Redesigning the Welfare State

A new report raises questions about the past and future of the support that we give to those in need.

The Child Poverty Action Group has produced a report, Further Fraying of the Welfare State, describing the ongoing undermining of the welfare safety net under the Key-English National Government. It needs to be put into a context which begins before 1984 where the report starts.

Starting points always involve judgements because things happen before then. Even so, it makes sense to start with the 1972 Report of the Royal Commission on Social Security because it consolidated what had gone on in the 34 years since the introduction of the 1938 Social Security Act. There is much to admire in the report and I shall draw on that below. However, it was at the end of an era. All social policy is based upon assumptions about how society works. Critical ones which the RCSS assumed became obsolescent over the following decade. They included (in alphabetical order):

            - new and diverse family structures;

            - the Maori urban migration which shifted them from subsistence rural living to living in the urban market;

            - mothers entering the paid workforce;

            - increased social diversity;

            - higher (structural) unemployment.

Each undermined the analysis of the 1972 RCSS.

Anne Hercus, the Minister for Social Welfare in the Lange-Douglas Labour Government, wanted a new royal commission on social security to grapple with the changes, but her proposal was kidnapped by those who wanted to head off Rogernomics, extending it into a wider Royal Commission on Social Policy.

The 1988 RCSP was a disaster. Perhaps that was inevitable. Social security is based on legislation, which royal commissions review well, as the 1972 RCSS did. Social policy is a vast morass of law, practices and beliefs. The 1988 RCSP struggled to make sense of them. It was not helped by some poor decisions and weak advisors. Many people concerned with social policy have warm hearts, perhaps some understanding of a particular policy issue, but no appreciation of the broad social policy issues nor the analytic skills to bring them together. Each was eager to pursue their special interest. The consequence was that the April Report had no overall vision but lots of bits and pieces by those with warm hearts and small heads.

The objective observer might well have concluded that there was no coherent alternative to the neoliberal proposals and so the 1988 RCSP inadvertently opened the way to the 1990 Economic and Social Initiative, in which Ruth Richardson and Jenny Shipley promised to redesign the welfare state. Instructively, nobody used the 1988 RCSP report to defend against the attack; I went back to the 1972 RCSS report.

The ESI became the foundation for social policy over the next three decades. Even the Clark-Cullen Labour Government did little to reverse the underlying framework. Although it was a little more generous, its advisers were mainly neoliberals or those with warm hearts/small heads who accept the neoliberal framework without knowing it.

I draw attention to two features of the current regime by going back to the 1972 RCSP. First it set two standards for benefit levels. It said (original’s italics)

            The aims of the system, should be

            (i) First, to enable everyone to sustain life and health;

            (ii) Second, to ensure, within limitations which may be imposed by physical or other disabilities, that everyone is able to enjoy a standard of living much like that of the rest of the community, and thus is able to feel a sense of participation in and belonging to the community.

The first aim is consistent with a notion of maintaining everybody at or above an absolute level of poverty; the second defines a notion of relative poverty. The 1972 RCSS supported the second notion as the basis of society.

The ESI cut back social security benefit levels to an absolute level of poverty. (There are some good graphs in the CPAG report on page 28 which show just how vicious the cuts were.) We may argue whether they got it right – the chosen level is a bit mysterious but seems to have been based on the work of an American consultant who was so unaware of New Zealand conditions that she did not know her method had been rejected by the 1972 RCSS two decades earlier. That an absolute poverty level was the intention is evident because since 1990 it has been indexed to the consumer price index. By contrast New Zealand Superannuation is indexed to wages, so the elderly share in the rising prosperity.

Had I space I would explain the relationship between poverty lines and inequality. (Another day, except to say it is more complicated than the warm hearts/small heads say.) But at the heart of the change was separating out the deserving from the undeserving poor and treating the latter very badly. The distinction would be an anathema to the 1972 RCSS and leftish governments before 1984.

The CPAG report illustrates the distinction between the poor who are in the paid labour force are treated differently and those who are not. Recall that the Clark-Cullen Government consolidated the principle in the Working For Families scheme in which only those in a certain amount of paid work were given support. (The practice had been introduced earlier by the Bolger-Birch National Government and seems to have been copied from the US.) The report describes how under the Key-English Government the principle of driving beneficiaries into the paid labour force intensified.

The 1972 RCSS would have been perplexed. Had it argued to a group of National-aligned matrons in the 1970s that mothers of young children should be forced to go into paid work it would have been howled down. Times and circumstances change; the matrons of the 2010s seem to take exactly the opposite approach if the approach of their government is any indication.

Does it make sense to socially value paid work while ignoring unpaid work such as caring of children? Anyone who thinks that caring for children is not a demanding form of work has never had any children or left the stress to their wives or hired someone else to do it (the outsourcing adding to GDP but not to total work activity). Pretending it is not socially valuable is foolish – and generates a society which has serious embedded poverty.

Patterns of child rearing have got more complicated since 1972 but the fact is that children still require care; at some times and in some circumstances it can be very demanding, at others less so. How social policy responds to that efficiently and fairly is a challenge which requires a lot of careful analysis. The CPAG report illustrates that we currently do it badly.

Lined up today outside ministers’ doors are many of the warm hearted/small headed. It is doubtful any have the skills to offer the comprehensive analytic vision we need to get out of the muddle. But let me not finish with the pessimistic thought that the current Labour Government may end up, like its predecessor, with merely a slightly more generous version of a neoliberal framework.

The precipitant may be the poverty-reduction target legislation. It is easy to be warm with fuzzy thoughts about it, but cool analytic thinking leads one to conclude that if a government wants to succeed with the target they will be making numerous ad hoc, expensive and inefficient incremental changes, out of which may evolve an alternative vision more in keeping with the principles set out by the First Labour Government and the 1972 RCSS, albeit adapted for changing social circumstances. Perhaps in 34 years’ time – 2042 – another royal commission will review what has evolved and be able to commend it.