We’re richer, but more dependent on benefits

New Zealanders, on average, are wealthier than ever before, but more of us rely on a benefit to survive. To address the growing inter-generational welfare issues a new report suggests a longer-term approach is needed. Shane Cowlishaw reports.

Welfare reform looks certain under the Labour-led Government, but a new report has highlighted a raft of obstacles in the way of serious change.

Growing inequality and the unfairness of the benefit system were hot political issues pre-election, with both Labour and the Greens citing them as priorities.

Now a new Government is in power after protracted coalition negotiations, but it remains to be seen whether it will take a long-term approach to social development or simply paper over the cracks.

Ministers and staff have been frantically working on delivering the Government's 100 day plan, which includes passing a Families Package made-up of a winter fuel payment, newborn best start payments and increases to paid parental leave.

Next year more substantive work will begin and it is understood a new Welfare Working Group will likely be formed to report on the best way forward.

In his work with the New Zealand Initiative, Dr Bryce Wilkinson has written a report considering a way to improve a welfare system where “New Zealand needs to do better”.

Welfare, Work and Wellbeing: From Benefits to Better Lives points to entrenched, inter-generational welfare dependency as one of the country’s biggest problems.

"The problems are so deep and so entrenched, particularly this transmission of child abuse from one direction to the next, that there aren’t quick fixes or silver bullets."

Costing billions, it has lead to dramatically worse outcomes for children growing up in struggling families.

With family violence, child abuse and drug and alcohol dependency all linked, the report notes that children who have had contact with care and protection authorities are vastly worse off; for example almost 80 percent fail to reach NCEA level 2 compared to 30 percent of those with no contact.

“New Zealand should be doing better. It is a much more prosperous country today. Income per capita is now approaching twice what it was in 1970 and the minimum wage is 50 percent higher, inflation adjusted. Household durables that were a luxury or unknown are now cheap necessities,” Wilkinson said.

These issues are not new.

In 2015 the Productivity Commission reported back on how to make social services more effective, while in 2010 the Paula Rebstock-led welfare working group (assembled by the new National Government) came back with some grim conclusions.

“[The] scale and consequences of long-term benefit receipt are deeply concerning...[The welfare system] is not sustainable, it does not provide equal and fair opportunities for those people on different benefit types and it is associated with poor social outcomes,” the working group said.

Speaking to Newsroom, Wilkinson said he believed the social investment approach championed by former Prime Minister Bill English had a role to play.

Wilkinson's report said timely evidence-based early intervention made sense and had been championed by both recent Governments.

"The 1999-2008 Labour-led government promoted the social investment concept before the National-led government adopted the term," he said.

The report called for systematic monitoring of post-benefit wellbeing and the retention of the previous Government's social liability measure.

"It is the only one that requires statistical assessments to be made of the sustainability of moves out of the benefit system. To not retain this complementary measure would be to throw the baby out with the bathwater," he said.

A social investment approach would face challenges, however, as there were many roadblocks in front of it, including short-term focus from Ministers, pressure from politicians to maintain programmes that didn’t work, data privacy, and siloed government departments that didn’t communicate.

“The problems are so deep and so entrenched, particularly this transmission of child abuse from one generation to the next, that there aren’t quick fixes or silver bullets, it’s got to take a long-term view, not just a view that 'okay, if we pay bigger benefits we’ll shift 100,000 kids over an arbitrary poverty line', that doesn’t deal with the symptoms, the underlying causes, all the misery and dysfunction,” he said.

Dr Bryce Wilkinson: "New Zealand should be doing better." Photo: Supplied

The aim of social investment under National was to save money in the long term and it adopted an approach that it was worth spending money in the short term to get better results in the future.

The promised outcomes would be difficult to achieve, as it would require ongoing Ministerial and Cabinet commitment, Wilkinson said.

In a recent interview with Newsroom, Social Development Minister Carmel Sepuloni appeared to agree with the need for a more considered approach: “We have to think long-term. If we think there’s some kind of short, sharp fix to the problems we’re facing as a country, we’re kidding ourselves.”

She also indicated that social investment would remain, albeit in a tweaked form.

”This is a good opportunity for the new Government, I hope they don’t do a patch-up.”

Uneasy with the focus on fiscal implications, Sepuloni said she wanted to see the direction shift towards improving the outcomes of all needy New Zealanders. To this end, she has asked officials to look at how European countries had approached the concept.

Minimum wage rise unhelpful

In his paper, Wilkinson argues that moves to raise the minimum wage were a short-term help to those employed but actually reduced the chances of someone who was long-term unemployed getting a job.

In April the minimum wage will rise from $15.75 to $16.50 and will incrementally increase to $20 by 2021.

But Wilkinson said this meant that there would likely be fewer jobs, making it even harder for those struggling with issues such as poor literacy to find employment.

“As a welfare policy measure, they are ill-targeted. They make it harder to reduce the inter-generational benefit dependency. Politicians know this, but they must count heads.

“No-one explained to me how raising minimum wage can help long-term unemployed.

“It’s the people who are least employable that raising the minimum wage will likely hurt.”

But Susan St John, an Associate Professor at the University of Auckland and spokeswoman for the Child Poverty Action Group, said this was simply not true.

Without intervention wages would never increase, as many employers needed encouragement to do better.

It was, however, not enough alone and other measures such as improving Working For Families were needed alongside, she said.

”This is a good opportunity for the new Government, I hope they don’t do a patch-up.”


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