What the Welfare Working Group report really says

Buried deep in the report of the Welfare Working Group, “Long-term benefit dependency: the issues”, are two remarkable pieces of information.

First, “New Zealand’s rate of employment for disabled people is one of the highest in the OECD. Around two in three disabled people, with low or medium levels of support needs, are in employment.” So are one in three of those “with high support needs”.

Second, “New Zealand’s employment rate (64 percent of the working age population are in employment) is one of the highest in the OECD.”

So far from being over-run with beneficiaries who are perfectly capable of taking on paid employment, despite being solely responsible for looking after children, being sick, or being an invalid, we actually have more people - including more disabled people - already in employment than other comparable countries.

This is, to say the least, rather surprising, because the rest of the report goes to great lengths to convey exactly the opposite. It repeats no less than six times the information that 170,000 people have been on a benefit for at least 5 out of the last 10 years, without ever attempting to analyse what their circumstances are.

One of its master-strokes comes in Figure 3.3: “The growth in the prevalence of benefit receipt among the working age population, 1960 to 2009”.

In 1960, the majority of women – especially mothers – were not officially in the labour force at all. New Zealand had one of the lowest female participation rates in the developed world. There was no DPB and no legal abortion. Deserted or divorced mothers, no longer able to depend on a male breadwinner, were in such dire straits that some had to give their children up for adoption – as many single mothers did. Invalids, the disabled and the mentally ill lived mainly in institutions.

But not content with going back to 1960, the WWG has produced a graph where the spaces between the trend lines are neatly filled in, in different colours. So the DPB swells in gold at the bottom and the UEB surges up like a great grey mountain range at the top, while the thinner but still alarming layers of widows, sick and invalids spread across the middle. The result is the most distorted presentation of statistics I have ever seen in a government-sponsored document.

The preface says the WWG was established “to conduct a fundamental review on New Zealand’s welfare system and to make practical recommendations on how to improve economic and social outcomes for people on a benefit and New Zealanders as a whole.”

In fact it wasn’t asked to do this, and it hasn’t. As the introduction shows, the “primary focus” was much simpler: “addressing issues of long-term welfare receipt”.

The first issue seems obvious: poverty. The Ministry of Social Development’s own statistics show that living on a benefit is highly likely to mean living in hardship and often in “severe and significant” hardship – especially if you’re a sole parent with children. And the longer you stay on a benefit, the poorer (and often sicker) you, and they, get.

When the 1969 National government set up a Royal Commission to look at social security, adequacy was the first issue it was asked to consider. It decided that the whole point of benefits was to ensure that no-one was:

“to be so poor that he cannot eat the sort of food that New Zealanders usually eat, wear the same sort of clothes, take a moderate part in those activities which the ordinary New Zealander takes part in as a matter of course. The goal is to enable any citizen to meet and mix with other New Zealanders as one of them, as a full member of the community – in brief, to belong.”*

Perhaps setting benefits to achieve this meant that people who had to go on them could get off them much more easily than they can now? Maybe higher benefits mean a faster return to paid work? And for those who have to stay on them, a much greater chance of contributing in other ways – not to mention less misery?

But the WWG was told not to bother with any of this: “Our terms of reference do not cover the adequacy of benefit levels”. So it didn’t. And it certainly didn’t consider whether very low benefit levels might make it harder to get off them.

But it couldn’t entirely avoid the issue. There’s a chart on page 63 that shows average benefit payments as a proportion of the average wage. The peak came in the late 1970s, when it reached around 44%.

Since then it’s fallen more or less steadily. By 2009 it was well under 30% of the average wage. The projections show it continuing to fall, till by 2050 it will be less than 20% of the average wage.

How anyone could actually live on such incomes is of no interest to the WWG. Paying benefits at a sustainable level is not a principle which the WWG endorses or even mentions. It takes it for granted that being on a benefit inevitably means living in poverty. So receiving a benefit long-term is inevitably not going to be good for you or your children. This then becomes an argument not for raising benefit levels, but for getting people off benefits of every kind (except superannuation, war pensions, and ACC – but they’re working on that too).

What is to be done? The WWG is sure it knows the answer, because it knows the reason.

“There are a range of explanations for people spending longer periods on a benefit. Part of the explanation relates to people’s personal circumstances. However, it also relates to how the support that people receive when in the benefit system affects their ability to locate and sustain employment. Our conclusion is that a lack of consistent work focus makes it difficult for the most vulnerable groups to secure employment.”

And again (repeatedly, but twice will do here):

“People on a benefit long-term are disproportionately [my italics] on the Domestic Purposes Benefit, Sickness Benefit and Invalid’s Benefit, rather than on the Unemployment Benefit. The lack of a consistent work focus on these benefits has contributed to people remaining on a benefit for long periods.”

It’s really quite simple. More work focus equals shorter benefit receipt, regardless of the reason for being on a benefit in the first place. Given enough consistent work focus, almost everyone, despite ill-health, disability or sole parenting, should be able to support themselves from paid work.

For many, especially sole parents on low wages, it’s likely that the government will have to subsidise their earnings by almost as much as the benefit. The WWG barely mentions this, though one graph (Figure 5.4) gives some idea of the truth (and, incidentally, the appalling complexity of the benefit system): for most sole mothers, it is only these subsidies that “make work pay”.

At one point the WWG attempts to show that it understands what parenting – let alone sole parenting – involves. It is hard to grasp how the embarrassing result ever made it into the final report:

“Care involves activities like over-seeing health and safety, controlling inter-child conflict and feeding. Education involves more active learning. The OECD notes that ‘care shades into education... [and that] appropriate adult-child ratios decline as the child gets older and care needs diminish’.”

This is straight out of Oliver Twist. It harks back to the bad old days (lasting until the 1980s) before New Zealand governments accepted that childcare and education aer inseparable. But the WWG knows better. Moreover, once out of babyhood, the children of the poor have no right to the luxury of even one parent’s full-time attention.

Another graph, Figure 5.3, tries to show that the more “work focus” applied to sole parents, the lower the numbers of DPB recipients. In fact the numbers move broadly in line with the state of the labour market, both male and female (jobs are still strongly divided by gender). Despite Working for Families, DPB numbers began to rise sharply as the recession took hold.

And this, of course, is the looming elephant in the room. At a time when straightforward, no-job unemployment has soared, especially among Maori (over 16 percent) and Pasifika (over 14 percent), what on earth makes the WWG think that this is a good time to crank up the pressure on those who face so many extra hurdles to earning enough to live on?

It is probably true that for many people now on a benefit other than the UEB, having a decent, safe, accessible, manageable job to go to would improve their lives - though probably not as much as simply having enough to live on, rather than barely survive; and certainly not as much as getting the help they need to deal properly with the circumstances and conditions which made them dependent on a benefit in the first place.

But with its other hand, the government has been busily kicking away possible ladders. It has removed the Training Incentive Allowance for sole parents, as well as the cheap evening classes thousands of people used to better their lives, and ensured that entry to university is restricted. Health care is under siege too, with Wellington’s CEO resigning because he was unable to make more cuts without damaging care.

There is almost no indication in the report that the WWG has any notion of what keeps people on benefits long-term, or what their lives are like, or what amazing feats of survival they perform every day. To the WWG, all that matters is that they are not working (or not working enough):

“When people lose their jobs [meaning, become ill or disabled or have to care for children alone] they are classified in a way that emphasises extra difficulties, rather than the fundamental need for employment.”

Make benefits hard enough to get, regardless of these “extra difficulties”, and the problem will be solved. Where the jobs are to come from is not worth discussing.

To be fair, there is one revealing hint in the report that the demand for labour – or at least for cheap, flexible labour – did influence the WWG’s thinking:

“Allied Workforce also notes that employment legislation (personal grievance laws, the ever-increasing minimum wage, and the now defunct youth rates) can be counter-productive to the interests of those they seek to help.”

Allied Workforce says it is now the largest supplier of casual and temporary labour-hire in New Zealand, with 27 branches from Kaitaia to Invercargill. Despite the recession, its after-tax profit to 31 March was $2 million, slightly down from the previous year’s $2.1 million, but enough to push its shares up 18 percent.

Its managing director, Simon Hull, says “a number of businesses are … rediscovering the ways in which contract labour can reduce costs and increase productivity for industry.” He hopes businesses will shift to hiring casual labour, rather than keeping on permanent staff they don’t need: “Hopefully, we won’t see a return to the patterns of four to five years ago where businesses clung on to staff, often even when they couldn’t keep them fully utilised, as they were afraid of losing the capacity.”

“Companies like ours are best placed to manage and place people where and when they are required for industry. That way when a particular skill set is required you pick up the phone and it’s there, and when you no longer need it the cost is gone.”

(Scoop, 28 July 2010, http://business.scoop.co.nz/2010/07/28/contract-labour-demand-strong-despite-recession/ )

It doesn’t take much thought to understand why it would suit Allied Workforce and its shareholders – 25 of whom own 18.6 million shares – to have a lower or no minimum wage, a return to youth rates, and easier dismissals. And the government is listening – the last has already been achieved, with the extension of the 90-day provision to all workplaces.

Creating a larger pool of desperate job-seekers partly subsidised by the state would be a big help too.

* New Zealand Royal Commission of Inquiry into Social Security Social Security in New Zealand: Report of the Royal Commission of Inquiry [1972] IV AJHR H 53, p.62.

Anne Else is a Wellington writer and social commentator. Her occasional column will typically appear on a Monday. You can subscribe to receive Letter From Elsewhere by email when it appears via theFree My Scoop News-By-Email Service. Anne blogs at http://elsewoman.blogspot.com

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