Job creation and welfare policies are failing

Last week, Business Roundtable Executive Director Roger Kerr had a beneficiary bashing opinion piece published in the Dominion Post.  I decided to write a response, which was published today.

I’m sharing it with Frogblog readers:

Roger Kerr’s ideas about welfare are so backward they belong in the 19th century. His article was a salutary reminder that some things recur every recession, and one of these is the heightened level of public blame and humiliation beneficiaries are subjected to.

I would like to disabuse Mr Kerr of the notion that it is easy trying to raise children, pay the bills and keep a safe, warm roof over your head on a benefit.

It is not. Making ends meet on as little as $161 a week is incredibly hard. Often people aren’t told about their full entitlements and make do on even less.

Let’s remember that beneficiaries (unlike many of the wealthiest people in this country) pay their fair share of taxes, and contribute to society in numerous ways.

They often volunteer in their communities, and many are full-time caregivers for children and elderly or sick relatives.

Others are out of work because they are sick or disabled, and would like nothing better than a decent job, if they could manage the hours or if their employer was flexible about working conditions.

Most people spend less than one year on any benefit and use that time to rebuild their lives and education. The very few who abuse the system pale into insignificance against the losses incurred by failed investment companies, tax evaders and corporate fraudsters.

These people do not deserve the contempt of the better-off like Roger Kerr.

The impact of this recession has been carried by Maori and Pasifika whanau, who are twice as likely as Pakeha to be unemployed.

Presumably Mr Kerr thinks these people are not trying hard enough to find a job, but the queues outside supermarkets for those fabulous checkout jobs tell a different story.

What Mr Kerr and the Business Roundtable prefer not to publicly talk about is the structural value of unemployment to a growth-based economy, where a level of unemployment helps to keep wages low and people willing to work for very little.

He may be heartened by the members and advisers Social Development Minister Paula Bennett has appointed to the Welfare Working Group, including one Peter Saunders, who believes in an inherent link between low class and low intelligence.

He may also be heartened by the appointment of Catherine Isaac (nee Judd), former president of the ACT party, who presided over a policy direction more about dismantling support for the vulnerable than creating employment which provides a living wage.

The makeup of this committee is disturbing in the current political and economic context.

Its terms of reference deterred more modern and liberal commentators, and who can blame them? Why would they associate themselves with a group being encouraged to call on the likes of Peter Saunders for “expertise”?

With such members, the Welfare Working Group may well come up with some recommendations that align with the United States welfare experiment known as the “Wisconsin Model” that Mr Kerr and the Business Roundtable are so enthusiastic about.

The Wisconsin model has elevated the mantra of “work” instead of “welfare”. This has resulted in solo mothers from one side of town being bused to low-wage jobs on the other, while their children are placed in care.

This has cost the state government more than it has saved, in increased case worker load, childcare payments, transport subsidies, and high contract payments for private social service providers.

Because the push to move people into work hasn’t been matched by investment in job creation, the economic circumstances of these families hasn’t improved.

More families than ever make their homes in homeless shelters, and schools have brought in universal free breakfasts to deal with child hunger.

The Wisconsin model cut many people off the welfare rolls, but it hasn’t improved their lives.

Three-quarters of those who have moved from welfare to paid work are now in casual, part-time and temporary jobs without medical insurance, retirement benefits, sick days, or annual leave.

These are the kind of working conditions Mr Kerr and the Business Roundtable advocate, but as the US experience shows, they won’t get rid of poverty.

Thankfully, New Zealanders are waking up to the real costs of increasing inequality. Economic commentators such as Gareth Morgan have suggested a different approach to welfare, such as a form of universal basic income.

The time has come to take bold ideas like this seriously. The current blame-and- shame culture and the absence of Government-led job creation has failed our communities.

We need a sustainable economy and a fair society that delivers a living wage to everyone.

27 Comments Posted

  1. To Link-building and John-ston et al, Welfare in NZ is for those who need it, and perusing the relevant sections of the Social Security Act you can find out the legal requirements. If you have ever been a beneficiary you will understand the processes and time constraints case managers are under and some of the negative attitudes people in need face from case managers, neighbours, family and starngers.
    As for volunteering, almost all NGOs survive on the effort of volunteers, and many of these are on benefits. But as a growing number of NGOs can not reimburse travel costs the getting to the NGO is a bigger and bigger problem for those on a benefit. Added to this, those on UB can get caught as the voluntary effort can be used against the person’s “looking for fulltime paid for work” obligations and for those on the IB and DPB the voluntary effort has to be balanced through bouts of wellness and child-care. As someone who is the chairperson of an organisation with over 40 volunteers (30-plus on benefits) the effort is hugely appreciated, and we reimburse travel costs and make it known in all sorts of ways the effort is appreciated.

  2. Thanks Lindsay for the report reference, I will read it. Issue of relative lack of inter-state transience interesting. Yes clearly low income people rely on what could be calledtheir community structures of friends/family, as indeed many not on low incomes do…. The up sticks is not always a function of choice of the mover as often the landlords of the low income houisehold cause this to occur.
    I am aware from Alan Johnson’s research into transience in South Auckland that in fact it is a major issue causing dislocation from community, friends and family. I am also aware of the same issues in the Wellington region when market rents for HZ tenants were introduced with quite large numbers moving into less quality, cheaper private rentals which may have saved money but led to other negative outcomes from starting new schiools, or foten not starting new schools.
    It is intersting to relate the time-limited aspect of entitlement (although discretion exists to extend this) with periods of high/low job growth/unemployment when people on low incomes who may have limited human capital investment (as defined by labour economists) become more vulnerable than others to loss of market income. Given the Wisconsin reforms date from the mid-1990s are there significant numbers who have reached their five years in aggregate over several periods of benefit dependency (as opposed to wage dependency).

  3. Agree with John-ston, welfare should be for those who need it and ideally for the short-term, accepting that some members of society will require long term assistance. Catherine, I’m not convinced that beneficiaries contribute to society in many ways, specifically volunteering as in my experience this may only be for a week or two and be a relatively small part of their time on benefits.

  4. Hi Graham, The reduction in TANF numbers was not uniform across states but they all showed initial reduction. From Jan 2004 – Jan 2008 only four states showed slight growth – Maine 12%, Massachusetts 6%, Oregon 8% and South Dakota 2%.

    A report here;

    shows that of people exiting TANF only 2.8 percent left the state and of those entering TANF only 2.1 percent had crossed a state line (Indicator ten).

    Two things make me think that not much movement would have occurred in order to access benefits. 1/ States had their federal funds capped and if they wanted to extend a benefit or exempt a family from the time limit had to use their own funds. So the chances of then granting a newcomer an extension or exemption are probably low. And 2/ low income people with children do not find it easy to up sticks. They rely on established friend/family support networks and can’t easily afford to move.

  5. Hello Lindsay, I have a question (and sorry no comment over the weekend as I do not have a computer at hom) but does the US analysis take into account intra-state movement which is possible.
    As regards the Future Focus Bill, there is evidence already of gung-ho case managers saying to solo-parents with youngest child aged 6 that DPB no longer appropriate, apply for UB. That aside, the changes, for example, to advances (legislating the directive with the associated limiting grounds for discretion) will create mayhem.
    The first strike procedures around sanctions and reapplying for UB will also create hardship. perhaps unintended, but neveetheless the ramifications will be real to those affected.

  6. jh-Statistics are only useful when the human factors they represent are properly understood. The sickness benificiary I know who is waiting for a neck operation that ACC won’t cover because he is over fifty (and the injury was caused by an accident) is a victim of pure statistics as is the elderly lady nearby (who uses a walking frame) who has been told she is no longer eligible for home support and must do her own vacuuming.

    I don’t think I would like to live in a world run by number crunchers in offices, thankyou!

  7. Sprout Says:
    “Statistics can’t replace stories when it comes to welfare and employment figures. ”
    so you prefer anecdotal evidence to statistics?

  8. Good onya Catherine.. if this Govt. & their supporters, spent as much effort on job creation, as they appear to on welfare bashing, they may find the unemployment numbers would be even lower !


  9. Roger’s article sounds reasonable to anyone who hasn’t been unemployed and even to some like Paula Bennett who are now employed. The attitude is “If I can do it everyone can!” Trouble is this doesn’t work for the losers in the ‘get a job’ race. Blaming all the unemployed for the behaviour of a few is not helpful. When jobs are scarce, Job Interview training amounts to blaming the unemployed . It would better to train the interviewers to select the best people for the job. Then businesses would do better and be able to employ more people. When I worked for the Rehabilitation League often the client who was best at taking an interview got the job not the one we knew, from their work at the League, would make the most reliable skillful worker.
    Another approach to increase employment would be a shorter working week. This would share the reduction in income in times of recession. In the 1970’s this was the Utopian dream that increasing automation and other efficiencies were going give us more leisure time. Instead we now have a society where many work long hours and unemployment, plus much less durable products that create waste and litter.

  10. jc2, Each state now has a great deal of flexibility to tailor its own programmes. There are broad commonalities emerging that show certain approaches eg work-first, are more effective.

    But federal funding, which makes up 50-70% of each state’s welfare, is contingent on legislative requirements laid down in 1996. States have to work within that framework. And it is national results that will influence future federal funding.

    But your question is important. That so many distinct populations are trying different approaches should provide plenty of experience and outcomes to draw on. But (to answer your question) no, I can’t identify any particular success story yet. It is certainly possible to rank states by how much caseloads dropped but much more would need to be taken into account.

  11. Hi Lindsay,

    In the US single parent poverty is lower and their employment is higher than before the reforms.

    The US varies a lot. Do you have a state in mind, which is conspicuously doing the right thing? If so, could you tell us what it’s doing, and what features of the national context help it to work?

  12. The question is though, how are we going to ensure that we don’t end up with a system where we have large numbers of people on welfare over the long term? Most people don’t have an issue with welfare for those who need it, but in the case of the unemployed, it should be for the short term to ensure that the bills get paid while they are seeking new employment, and not to become a means of living over the long term.


    They should put Roger Kerr in a work house with little Dorrit’s father. I am sure he would be in his element!!!For thirty years he is still trotting out the same old mantra and spin.

    I think that self sufficiency starts in the back (and front) garden and living within our means, after all Cuba has in the face of vicious US sanctions since 1989. And when Asia had suffered an economic crash in 1997 did that effect China?

    So our PM is borrowing millions of $$$ a day (Im not desputing Sam here)well he has to be spending (or speculating) it on something I can’t believe that it’s all on welfare.

  14. Hi Sprout

    I wish I could believe in the New Green deal happening sooner than later;however, not enough of the moneyed investors care about the green earth (mining NZ? supporting US involvement in Afganistan) so their short-tern gain is our/their grandchildrens’ long-term loss. I wish you were able to convince them of the need for this change! For example, the need for us to grow our own is one thing and to have a surplus of organics is nice but not essential except for export to those who cannot grow such food. We should live on our own food when it is in season (NZ jobs). I will certainly miss imported bananas as I am addicted to them but maybeI could do it for my country?

  15. Graham,

    I try to avoid using think-tanks for info. The poverty figures I rely on come from the Census Bureau and the employment figures from the Dept of Labour. Yes, the non-beneficiary assistance is substantial eg food stamps and public housing. The cash benefit expenditure has reduced but the overall ‘welfare’ bill has not.

    The Future Focus reforms will not achieve their stated purpose, to “reduce the cycle of welfare dependency” (same as the Welfare Working Group). They are largely about being seen to be doing something.

  16. Could be a few useful ideas and likely ventures arising @ campcoms.

    Putting the blighters of human kind (Kerr et al would exemplify them for enzed from the look of things) on the backshelf would be the way to go.. but the blighted have to do it for themselves..

  17. Hello Lindsay, the National Super comment was but a red flag but that aside the non-beneficiary entitlement system in the US of A, combined with improved wages due to increased human capital of the single parents must be significant. Certainly the provision of child care in the USA was of very questionable quality when I last read of the US General Accounting Office analysis, and I would trust that before think-tanks.
    It is interesting to look at the detail within the Future Focus Bill.
    Several examples: The need for more regular medical certificates – is this a make rich scheme to enhance Nationa;/Act voting GPs better. The fact the first strike of non-compliance with work-testing obligations remain forever… worse than the 3rd strike criminal offending regime methinks. The abatement changes too little/do not assist those on UB for example. Part-time/casual work is a reality of the NZ labour market, and part-time workers are more attractive to employers looking for fullt-me workers than those without work so the stance of MSD/Government is strange to say the least. A fourth area is changes to advances of benefit with beneficiaries likely to be forced to approach loan sharks with their usury and collection methods.
    Overall NZ is going to get nastier than ever in terms of alleviating poverty.
    By the way, latest take-up/provision of Temporary Additional Support according to MSD is still only 60% of those potentially eligible. Sad that such bureaucratic maladministration is not a concern of a Minister of the Crown.

  18. Graham, The statistics I referred to did not include National Super.

    In the US single parent poverty is lower and their employment is higher than before the reforms. There are doubtless cases of increased hardship but policy should achieve the best outcomes for the greatest number of people. The reforms will not be reversed based on the overall results. They have already been re-authorised once and they are expected to be re-authorised either this year or 2011.

  19. The Wiscounsin welfare reforms have been proven to NOT alleviate poverty one iota and I suspect those on the right who are informed/knowledgable of the impacts of these reforms know fine well this is the case.
    Ms Mitchel’s rebuttle of Catherine’s claim about being on a benefit less than a year is interesting. Prisms and mirrors say a lot. After taking out those of DPB-Sole Parent, Invalids Benefit and National Superannuation the percentages change.
    As it happens, most beneficiaries (including the DPB-Sole Parentsd, those on IB and even some on Super) to say nothing of those on asap. This is mainly because life on a benefit for families particularly is unsustainable. (It is not overly grand for single people either I might add.) Increased debt, falling housing standards, lowering health status, inadequate diet unless having access to a garden and inability to remain part of a community all result. The Future Focus changes will make life tougher.
    As well, relationships with Work and Income are frought due to either bad attitude of case managers or simply that case managers are over-worked resulting in poor decisions.

  20. Dianne-If the money you borrow is invested in things that provide a sustainable future, the repayment of debt becomes easy when global markets stabilize, hence the Green New Deal. If a Government tries to limit spending in things that may support future wealth (ie R&D) the country would not have the infrustructure or capacity to take advantage of an upturn and better positioned countries will beat us to potential markets. There is a greater future in eco tourism than mining, yet what is happening with the proposed rail trails? Organic food achieves premium prices internationally yet our country has one of the lowest percentage of organic farms in the OECD.

  21. Great response, Catherine. Statistics can’t replace stories when it comes to welfare and employment figures. Being in work means different things to different people and a working solo parent on a minimum wage is not a pretty story or a happy ending as Roger Kerr would have us believe.

    I also think it is good luck rather than good management that has seen unemployment figures undergo a positive change and with heavy cuts to the public sector it won’t just be the low waged workers under pressure.

  22. I would like to know if NZ can start getting out of debt by not borrowing so much (a million a month) and by paying off our debts, little by little, so we do not become like Greece. If the NZ government stopped taking loans tomorrw by lunch what would we lose and gain in the process? Does anybody give a damn out there or even know how to avoid this?

  23. “Most people spend less than one year on any benefit and use that time to rebuild their lives and education.”

    The MP need only refer to the latest Ministry of Social Development factsheets – available on-line – to find that 69 percent of people reliant on any benefit continuously, are dependent for more than one year; 38 percent for more than 4 years. These percentages however take no account of the fact that many people leave a benefit and then return. The clock starts afresh on their new spell.

    The Ministry cannot provide information about how long the average or cumulative stay on a benefit is.

    The concern of the Welfare Working Group is breaking the ‘cycle of dependency’. Except for Green MPs most people can see that it exists and that it is damaging, to children especially.

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