Congratulations to our new Prime Minister, National Party Leader John Key, and his support parties Rodney Hide’s ACT New Zealand and Peter Dunne’s United Party, on a successful election outcome. In his victory speech, John Key stated that the election result showed that New Zealanders had voted for a safer, more prosperous and more ambitious country: “They voted for hope, they voted for action and they voted for results. They voted for a better life for all New Zealanders.”
He went on to explain: “In my first speech after becoming leader of the National Party I talked about when I was a boy living in a state house riding my bike past the homes of kids more fortunate than me. What inspired me then and still inspires me today is a belief that within ourselves we have the ability to make our lives better.”
He gave a call to action: “Now more than ever, New Zealand needs to be on top of its game. What will determine success is the unity of purpose – a willingness to work together, while recognising that our collective success rests on the success of individuals”.
That a boy who was brought up in a state house by a solo mum on a benefit, can become a Prime Minister exemplifies the amazing power of democracy. It shows that New Zealand is a remarkable land of opportunity where individuals really do have unlimited potential to improve their lives. The story also demonstrates how successful a welfare system can be when it not only offers a helping hand in times of need, but encourages self-reliance and independence from the state.
John Key and his new government face challenging times. The extent of the difficulties they face cannot be under-estimated. When Treasury opened the government’s books on October 6th, the Pre-Election Economic and Fiscal Update predicted a decade of deficits ahead. A key contributor was an expected dramatic increase in social welfare spending: “The largest single change in government spending in the Pre-election Update is an increase in the expected costs of benefits. Benefit expenses are around $500 million per annum higher, reflecting both an increase in numbers of beneficiaries as a result of the slowing economy, and the impact of higher inflation on the costs of indexing benefits.”[1]
A first indication of the extent of the problem came last week with the release of the unemployment figures by Statistics New Zealand. They showed that there has been a 23.5 percent rise in unemployment this year. From a record low level of 3.4 percent in January, unemployment has now risen to 4.2 percent, with 94,000 people on the dole.
While some economists are predicting that unemployment will peak at 6 or 7 percent, few believe that it will go as high as 7.6 percent – the level it reached in 1998 – or the 10.9 percent it reached in 1991.[2]
The main reason that economists are not projecting that unemployment will reach these historic levels is that they believe that the present-day high cost of living pressures will force the unemployed to stay motivated and find another job instead of getting discouraged and languishing on a benefit. This serves as a reminder of the crucial importance of getting the incentives right in welfare policy, so that the unemployed can get a hand up to a better life rather than becoming trapped in a system that encourages dependency.
This week’s NZCPR Guest Commentator Luke Malpass, a policy analyst with the Centre for Independent Studies, describes the negative consequences of the welfare trap:
“There is an indisputable link between levels of welfare dependence and negative social outcomes. The more dependent a person is, the greater their likelihood of suffering from a lifestyle illness such as obesity, diabetes, lung cancer, or heart disease, and the greater their chance of education failure, or being involved in illegal activity. For children raised in welfare-dependent households, social indicators strongly suggest less successful life outcomes. This is symptomatic of some complex social problems where the primary issue is not income but an environment created by dependence.”
As Luke explains, “Welfare fosters a culture of dependency and lack of initiative, characterised by a loss of intergenerational skills, corporate knowledge in communities, and good work habits. It encourages constant rorting of the system, as people must order their affairs to take advantage of the benefits on offer. The higher the level of dependence, the higher the social cost, as people lose control of their own destinies.”
In his article Where Welfare Dependence and Public Health Collide, Luke contends that there is now a tendency to ‘dress up’ the outcomes of poor personal choices by beneficiaries as ‘public health’ issues of grave importance. As a result it becomes acceptable to pump hundreds of millions of dollars of funding into fighting obesity, gambling addictions, smoking and other intemperate behaviours – the new class warfare battleground.
Interestingly, Luke quotes statistics from Australia which show that Indigenous Australians who earn income through work have the same life expectancy as mainstream Australians, but those who are reliant on welfare have a life expectancy that is some twenty-five years lower.
This sort of information focuses the mind – no-one in New Zealand should be allowed to rot on welfare. Tariana Turia, the co-leader of the Maori Party said as much when she called for the dole to be scrapped, on the basis that it is very damaging to pay able-bodied people on welfare to do nothing. Instead, she wanted the unemployed to be given jobs and other activities to keep them active, keep them engaged in their community networks, and to keep their dignity and self-respect intact.
All successful welfare programmes are based on keeping the unemployed engaged and active. That is why supporting the newly unemployed during the current downturn, with an intensive approach that supports them but keeps them active, is so vital. The last thing any compassionate society should be doing is giving people money and requiring nothing in return.
But it shouldn’t stop there.
As a solo mum with two young children I spent time on a benefit. It was one of the bleakest and most demoralising periods of my life. The only good thing to come out of it was a determination to succeed.
What solo parents need more than anything else is that helping hand of support – support to assist them in getting organised so they can get a job and build a decent life for themselves and their children. Being given a welfare check is simply not enough. In fact, during all of the good economic times over the last few years, the numbers on the domestic purposes benefit have remained stubbornly at around 100,000. If the welfare system was working properly for sole parents and their children, those numbers would have plummeted as beneficiaries moved off welfare and into work. That they have remained so high is a huge indictment of the changes to the welfare system that Labour introduced during their term in office.
I have always believed that getting our welfare system working properly so that no-one who is able-bodied is paid to do nothing, is one of the country’s most urgent priorities. With the numbers moving onto welfare escalating, the time is now right to improve the way we deliver welfare in this country so that no-one gets stuck in that dreadful cycle of dependency and no bright spark of a child is denied his or her opportunity to one day become the New Zealand Prime Minister!
Footnotes:
1. Treasury, Pre-Election Economic and Fiscal Update 2008
http://www.treasury.govt.nz/budget/forecasts/prefu2008
2.Herald, Job market holds up but future gloomy
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3objectid=10541547
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