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Dr Muriel Newman

Readjusting welfare

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The Christchurch earthquake has shocked the nation. The unbelievable pain and suffering of families who have lost their loved ones is heartbreaking. Amid the devastation is the extraordinary bravery of people risking their lives to help others.

Yet through it all the Kiwi spirit is already rebuilding. Families are being supported during their grief, streets are being cleared, infrastructure is being restored, and soon work will begin on reconstruction.

The earthquake has also sent the unwelcome reminder that as a county we should be prepared for events we hope will never happen. We badly need a strong economy so the government has the resources to cope in times of trouble and individuals are better able to cushion themselves from the effects of life’s hard knocks. This crisis should be a signal to government to refocus on getting their affairs in order so the country can finally move forwards after years of treading water and going backwards.

At midday last Tuesday, less than an hour before the earthquake struck, a report was launched in Wellington that could play a crucial role in helping the country get itself back onto an economically affordable path. It was the final report of the Welfare Working Group, which had been established by the government last March to look at options for reducing long term welfare dependency.1

The group has been studying options for welfare reform, consulting widely and researching successful initiatives from around the world. In their report, Reducing Long Term Benefit Dependency, they have devised a set of recommendations that they believe will return our welfare system to its original concept of being a safety net that provides long term support for those in genuine need, and a hand up to work and a better future for those who are able bodied.

While poverty action groups are predictably up in arms about proposals that strengthen the requirement for beneficiaries to return to work, they ignore the basic reality that being in work is good for everyone – the beneficiary, their family, and the country. The evidence that poor outcomes are associated with long-term welfare dependency is overwhelming. That means government policy should be totally focussed on helping people move off benefits and into employment.

The problem is that over the years New Zealand’s welfare system has become more focussed on providing income support than on getting people back into work. The statistics say it all:

  • · In 1960, just one person in fifty of the working age population was on a benefit. By April 2008 – after a decade of strong employment growth and before the recession – the number on a benefit had increased to one in ten.
  • · As at the end of June 2010, there were 362,400 working age beneficiaries on welfare.
  • · Almost a half – around 175,100 – had spent five or more years out of the last ten on a benefit.
  • · As at June 2010, approximately 31 percent of all working age Maori were on welfare – that’s 112,900 beneficiaries.
  • · Around one in five children are living in benefit dependent families.
  • · Last year, 12 percent of all government spending was on welfare benefits (excluding superannuation).
  • · Under the current system, only 37 per cent of all working age beneficiaries are expected to actively look for work.
  • · In 2008, in spite of 10 percent of the working age population being on benefits there was a critical shortage of low skilled labour.

At the heart of the Welfare Working Group’s proposals is the concept of replacing existing benefits with a single new benefit, “Jobseeker Support”, in order to signal that work is the main focus of the welfare system. Additional support to top up those on sickness, invalid or domestic purposes benefits to present levels would be provided through supplementary grants. Given that there are communities in New Zealand where dependency has become so institutionalised that when asked about their aspirations for the future, young boys will say they want to go on the dole and young girls will say the DPB, a realignment of benefits cannot come soon enough.

Introducing one core benefit is also part of the strategy being adopted by the British Prime Minister David Cameron, who launched his Welfare Reform Bill – to simplify the system and bring the out-of-control costs of welfare back to affordable levels – two weeks ago. In his speech he explained the importance of ‘responsibility’, “Nine months ago, on the steps of Downing Street, I said I wanted to help to try and build a more responsible society in Britain – where we don’t ask what am I just owed, but what more can I give… And my point today is that this idea of mutual responsibility is the vital ingredient of a strong, successful, compassionate welfare system.We need responsibility on the part of those who contribute to the system – government and taxpayers. And responsibility on the part of those who receive from the system.”2

A commitment to personal responsibility and mutual obligation underpins the approach being promoted by the Welfare Working Group. Welfare recipients will be required to do all they can to get a job – any job. Teenagers under the age of 18 are expected to be engaged in work, education or training and live under adult supervision. Drug and alcohol addicts are expected to undergo rehabilitation as a condition of benefit receipt.

Women on the DPB are expected to take on part-time work for 20 hours a week when their youngest child is three years old, increasing that to 30 hours a week when the child turns 6. Child care and after-school support will be available as needed.

In order to discourage single women on the DPB from having more children, benefit receipt would be aligned to Paid Parental Leave provisions for any new baby. This would require the sole parent to engage in work when their baby is 14 weeks old, in the same way as working mums.

While John Key’s rather off-hand response was that the thought of that made him “queasy”, he should think again. When in opposition, he made a big issue about the need to prevent the growth of the underclass. Yet when presented with policies that would go a long way towards discouraging the growth of intergenerational dependency and reduce the number of children being born into such sole parent welfare families that fuel the underclass, he says he feels queasy!

New Zealand desperately needs a Prime Minister with the commitment and courage to provide leadership in this difficult area.

A major concern of the Welfare Working Group is the number of beneficiaries of Maori descent who are receiving welfare, as our NZCPR guest commentator Roger Kerr, the chief executive of the Business Round Table, explains in his analysis, The Real Meaning of Welfare:

“As the report spells out, Maori are heavily over-represented in all the negative welfare statistics, with 27% of Maori youth unemployed, 31% of all Maori on welfare, and 41% of sole mothers on benefits being Maori. While iwi-supported initiatives to turn these statistics around may help, they will not succeed without a responsive, student-focused education system, a more flexible labour market, and meaningful changes to welfare incentives.”

Roger also describes the tough love aspects of the Working Group’s proposals: “The group recommends a number of rules, carrots and sticks designed to leave welfare recipients in no doubt that malingering on a benefit will not be tolerated. These include ‘work for welfare’ for intractable cases, and income management, whereby the benefit is controlled by a third party or via a programmed ‘smartcard’, to ensure children’s necessities are provided. This approach, successfully trialed in indigenous Australian welfare dependent communities to combat drug and alcohol abuse, is proposed as a last resort measure for those who repeatedly fail to provide essentials for their children. Also proposed is a requirement for people with drug and alcohol issues that prevent them working to enter rehabilitation or lose their benefit.”

Overall the Welfare Working Group has estimated that their reforms would lower the number of people on welfare by 100,000 over time, reduce Maori on welfare by up to a half, and trim the long-term future cost of welfare by around 28 percent.

The reality is that New Zealand’s welfare system, which was originally introduced to help the needy, has now turned into a costly blight on society. Riddled with fraud and abuse, it has become a destructive lifestyle choice for far too many people and is long overdue for reform.

What is urgently needed is a readjusted system designed to restore the integrity of welfare and enable it to deliver on its original promise of providing a hand up to work and independence for the able-bodied, and security for the truly needy. The Welfare Working Group’s reform plan goes a long way towards delivering on that promise. A summary of their forty-three key recommendations can be found HERE .