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Lindsay Mitchell

National’s welfare reforms – lots of smoke but not much fire

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Listening to the response to National’s welfare policy on talkback radio you would think National had proposed really radical reforms in the run up to next month’s election. From opponents claiming the abortion rate will soar, to supporters cheering long overdue moves, people seem to believe John Key’s announcements are highly significant. Are they?

Parents on the DPB whose youngest child is 6 have been work-tested since September 2010. In that time the numbers on the DPB have climbed from 112,765 to 114,147. So promising to drop the age to 5 in 2013, the new policy, doesn’t guarantee a reduction in numbers. In any case expecting mothers to work part-time when their youngest starts school is still very generous compared to other countries like the US and some Canadian provinces where single mothers are expected to start making an effort to support themselves when their child is as young as one. In Norway, France, Germany, Switzerland and Austria the age is 3. The Welfare Working Group recommended three, in line with the availability of free early childhood education, the part-time work requirement being just 20 hours per week after all.

What’s more interesting is National acknowledging and addressing the issue of people continuing to have children on a benefit – around 23 percent of current recipients. The work-testing which would normally kick in when the youngest turns 5 is suspended for one year only, if another baby comes along. There is a mixed message here however. It is OK for the new baby to go into care at one but not the older sibling? And again, the Welfare Working Group recommended that for a child added to a benefit, the mother should only get 14 weeks before work-testing – in line with Paid Parental Leave. But National took a softer option.

National first introduced work-testing on the DPB in the 1990s and this ‘new’ policy has only slight variations. It didn’t reduce numbers significantly back then (although they would argue it didn’t have time to before Labour undid the requirements.)

Like the DPB, the sickness benefit is also alreadywork-tested. That process began in May this year and may be having some positive effect on numbers. Nevertheless National made something ‘new’ out of existing practice, a not uncommon political ploy.

They did this by way of announcing a complete overhaul of benefit names. The Unemployment Benefit becomes Jobseeker Support. That encompasses people who were on the Sickness Benefit but can do some work and people on the DPB whose youngest child is 14 or older. The DPB becomes Sole Parent Support. And the last new benefit is the Supported Living Payment which takes in previous Invalid Benefit recipients and those receiving the DPB Care of the sick or infirm.

Nothing has been said about the expected costs of transforming the names and moving individuals around within the system. But it is an enormous IT exercise and the hundreds of thousands of existing Work and Income pamphlets, available across the length and breadth of the country from numerous public outlets, will become redundant and require re-printing. The heavily patronisedWork and Income website will have to be re-developed. All of this is a windfall for someone but not the taxpayer.

Ironically National attacked Labour when then Social Development Minister, Steve Maharey promised this sort of overhaul. Now Labour is attacking National for the same with Phil Goff saying that re-naming benefits won’t create jobs. (Actually it will Mr Goff. The kind of jobs where one man digs a hole and the other fills it.)

National says the name changes are needed to focus on what people can do rather than what they can’t; to create a work focus. But they could have achieved this far more easily by simply moving those with work capacity and obligation onto the unemployment benefit, leaving the existing system intact. It baffles me why such an elaborate and expensive process is going to be embarked upon in such tough economic times.

And that’s not all that baffles me. The new Sole Parent Support is for those 19 and older. That wasn’t mentioned in the announcement. So which category of benefit will 16, 17 and 18 year-old single parents fall into? I suspect a different benefit will be created for this group unless the Emergency Maintenance Allowance is extended to 18 year-olds (it currently covers 16-17 year-olds). But already less simplicity than is being promised looks likely.

Another aspect of the new Sole Parent Support rules also exercises the mind. As it stands many people cycle on and off the DPB which turns its case-load over by about a third each year. Will the same work-testing rules apply if someone enters a new spell of benefit dependency? According to the official MSD factsheet information, After 12 months work obligations will be reset based on the age of their youngest child when they came on to benefit. Which benefit? Their first or subsequent? Will the same rules apply if a child transfers from one caregiver to another, for example from the mother to the father? Benefit rules are like any other rules in society. Some people will always look for ways around them.

Would it not have been far more straight forward to go

the way of time-limits whereby each individual has an entitlement to X number of years of (means-tested) parenting assistance in their lifetime and that’s it? That was the principle at the core of President Clinton’s welfare reforms. To be fair Clinton also introduced a name change but his was a genuine game-changer. He turned their decades old relevant benefit into Temporary Assistance for Needy Families. The key word being ‘temporary’.

So, on balance, National’s reforms are still looking comparatively timid. The goal they have set, to reduce the number of people on welfare by 46,000 over their next term, is equally so. Between 2004 and2008, numbers on the unemployment benefit fell by 52,000 so an improving economy is capable of deliveringNational’s goal anyway. In the final analysis the reforms are about re-election. They have created quite a bit of the smoke National and some swinging voters are looking for out of very little fire.