Reforms Could Arguably be Worse than the Status Quo

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The National government’s long awaited welfare reforms are at best a rehash of previous efforts to reduce the cycle of dependency. At worst, they may increase it. What better way to worsen inter-generational dependency than tell people on the DPB that if they want to avoid working they should have more children?

Of course not all would take this course of action. Some do want to work. But then, people on the DPB who do want to work are not the problem.

Around 5,000 children are already added to an existing benefit each year, so even without work-testing there is an established pattern of behaviour created through cash incentives. Additional children mean increased income. The reform fact sheets issued by the Ministry this week showed that a DPB recipient with two children living in Auckland would typically receive $580 a week. That is 14 percent more than someone working full-time on the minimum wage earns . It isn’t difficult to understand why people would seek to stay on a benefit.

If the birthrate of benefit dependent women rises, more children will be raised long-term on welfare. These children are far more likely to become beneficiaries themselves, hence inter-generational dependency will increase.

National introduced work-testing last time they were in government. Over the period it applied the DPB caseload dropped by 3,000 or 2.7 percent. Hardly a resounding success.

Their reforms to the sickness and invalid benefit are barely worthy of the word ‘reform’. The medical certificate required to gain eligibility will be re-designed. But it was re-designed in 2007 under Labour’s reform programme, Working New Zealand. Additionally we are told that applicants for the invalid’s benefit who are expected to be able to work part-time in the next two years will instead receive a sickness benefit. That is the existing criteria for eligibility.

National’s plans very much resemble what John Howard introduced in Australia in 2006. According to the Sydney Morning Herald, The reforms introduced a much tougher social security regime that aimed to end long-term welfare dependency and cut the growth in welfare rolls…in the year after the reforms the same numbers were added to the disability pension rolls as in previous years. These rose from 712,000 in July 2006 to 757,118 three years later.

In the United Kingdom new applicants for an incapacity benefit are now put through a rigorous work assessment resulting in a majority being sent to the dole queue. Yes, that may shift the problem, but it means those beneficiaries are subject to the same work obligations as other unemployed people.

Finally, while there is nothing wrong with making unemployment beneficiaries reapply for the dole after a year, 84 percent of current recipients don’t reach that milestone. This reform has received probably the lion’s share of attention (and has been wrongly described as a time-limit), yet the unemployment benefit is the least worrying in terms of its contribution to long term and inter-generational reliance on welfare. Since the 1990s the numbers on the dole have plummeted and have only recently climbed due to the recession. The unemployment benefit largely reflects the labour market. When there are jobs, the numbers will fall. In a recession, unfortunately they will rise.

The main drivers of a culture of dependence are the DPB, which has morphed into an alternative lifestyle for uneducated and unskilled females, and sickness/invalid benefits which allow demoralised , depressed and ailing long-term unemployed people to languish.

Reducing dependence requires a government to not just move people off welfare but discourage them from going onto welfare. Nothing in the Future Focus package achieves that. It simply makes beneficiaries jump through more hoops. And the promise of an unconditional benefit until their youngest child turns six is not a deterrent to prospective domestic purpose beneficiaries. To a young female, 6 years away – or longer if she has more children – is a lifetime.