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Dr Muriel Newman

Welfare Bad for Health

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“…long term worklessness is one of the greatest risks to health in our society. It is more dangerous than most dangerous jobs in the construction industry or working on an oil rig in the North Sea, and too often we not only fail to protect our patients from long term worklessness, we sometimes actually push them into it inadvertently…”

– Professor Gordon Waddell

Last week the Royal Australasian College of Physicians released a report which strongly affirmed something we all know – that work is good for us. The report, Realising the Health Benefits of Work, was prepared by occupational physicians who see first hand the adverse impact that long term welfare dependency can have on individuals, families and communities: “We see marriages end, breadwinners become reliant on pensions and mental health problems like depression and anxiety develop. Rubbing salt in the wound, extended time off work often sees a worsening rather than an improvement in the symptoms and conditions it is supposed to ameliorate.”

The report is very clear on the fact that long term unemployment is harmful to physical and mental health wellbeing. It is associated with a range of poor health outcomes, which include significantly increased rates of sickness, death and suicide. The affects of prolonged parental unemployment have also been found to have profound detrimental consequences for children. These include higher rates of chronic illnesses, anxiety and depression, aggressive or delinquent behaviour, substance abuse, as well as an increased likelihood that one day they will suffer long-term unemployment themselves.

The study also points out that in most cases where people are suffering from conditions involving musculoskeletal problems such as bad backs, and mental health issues such as anxiety and depression – which account for by far the largest proportion of sickness and invalid beneficiaries – those who remain in work enjoy better health and make a faster recovery than those who become unemployed.

The report contains some statistics that should have a profound impact on policy makers, since it quantifies anecdotal evidence that the longer someone is off work, the less likely they are to ever return. The report states that if a person is off work for:

  • * 20 days the chance of ever getting back to work is 70%;
  • * 45 days the chance of ever getting back to work is 50%; and
  • * 70 days the chance of ever getting back to work is 35%.

In other words, to be effective, welfare policies should be focussed on returning beneficiaries to work at the earliest possible opportunity as clearly, the longer they stay on welfare, the harder it will be for them to successfully find permanent employment.

With these matters in mind, it is timely to reflect on whether the government’s Social Assistance (Future Focus) Bill that is presently being considered by the Social Services Select Committee will achieve a significant reduction in welfare numbers. The explanatory note to the Bill states that “The main objective of the changes is to ensure a fairer system of social assistance with an unrelenting focus on work.”The question is whether this unrelenting focus on work is an honest reflection of the proposed changes, or whether it is empty rhetoric.

This week’s NZCPR Guest Commentator, Lindsay Mitchell, a social reform analyst who has been very critical of the long-term damage caused by the Domestic Purposes Benefit, explained to the Social Services Select Committee:

“The stated purpose of this bill is to ‘…break the cycle of welfare dependency’. Central to that cycle is the domestic purposes benefit (DPB). To that end this bill legislates to re-introduce work-testing of DPB recipients when their youngest child turns six.

“The most pressing problem with the DPB is not the mother who enters the system with a work history fresh from a relationship breakdown. Many of those women will only use the DPB short term and do not lack the motivation or ability to re-enter the workforce. The urgent problem is the young, sometimes very young mothers (around six to seven hundred 16 and 17 year-olds are typically on the DPB/EMA at any given time) who come into the benefit system with no educational qualifications or work skills and cannot thereafter easily command an income equal to or better than the inclusive DPB package”.

Background papers issued by the Ministry of Social Development showed that a DPB recipient with two children living in Auckland would typically receive $580 a week, including housing assistance.[] That compares to someone employed on the minimum wage, who would receive $510 for working for 40-hours a week.

National’s new Bill will increase the amount that a sole parent on the DPB can earn, without losing any benefit, from $80 to $100 a week. That means (disregarding tax implications) that by working for just under 8-hours a week on the minimum wage of $12.75 an hour – to earn an additional $100 – that DPB recipient can receive a total of $680 a week. That is the equivalent of a full time job paying $17 an hour. Given that a sole parent on the DPB can receive that amount by working for only one to two hours a day from Monday to Friday, what possible incentive is there to move into full time 40-hour-a-week work? The reality is that without any form of compulsion, there is little incentive to leave the security (and freedom?) of the benefit system for a job. In other words, National’s reforms as they have been outlined are unlikely to have much impact on the biggest benefit, the DPB.

Without a doubt, the whole benefit system is now out of kilter with the realities of modern day life in New Zealand. On Saturday the Minister of Social Welfare told delegates at a National Party conference about a West Coast couple, who had been living on a benefit for 15 years and were receiving $1700 a week from taxpayers![] She explained how the husband, who has a “very bad back”, had 10 children! That couple are some of the more than 1,000 beneficiaries identified last year as receiving more than $1,000 a week in benefits. And to be sure, these are only the tip of a very large iceberg of people who are living well on welfare – many by rorting the system.

The point is that a fundamental shift is needed if we are ever going to reduce New Zealand’s benefit dependency problem. That’s not to say that we should not help those who are in genuine need – of course we should. But in this country there are far too many people living off welfare when they could and should be working for a living.

According to the Ministry of Social Development’s latest figures at the end of March, there were 325,000 people receiving social welfare benefits, up from 289,000 a year ago. Of those, the biggest groups are 110,000 sole parents on the DPB, followed by 85,000 invalid beneficiaries, 60,000 unemployed and 56,000 sickness beneficiaries. Treasury puts the forecasted 2010 cost of these benefits at almost $13 billion. This is the second biggest item of expenditure – behind Health – in the government’s $65 billion budget.

What is of concern however, is that in spite of the welfare reforms that are presently in front of Parliament, the government is forecasting a continued increase in welfare costs to $14 billion by 2014, with an increase of 4,000 in the number of beneficiaries on the DPB, an increase of 3,000 in the number of the Invalid Benefit, and an increase in 6,000 in the numbers on the Sickness Benefit. In other words, through these figures, the government has acknowledged that their so-called reforms will have virtually no effect, and will certainly do nothing to turn around the hard-core dependency culture that is a root cause of most of New Zealand’s social problems.

What is needed is not tinkering but a fundamental shift in thinking about welfare. Don Brash’s 2025 Taskforce said as much in their report released last November: “As we’ve become relatively poorer, we developed a welfare system that has allowed a much larger proportion of the working age population to opt out of the labour market, fully supported by the state. That comes at a huge cost, both fiscal and in terms of wasted skills and talents.” In particular they recommended that “Ambitious welfare reform measures should be undertaken as a matter of priority to reduce the very large number of people of working age currently receiving welfare benefits.”

The truth of that is evident in the example given earlier – that solo mum with two children who works 8 hours a week and earns as much as a full time worker on $17 an hour, will not leave welfare for a full-time job unless she is forced to do so. That means in essence that time limits to welfare need to be introduced. In her article The Social Assistance Bill, Lindsay Mitchell arrives at that conclusion: “New Zealand needs to get serious about returning welfare to what was intended – temporary assistance for all but the most disabled. Many European countries and the US exercise quite stringent time limits. And NZ will ultimately have to go in the same direction. This bill just delays that eventuality.”

In reality, if New Zealand was to embrace the fact that people who are capable of working are far better off in work than they are on benefits – and if proper reforms were introduced to deliver such outcomes – the consequences would be profound. Tens of thousands of capable people would become productive, with better health and a significantly improved outlook for their children. The cost of social welfare would be reduced by billions of dollars a year and the savings could be used to lower the country’s growing debt burden. The changes would be all positive – except for the bleeding hearts, who would campaign strongly against people being forced off welfare, claiming that life on a benefit is better for them and for their children.

Fortunately, the report from the Royal Australasian College of Physicians puts paid to that argument once and for all. People are better off in work. All we need now is a government with the gumption – and the guts – to put in place reforms that are capable of delivering that outcome.