The Feb 22nd rumble has delayed my analysis of the WWG report into long term benefit dependency but in between shoveling silt, delivering chemical toilets and getting our chimneys removed, I have managed to have a peek. I only looked at the executive summary paper but there is a fuller report for those who want to look at some of the detail behind the argument.
There has already been some outraged commentary on some of the more sensitive aspects of the report but it’s worth a closer look. Clearly we have a serious problem with the benefit system at the moment: there are 376,000 people on some form of benefit (79,058 on unemployment (UB), 68,056 on sickness (SB), 99,269 on invalid’s (IB) and 99,289 on the domestic purposes (DPB) plus other smaller categories). Having 167,325 people unable to work through ill health or disability is a major issue but that’s really a health problem not an economic one. Having nearly 100,000 sole parents on benefits is a serious social problem reflecting the breakdown in the family as well as unstable and unhealthy relationships. That leaves 79,000 unemployed and actively looking for work. That is a big number at a time when the economy is heading for a double dip recession.
So those are the important numbers but what does the WWG have to say about them? They outline 8 key reform themes amongst 43 recommendations (42 would have suggested a dark sense of humour!)
1) The key theme of the report is the importance of paid work. That’s interesting because I imagine most people would like to have paid work to do. Unfortunately with 79,000 unemployed it suggests there isn’t enough paid work around (certainly not enough suitable jobs). So it’s all very well saying paid work is the way forward but if the jobs are not there then it becomes a platitude. The focus on paid work also ignores the fact that many people do very important unpaid work: this includes child rearing (100,000 sole parents on the DPB), caring for the unwell, volunteering and other unrecorded contributions. This is where the report really misses the target. By only offering up paid work as a contribution to society it misunderstands how society functions, seeing society as a simple economic structure. If we valued unpaid work then that might be the case and actually there is a very sensible way of doing that which I will come to later.
2) Reciprocal obligations: this reinforces the paid work theme by making sure people are taking all reasonable steps to find work even if this means moving about the country (echoes of Norman Tebbit and his infamous and misquoted “on yer bike” remark). 2 comments here: Reciprocity is important. A benefit is a gift from the taxpayer in times of hardship. In return one is expected to do one’s best to find a job or at least re-train in order to find a different job. The problem with treating labour as a highly mobile input is that families are disrupted. Still it’s a fair point to make. With online job search sites now available, people can find suitable jobs all over the country. However, relocating may not be as easy (or cost efficient) as it sounds. This leads into the next theme.
3) Taking a long term view: the WWG recognised the need for further investment into education, training and job finding services. This makes sense. Every time someone becomes unemployed they need a thorough assessment of their abilities and potential opportunities. At that point upskilling and retraining can be offered. From what I have heard the current system is a bit lackluster in this department.
The remaining 5 themes are fairly standard fare: measuring outcomes, focus on Maori (31% on welfare, 41% of DBP recipients), focus on at-risk children (220,000 living in benefit households), cross government approach (bringing in health and education departments as well as the community) and more effective delivery (new outcomes focused agency). All standard stuff.
There has been a bit of an uproar over 2 recommendations:
- One is over the 14 week return to work proposal: this is actually about addressing the issue of having further children whilst on welfare and it is designed to act as a disincentive. This ties in with the expectation to look for work once your youngest child reaches 3 (up to 20 hours a week). It is quite specific to people who already have children and go on to have another one whilst on welfare. I think it’s reasonable to ask people to put off having further children until they are in a stable financial situation. Otherwise we do get into the potential situation of multiple children to extend time on benefit. The WWG notes that the government should monitor this policy closely and apply further financial disincentives if necessary. John Key has already said he’s uncomfortable with this proposal and this demonstrates how difficult this issue is to address.
- The other is the furore over teenage pregnancy and contraception. One of the proposals is to offer free long term contraception to women on welfare as a way of helping to ensure no further pregnancies. This ties in with a post from 2008 which looks at incentives around teenage pregnancy. It’s always preferable to see behaviours change intrinsically but it is likely to require some serious incentives to capture the attention of young people and use that to show that there are alternatives. Whether it’s annual payments into a savings scheme such as Kiwisaver or housing deposit. Incentives do matter and can help bring about lasting change.
Two fundamental changes have been proposed from these 8 key themes:
- A new single work focused welfare payment called Jobseeker Support (with more focused supplementary benefits above that).
- A new agency called Employment and Support New Zealand (ESNZ) to implement new approach.
Interestingly enough they ruled out a guaranteed minimum income on the basis on large costs and transitional problems (they relied on a Treasury report which I will discuss in an upcoming post) but have tried to move the various benefits to a single payment, the Jobseeker Support. This really is the crux of the problem: how can people be supported whilst they are in between jobs, yet at the same time not penalised or disincentivised not to work at the margin and how can we make sure people are gainfully occupied when there are no jobs available. The UK has had a go at welfare reform as well coming up with a Universal Credit which again tries to simplify the payment process whilst incentivising the work search.
To summarise the report:
- Paid work is where it’s at.
- Labour is mobile and should go wherever the work is with appropriate support.
- Better training, support and rehabilitation is needed to help people into new employment.
- We should discourage women from having further children on welfare, teenage pregnancy and get sole parents in the workforce when their youngest turns 3 (or 14 weeks if you’ve been silly enough to have another one whilst collecting your benefit).
- Reciprocity and obligation: there’s no such thing as a free lunch.
- Invest for the future.
- Reduce beneficiaries by 100,000 by 2021.
- Improve efficiency in structure and delivery of benefits and employment prospects.
All in all these are sensible suggestions in a perfect world so what’s missing? Jobs for a start. As well as poor outcomes from an education system under strain, poor health from a section of society living in poverty and wages which for many have gone nowhere over the last 20 years. Unfortunately the WWG were given a poisoned chalice (governments have become good at outsourcing bad news) since the problems of welfare are deep seated and structural. I think they have made a reasonable fist of it despite the headline hysteria. So what’s my take on it? I’m a big fan of basic income, which comes in many forms, because I believe we have a structural decline in the availability of jobs which is going to get worse as technology strides ahead. However, there is never going to be a shortage of work. That’s the critical difference. Work can be paid or unpaid. By ignoring the value of unpaid work the WWG leaves itself with few options other than the ones they have recommended.
This is why I personally favour a conditional basic income to replace all benefits and superannuation (which I will discuss in more detail in another post). I’m glad the WWG raised the issue of reciprocity and obligation as I think it’s a very positive way to look at welfare. I’m also in favour of more investment into education and training for the workforce (the recommendation for all 16/17 year olds to be in paid work or training is good). Overall there is a need to really look at the future of work in a changing society, the embedded inequality and lack of positive pathways for many. The WWG is a very worthwhile effort at bringing some issues out for debate. It certainly doesn’t have all the answers and it does look at work through a very narrow lens but it’s a discussion we need to have with clear heads. This is just the start.