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Dr Muriel Newman

Reforms focus on work

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New Zealand has always had a strong welfare state tradition. In its original form, as introduced by Michael Joseph Savage in 1938, state welfare supplemented the community-based charitable efforts that had traditionally assisted the needy. For thirty years until the late sixties fewer than 15,000 people received state welfare, with under a thousand unemployed.

In the late sixties, however, amidst growing concerns that the benefit system was losing relativity with rising living standards, the Holyoake Government established a Royal Commission of Inquiry to review New Zealand’s social security system. The Commission, under the chairmanship of Sir Thaddeus McCarthy published its report, Social Security in New Zealand, in March 1972. Many of the recommendations were adopted by the 1973 Kirk Labour Government, but there were three recommendations in particular that were responsible for changing the social structure of New Zealand by giving rise to a permanent dependency culture and an emerging underclass.

The first of these recommendations changed benefit eligibility from being needs-based and available only to those ‘of good moral character and sober habits’, into a universal entitlement. That destroyed the well-established social contract that had existed between taxpayers and the government that ensured that only good citizens who met community standards were eligible for state benefits. From this point the welfare system began to reward indolent and destructive behaviours such as alcoholism, drug addiction, and criminality and removed moral responsibility from those receiving welfare.

The second was the raising of benefit levels to be closer to a working wage. Instead of welfare providing temporary support sufficient to tide people over until they found a new job, the Commission wanted a beneficiary to “enjoy a standard of living close enough to the general community standard for him to feel a sense of participating in the community and belonging to it”. As a result, the need for a beneficiary to find a job to make themselves appreciably better off disappeared. This established a base from which long-term inter-generational welfare has grown.

The third was the introduction of the Domestic Purposes Benefit to provide support for an estimated 20,000 sole mothers and their dependent children to escape from violent relationships. Despite being well intentioned, over the years the numbers on the DPB have mushroomed. There are now 114,000 sole parents and 180,000 children dependent on the DPB. A third of these women became parents as teenagers, and half have spent three quarters of the last ten years on a benefit. Around 29 percent of women on the DPB have given birth to one or more additional children whilst on the benefit since 1993. Over 90 percent of these women are single, and most who started on the DPB with a newborn baby have never had a job. In spite of its lofty ideals, the stark reality is that the DPB has become a lifestyle choice for unskilled teenage girls – despite the overwhelming evidence that the outlook for their children is dismal.

The introduction of the DPB represented a landmark change to our welfare system. It was the first benefit made available for reasons of personal choice, such as no longer wanting to remain married, rather than for reasons outside of a person’s control such as the death of a spouse, the loss of a job, injury or accident. Its introduction reinforced the view of other countries that New Zealand was indeed the social laboratory of the world.

Almost forty years on we know the results of that social welfare experiment.

  • One in seven working age New Zealanders is reliant on a benefit.
  • 222,000 children live in families dependent on welfare.
  • Welfare has become intergenerational, spawning an underclass of fragmented families entrenched in second and third generation benefit dependency, who no longer hold traditional values of work, study and self-improvement, but expect the government to provide for them no matter what sort of destructive antisocial behaviours they exhibit.
  • Children are the ones to suffer most when brought up in single parent families dependent on welfare. It’s the children who are most likely to feature in the future statistics on child abuse, alcohol and drug addictions, teenage pregnancy, youth suicide, educational failure, violence and crime.

Far from giving those on welfare dignity, as supporters of the present system like to claim, it entrenches beneficiaries and their children to a life of state dependency – and that’s something all politicians should be ashamed of.

In a state of the nation address in 2007, then Leader of the Opposition, John Key, pledged to tackle the underclass problem and reduce New Zealand’s long-term benefit dependency culture. He explained, “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; and home to families where mum and the kids live in fear of another beating from dad”.

His commitment to turn this situation around led to the establishment of the Welfare Working Group in 2010 and the formulation of a comprehensive set of reform guidelines. The welfare reform programme that National is now rolling out is based on this work and represents the most significant re-alignment of welfare policy settings since the seventies.

At the heart of the reform programme is an over-riding belief that people who can work are better off in jobs than on a benefit. The evidence is also overwhelming, that children living in families where there is a role model of a working parent do better than those dependent on benefits. Yet in spite of that, the Labour Government’s 9-year legacy on social welfare was a system where only a third of all working age beneficiaries were work tested. Even at the peak of the labour market shortages in 2007, when the economy was growing strongly, 300,000 working aged New Zealanders remained on welfare – that was 10 percent of the working aged population. In other words, under Labour the main focus of welfare was income support, not helping people back to work.

National’s reforms are based on the notion that if you invest in people to help them overcome their barriers to work, then even long-term beneficiaries will get jobs. In some cases that might mean providing assistance with relocation – so they can move to a town where there are jobs – after school and holiday care for children, literacy and numeracy training, budgeting advice, drug and alcohol rehabilitation, CV writing, job interview skills and so on. The point is that while most people are able to get work under their own steam when jobs are available, there are some beneficiaries who will realistically never get work unless special support is provided.

In line with this fundamental shift to refocus welfare on work, benefit categories will be realigned. Jobseeker Support will replace the Unemployment and Sickness Benefits, along with the Widows’ Benefit and DPB for parents with children aged 14 or above. Essentially full time work obligations will be imposed requiring beneficiaries to be available and ready to work if they are offered a job. Additional assistance will be provided if needed, such as childcare, training, workplace support, and access to health and disability support services. For those who are too sick to work full time, both part-time work requirements and full exemptions will be available.

Beneficiaries receiving Jobseeker Support will be expected to take any job that is offered or face sanctions that could result in the loss of their benefit. They will also be required to re-apply for their benefit on an annual basis, a prerequisite that has already resulted in the cancellation of thousands of benefits, many from recipients who were working in the cash economy or had multiple benefit identities! In addition, beneficiaries will be offered help and support to deal with alcohol or drug problems. Anyone who refuses to apply for a job, because a potential employer might ask them to take a drug test – or if they fail such a pre-employment drug test – will have their benefit cancelled. In other words drug and alcohol use will no longer be a valid reason for avoiding work. Similarly, a closer relationship will be developed with the Police so that anyone who is on the run, with a warrant out for their arrest, will have their benefit stopped. Taxpayers will no longer be expected to fund people to evade the law.

Sole parents with children who are younger than 14 who currently receive the Domestic Purposes Benefit – along with widows with children under 14 – will receive Sole Parent Support, which imposes part time work obligations once the youngest child is five years old. Again a range of support services will be provided to assist parents re-enter the workforce. Those with younger children will be expected to prepare for work, but if they take on a job before their work obligation requires it, they will receive a transitional incentive allowing them to retain their benefit and their wage, with the benefit reducing down by $100 a week.

The Invalid Benefit and the DPB for the carers of those who are incapacitated will be replaced by a Supported Living Payment to provide long term security, although more stringent work capacity assessments will be introduced. A Youth Payment and Youth Parent Payment will be available for young people who will be expected to be in education or training. Their benefits will be managed, so rent, power and other essentials are paid first, but an additional $10 a week incentive will be available for those who complete their education and successfully engage in programmes such as budgeting – or parenting courses, in the case of teen parents.

In light of the serious concerns about the poor outcomes for many of the 5,000 or so babies born to each year to mothers already on the DPB, National has chosen to align the benefit with employment law. Once a baby is one year old, the mother will be expected to resume the work requirement she had before the baby was born. According to this week’s NZCPR Guest Commentator, welfare analyst Lindsay Mitchell:

“In 2006 deputy chairman of the NZ Medical Association Don Simmers told a conference that too many women were contemplating pregnancy on a benefit. More recently I spoke with the head of an organisation working with beneficiary families who was in no doubt that women plan a pregnancy as the prospect of pressure to work looms. She believes the new policy will make a difference.”

In her article Welfare reforms are in the interest of children, Lindsay makes the point that “Nobody is forced to have a baby on a benefit – a benefit is provided because she is already unable to independently support her children. Never before have women been better able to control their fertility. If she chooses to get pregnant and have the baby she will be doing so fully aware that if a part-time job is available when that baby turns one, she will be expected to accept it. The choice is ultimately hers.”

With vocal groups opposing welfare reform – especially for DPB recipients – it is worth noting the significant advantages that work will bring. If a woman on the DPB, who receives $15,000 a year was to get a job for 20 hours a week, she would receive the minimum family tax credit of $22,204 a year and the in-work tax credit of $3,120 a year, giving an annual income of $25,300 a year.

Managed properly, welfare reform has the potential to turn around New Zealand’s entrenched dependency problem. Having said that, more notice, however, should have been taken of Recommendation 21 of the Welfare Working Group’s final report, that existing benefits be replaced with a single Jobseeker Support payment. They argued that a single benefit would send a strong signal that all beneficiaries receiving welfare would be required to actively seek paid employment. Obviously exemptions would apply – a full exemption for people unable to work due to illness, disability or having a child under 5, and a part-time exemption for people unable to work full time due to illness, disability, or having school-aged children under the age of 14. But it is only by making such a change, that New Zealand could finally close the book on the stand-alone sole parent benefit that over the years has not only caused immeasurable harm to families and children, but has alienated fathers on a massive scale. If a stand-alone sole parent benefit was replaced by Jobseeker Support, our move away from an underclass culture would finally be assured.

John Key should take note and change the proposed welfare laws accordingly – before it’s too late.