No Right Turn: Failed policies

National looks set to try and revive the failed policies of the 1990's with a vengeance, with Judith Collins announcing that a National government would reintroduce work-for-the-dole. There's no question that this policy was a failure: a report by WINZ's Centre for Operational Research and Evaluation found that beneficiaries were in fact no better off on work-for-dole schemes than on a benefit, and worse, that the employment outcomes of those in makework schemes were noticably poorer than those not participating. It attributed this to the programmes having a "locking in" effect - rather than helping people to find work, they were instead trapping them in poverty and dependence. And National wants to return to this?

But quite apart from questions of effectiveness, there is also a wider question about the point of pursuing punitive welfare and employment policies aimed at forcing people off benefits and into work when monetary policy is working at cross-purposes to this. It's a long story, but the short version is that our monetary policy commits us to a certain level of unemployment in order to keep inflation down. When Brash was in charge of the Reserve Bank, that level was around 7% - and he would hike interest rates to throw people out of work whenever unemployment looked to be getting "too low" and wages (and hence inflation) threatened to rise. Bollard operates under a broader inflation target, and hence we can have lower unemployment - though we have still had worrying pronouncements about the labour shortage and wage claims needing to be stomped with higher interest rates.

That's a very brief rundown; Brian Easton has more here. Its unclear whether the Reserve Bank is actually pursuing an unemployment target (though Brash certainly seemed to be), but at the very least some arbitrary level of unemployment is a side-effect of our low inflation policies. Which means that all welfare policy can ultimately do is adjust the "churn" rate between the workforce and the dole queue; anything more - say, National's underlying goal of making sure that everyone who can work has a job - is frustrated by monetary policy.

Against this policy background, punitive welfare policies aimed at punishing the unemployed so as to provide an incentive for them to work are simply needlessly, mindlessly cruel. It is the equivalent of picking someone at random and then punishing them simply for being picked - unjust, immoral, and ultimately pointless.

As a society, we have chosen to have a certain level of unemployment in exchange for low inflation. Therefore, as a society, we have an obligation to care for those whose lives and prospects we are sacrificing. Policywise, this means trying to ensure that unemployment is not too great a burden and easy to escape from (or at least, not a trap). This suggests both decent benefit levels, and policies centered around umproving "churn": training, education, active job finding, and an array of grants, loans, housing and transport assistance to help people move or travel to work. Unfortunately, National's policies are moving in precisely the opposite direction to what is required.

ENDS

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