Making welfare work in the troubled 2000s

Times change. In 1953 the state could readily afford to finance 1940s Labour Prime Minister Peter Fraser’s noble aim that each person should have “free” education to the “fullest extent of his [sic] powers”.

Then only a very few wanted or needed to go to university. Most occupational training was on the job, not at polytechnics. Now tens of thousands go to universities and likewise to polytechnics. The state could afford to make this “free” only by raising taxes or cutting other activities. So there are fees. National is toying with rationing university places with higher academic entry hurdles.

Similarly with health care. “Free” health care for all was a realisable objective in 1953, when technology, medical ambitions and individual hopes were limited. Now health gobbles 20 per cent of the Budget and its share rises every year. Labour is toying with a special tax.

Something similar has also happened to welfare. Full employment in the settled, cohesive society of 1953 kept welfare rolls very low. There was no domestic purposes benefit (though there was a generous child allowance). There were fewer old people and their pensions were modest.

Now, in a society more fragmented and fractious (and normal?), the welfare rolls rise inexorably. Jenny Shipley briefly checked the DPB rise and there is some (disputed) evidence her late welfare-to-work drive may have cut numbers. Since 1999 the roll has set off upward again.

There is a limit to this, just as there is a limit to “free” education and “free” health care. The question this country faces, as other countries of our ilk do, is how to draw the line. Parties of both right and left have been putting the accent on getting beneficiaries into self-sustaining work, both for their own and for society’s good.

Social Development Minister Steve Maharey comes from the liberal-left, with strong egalitarian ideals which presume that what was achievable in the 1950s should be achievable now.

He abolished National’s work test for beneficiaries as heartless and counterproductive. His approach is to ease beneficiaries into work with help for transport and child care and so on and even continuation of the benefit for a time during the transition.

Sounds logical. But Canada, whence he got this idea (which he has persuaded the cabinet to expand next year) has found after a time there is no difference between those who were so assisted and those who were not. So said Professor David Zussman, a Canadian social policy expert, at a social policy evaluation and research conference in Wellington last month.

More to the point is Maharey’s aim to “make work pay”. Professor David Ellwood, a United States expert on poverty and welfare who once advised former President Bill Clinton, said one of the lessons from Clinton’s time limits on welfare (which Ellwood opposed) was that incentives matter. Higher tax credits for those in work and lower support for healthy adults not in work widened the financial differential.

Ellwood also noted another important difference: the rhetoric was changed from “welfare” (passive) to “work first” (active). Again, Maharey has headed in a similar direction.

But has he moved enough to make a real difference?

National thinks not. Its welfare speaker, Katherine Rich, will tomorrow publish a position paper, the thoughtful totality of which was ill-served by Bill English’s swipe on truancy on Sunday.

Rich says welfare staff no longer emphasise “work” to beneficiaries. She wants to restore that focus, including “work for the dole”.

She is much taken with the Wisconsin programme of pushing beneficiaries out to work, which is the core of ACT’s hard-nosed policy and has offended the left. But Rich also notes, as Ellwood did, that it has worked at least partly because of “major spending on targeted assistance such as subsidised child-care, transport, training, etc… Wisconsin is a reminder that moving significant numbers of welfare recipients into the workforce has a hefty price tag”.

So, while Clinton’s time limits have cut welfare rolls by 60 per cent, the cost has not dropped commensurately. And, Ellwood noted, the drop was partly because a booming economy provided bountiful jobs.

Rich’s paper ranges widely, into education, immunisation, child health monitoring. It backs a safety net, support for the incapacitated — and “reciprocal obligations”, at which Maharey demurs but without which, Rich says, welfare is making society less cohesive, not more cohesive as Labour ideology insists. Hard-working low-income families resent getting the same as, and sometimes less than, a welfare family down the street.

Rich and Maharey agree most beneficiaries would prefer to be in work. Rich implies welfare is holding many back. Maharey wants to prove welfare can be a vehicle into work, as his 1930s Labour forebears intended.

But can Maharey adjust 1930s ideology so it works in the troubled 2000s? Alternatively, can Rich escape the 1990s into a genuine alternative?


News story that accompanied this column:

National would support those not able to work but would “ask the tough questions about why someone is not independent”, a policy discussion paper to be released tomorrow says.

This follows leader Bill English’s warning on Sunday to parents of truant schoolchildren that their benefits might be docked if truancy persists.

The paper, developed by welfare spokesperson Katherine Rich, takes a broad view of welfare. “The success of any welfare system is inextricably linked to the performance of other key government portfolios: health, education, labour, housing and finance, in particular,” Mrs Rich says.

And she wants obligations on beneficiaries to give something in return for their benefits.

Mrs Rich says in her paper that benefit numbers have been rising yearly, except when there was a strong work-testing requirement in 1998, and are projected by the Treasury to rise another 29,000 over the next four years.

Welfare has led, she says, not to a more cohesive society as Labour claimed the welfare system ensures, but to “increasing social fragmentation”.

So getting people back to work is central to National’s welfare strategy. And it is important that there is an income gap between welfare and work, she says. That has been an important factor in the success of the Wisconsin “work-first” scheme in the United States.

She outlines National’s approach to welfare as:

* a safety net, that is, “assistance but not a sentence to lifetime dependency”;

* support for those not able to work through disability or incapacity;

* temporary support for the able-bodied while they return to independence, “not a lifestyle choice or entitlement”:

* a “support network” that is “able to ask the tough questions about why someone is not independent”;

* “encouragement to return to independence through work” because “the real ticket out of welfare dependency is work, any kind of work”;

* reciprocal obligations on beneficiaries — “an expectation that things will be done in return”; and

* “certainty and fairness”.

Included in that reciprocation is a resurrection of the work-for-the-dole scheme scrapped by the present government, getting children immunised (or at least making a definite choice about it) and ensuring children go to school.

Mrs Rich says that “reciprocal obligations, rather than being presented as punitive or singling out certain New Zealanders, are actually a fact of life. Just as a taxpayer’s obligation is to pay tax, beneficiaries are expected to take certain steps in return for support”.

So “the first appointment (with a welfare officer) should be to talk about job opportunities before anything else is discussed”. National would put time limits on benefits for those fit and able to work.

She also wants more pressure on single mothers to name the fathers and on fathers to pay support.

Mrs Rich says that there is a lot of “contradictory research and opinion” which means a minister must “ultimately make a judgment call on the best information available at the time”. Her heavily footnoted paper is the result of wide research.

But New Zealanders need to accept there is a welfare problem, she says. She thinks Michael Joseph Savage, Prime Minister in the Labour government which introduced social security, the forerunner of social welfare, in 1938 would be “appalled to see the expansion of the welfare system and the dire effects on what was once a proud and independent citizenry”.