Right-wingers oppose state-provided social programs like education, health, and welfare services on the grounds that they create powerful and wasteful new bureaucracies. But it’s means-tested benefits, not universal programs, that empower bureaucrats to act like petty tyrants.
We have seen that in New Zealand with the delivery of welfare benefits to the unemployed and sole parents and income support through the tax system for low-income families with Working for Families.
Benefits in New Zealand are very low and cannot meet people’s basic needs. That has been confirwed by the government’s own Welfare Expert Advisory Group in their report.
It is simply a lie when people claim that benefit levels being “too high” encourages people to choose benefits over jobs. Levels of unemployment were much lower in the period from the 1960s to the 1980s when benefits were twice as high in relation to average wages than they are today.
The real value of benefits in relation to average wages has been halved since the 1990s and the hugely unpopular “Mother of All Budgets” in 1991.
1991 benefit cuts drove up child poverty and it remains unchanged today
Prior to the cuts in 1991 around 25% of children in beneficiary families were identified as poor in the Household Economic Survey. That rose to 75% post cuts and hasn’t changed much since.
But, only half of the cut in the value of benefits in relation to the average wage was due to Ruth Ricardson’s budget in 1991. The rest came as a consequence of both National and Labour only increasing benefits by the Consumer Price Index rather than average wages for the next three decades. This only changed in 2020 when benefit increases were restored to being in line with the average wage movement again.
The poverty produced by this cut is real and felt and can’t be discounted as simply the result of a “relative” decline.
The value of the benefit for people on National Superannuation was also cut in 1991 but its value in relation to the average wage was maintained at 72% for a couple.
The “deserving” and “undeserving” poor
To justify these cuts (and the refusal of future Labour-led governments to reverse them) a whole ideology around “deserving” and “undeserving” poor has been developed. Anyone who is not working is deemed a “bludger”. Cartoons of overweight brown people queueing up for any handout available became almost normalised.
Assistance is targeted to those deserving people in work through Working for Families.
Universal entitlements like the family benefit were eliminated so assistance could be targeted to the deserving more accurately.
The system became one where seeking assistance became more and more difficult, humiliating, and vindictive.
The economic recession that was partly induced by the 1991 welfare cuts saw unemployment go from less than 4 % to 11% on average. But for those of Māori or Pasifika descent, the recession was a depression with unemployment reaching 25% and whole communities shattered.
Anti-union laws were imposed during the crisis and union protections were removed for most private-sector workers. Real wages were slashed.
Prior to this recession, Māori and Pasifika had higher labour force participation rates than did Pakeha. That was before the infection of these communities by a mass virus of laziness that saw tens of thousands of them quit work over just a few years.
Full-time male employment fell by 120,000 over four years from 1987-91. Of course, this impacted much more on Māori and Pasifika. Working-class communities and families were torn inside out and upside down.
To compensate for the loss of real income families worked more hours. Two-parent families with both working full time doubled from 20% in the 1980s to 42% of all families.
Another 28% of families today had a parent working part time.
A report by Simon Collins in the New Zealand Herald November 25, 2006, found that average family income in 2001 in constant dollars was the same as in 1981 despite the fact that the proportion of women working went from 47% to 61% and the percentage of families working 50+ hours a week went from half to two-thirds.
On top of that household indebtedness exploded from 28% of GDP in 1990 to 100% today.
It was also during the last few years of the 1999-2008 Labour-led government that WINZ radically reduced the percentage of people receiving welfare support from the State.
WINZ imposes a culture of benefit denial
In the mid-2000s WINZ imposed a culture of denial that saw a halving in the percentage of unemployed people accessing benefits. Many had no choice but to to try and survive with no income at all, rather than face ritual humiliation, belittling and bullying from caseworkers.
The Household Labour Force Survey measures the number of people officially unemployed, as well as a broader number of people who are “jobless”.
Between 1990 and 2003 the number on benefits never dropped below 64% of the “jobless” number. Over the next decade, it dropped to only 18% of the “jobless” number.
No explanation has ever been provided as to this was achieved.
A billion dollars taken out of working class communities
People receiving a benefit as a percentage of the working-age population fell from 13% to 8% when unemployment only fell on average from 8% to 6%. I am convinced the big growth in homelessness since 2008 is directly related to that policy of excluding people from even their minimum entitlements. Getting that 3% of the working-age population (about 110,000 people) off benefits essentially has just removed about a billion dollars a year from working-class communities.
It is reflected in overcrowded homes, people living in garages or on the street, kids staying at home longer, poor health, poor nutrition. That billion dollars saved isn’t going to the likes of you and me. It is being used by a big business-friendly Government to hand out favours to their friends. And of course, there is always enough for the police, prisons, military, and spies to protect their system.
These numbers are behind the hunger and homelessness associated with joblessness over the last seven years when unemployment was officially relatively low. But if you were unemployed and couldn’t access any form of entitlement then misery was the inevitable result.
This is also the reason beneficiary recipients have seen their debt to the Ministry Of Social Development (MSD) triple from $250 million to $750 million since 2008. These debts are then used to bully and harass people further including imposing addiitional penalties if not repaid on time.
The system of denial and treating working people accessing income support (working or not) as potential frauds or bludgers continues.
This contrasts with how tax avoiders or wage subsidy recipients are treated.
Tax “evasion” treated differently to benefit “fraud”
The different treatment of tax avoiders was highlighted in a Victoria University research paper titled: “Why is tax evasion treated more gently than benefit fraud?”
We investigate a higher rate of welfare recipients than taxpayers. Around 5 percent of welfare recipients are investigated in an average year, compared to around 0.01 percent of taxpayers.
We have greater numbers of criminal prosecutions of welfare fraudsters than tax evaders. In a typical year, there are 600–900 prosecutions of welfare fraudsters and 60–80 prosecutions of tax evaders.
A higher proportion of prison sentences are given to welfare fraudsters, for a lower level of offending, compared to tax evaders. For an average level of offending of $76,000, 67 percent of welfare fraudsters received a prison sentence. For an average level of offending of $229,000, 18 percent of tax evaders received a prison sentence.
Bernard Hickey in the Spinoff article headed “The real impact of New Zealand’s economic response to Covid-19” looks at the big capitalist recipients of wage subsidies and how they are treated for potential fraud:
So far, only one reported prosecution has been launched by MSD against those who took the money without justification, out of over 1,000 cases referred for investigation. During that time, MSD has launched dozens of prosecutions against beneficiaries.
The biggest losers in the Covid recovery have been those in itinerant work or piecemeal work, who have lost income, along with those renting. Last year those on benefits and the working poor received benefit increases that were not enough to cover rent increases. Last year they received a doubling of the winter energy payment, but not this year.
The government announced earlier this month it would lift the incomes of 346,000 families by an average of $20 a week with various increases in best start payments and higher tax credits, but only from April next year. The PM said it would lift 6,000 children out of poverty. It is costing $68m a year for the next four years. Just imagine what $20b worth of cash paid to increase benefits, let alone to invest in housing and infrastructure, would have done to reduce child poverty.
Last month, MSD minister Carmel Sepuloni announced an extra $9.6m in hardship assistance for low income workers, although some of it can be clawed back at a later date.
Child poverty activists have described the recent one-off grants and tax credits, some of which are clawed back as recipient incomes rise, as disappointing and out of touch.
That has been reflected in massive increases in demand for food parcels and a rise in debt owed by beneficiaries to MSD. As of March 2020, 67% of beneficiaries owed an average of $3,600 in debt to MSD, with debt rising $150m to $750m in the year to March, 2020. The Govt has rejected suggestions of an MSD debt moratorium or writeoff.
Criminalising Working for families overpayments
Finally, we have the New Zealand Herald look at Working for Families in an article headed “Welfare debts pushing thousands into ‘poverty trap’”. Thomas Coughlan writes:
The Government is collecting tens of millions of dollars worth of penalties and interest on debt owed by some of the poorest Kiwis.
As of September 30, Kiwis owed the Government $193.2 million from being overpaid working for families tax credits – usually because they have not notified MSD that their family circumstances have changed.
Payments vary depending on whether someone is in a relationship or is living with children of a certain age. If the Government is not kept abreast of a person’s changing personal status, that person might be overpaid any benefits or tax credits they receive- the Government will then treat the overpayment as debt, and try to claw it back, in some cases with interest.
More than a quarter of debt relating to working for families ($54 million) is actually not the overpayments themselves – it is the penalties and interest charged on that debt.
The debt is made up of $138.2m in overpayments,$29.6m in penalties, and $25.4m in interest debt.
The evidence is that if the jobs are available nearly everyone who wants to will work. Māori and Pasifika don’t have a wefare gene. In fact, they had a higher work participation rate than Pakeha before the 1990s restructuring of capitalism imposed endemic unemployment.
But low benefits do force people into taking the worst jobs on offer more quickly than would otherwise be the case. Higher benefits suit workers better because it gives us a little more bargaining power when negotiating our next job after losing one. That is why it is wrong for the CTU to be negotiating a new social insurance system of benefits for regularly employed people instead of fighting for higher benefits for everyone. That undermines working-class solidarity and power.
Cutting benefits weakens working class power
Cutting benefits went hand in hand with cutting union power and lowering real wages. That is why they destroyed collective bargaining and union representation for most workers at the same time.
But to cut real wages the employer thinks he needs the gap to grow between wages and welfare payments. You have to make living on a benefit as miserable as possible.
One of the worst things that has been done by the this Labour government has been to maintain the unequal position for parents in work or those not in work in terms of child support payments. The In Work Tax Credit is a payment of up to $72.50 per week ($3,770 per year) to working families for the first three children and up to $15 extra a week for each additional child. In work parents get $72.50 a week more. This is taken off them if they work less than 20 hours a week for a sole parent or 30 hours a week for a couple and rely on a benefit for support. Managing the boundary between being entitled and not entitled is a nightmare. The work requirement was suspended for the Covid emergency but could be returned anytime. The Child Poverty Action group has critiqued it as a failed way to deal with child poverty from day one.
We should demand a returning of benefit rates to 40% of the average wage for the adult unemployment benefit, an individual entitlement to benefits. This level of suppport with individual benefits was provided as a Covid welfare payment last year. The adult age should be returned to 18 from 25. Child support payments should be universal for all parents and not mean-tested.
That will fix the system not social insurance for the regularly employed. Then we can retrain the thousands of WINZ staff dedicated to denying entiiitlements and prosecuting welfare recipients into a much more worthwhile and useful job.
I would argue that it is open ended nature of benefit entitlements that have helped create the permanent subculture of failure that now exists in New Zealand.
Entitlements like health and education are mechanisms that can uplift people out of poverty whereas long term reliance on welfare traps communities into reliance on it.
I know people who, as the article says, just got sick of being treated as a criminals, ad jump through so many hoops, before even getting a payment. They gave up and told MSD to just go fuck themselves, and started dealing drugs to make ends meet, but still with pride and integrity intact.
Show us the jobs please.
The constant repetition that benefits are too high, or that solo parents must go out to work otherwise a generation of indolent people will arise, are false and such lies should never be acted on. But they are behind much of our ‘lack of welfare’ system. So lregirgotated lies spread and infect the minds of people who wouled deny others the ability to build a decent life for themselves and if they are parents, for their children. The state does mot care about imost of its lies.
I thought we had a pretty good society in the seventies and now the findings from Lake Alice institution and how obvious cruelties were being excused or ignored, showed that was a false idea and that we can’t rely on authority to hold to fair and kind standards. So we have a *nurse now venting about attacking medical workers and vaccination buses, spouting anti-vaccination beliefs. Will we need to question the standards and mentality of anyone we deal with? The stress on individualism over a group morality of care and concern for the group’s welfare, tribal and local community, along with our own, with individuals able to flourish finding their skills and gifts would result in a happier society. I consider it is merely a cost-saving procedure by government and financiers, basically leaving people ‘to stew in their own juice’ rather than enable and empower them, then when they fail they get fined, outed to society, put in jail, made an example of. This society we have now is descending into madness, suspicion, hate.
* https://www.rnz.co.nz/news/national/457824/dunedin-nurse-referred-to-nursing-council-over-online-threats-to-attack-vaccination-buses
Obviously you have never been on a benefit Andrew and you probably don’t know anyone who has. Having been on a benefit when needed and knowing many others on one and who have gone of one I can tell you the benefit system can work if delivered properly. Punitive measures don’t work far better to have incentives and other measures to encourage and assist those who can to get into meaningful, secure sustainable work. But unfortunately there will always be some people who are unemployable.
LOL, usual tripe from Mike Green. Agree we need to lift benefit levels to get kids out of poverty and we need a state house program to ensure all these kids can grow up in a safe and dry home. We also need support and training programs for solo caregivers so they can re-enter the workforce when their children reach 18. But lifting the unemployment benefit level, I would suggest a lift to something par with Super entitlements, with a maximum cap one can claim over their lifetime, say 5 years. No time for the unemployment lifers!.
Bang on! The Covid payment proved that this ‘Labour’ capitalist Govt thinks that beneficiaries are “undeserving” unless forces ‘outside their control’ like Covid put them out of work.
They are still pushing the neoliberal bullshit that the market is the natural order, and those who cannot compete in the market are written off as ‘losers’.
That’s why they will never challenge business as usual to correct the huge social deficit that goes back to Rogernomics and the ECA.
That’s why they will never undo the damage they did in the 1980s. They a paid up bosses’ lackeys.
This is why they rejected the advice from Maori backed up by the experts like Hendy that Maori would cop the most damage from Covid unless given special care.
That sounds too much like ‘separatism’ and ‘socialism’.
So the sabotaged their public health policy of ‘elimination’ in Auckland in September, immediately after Key’s ‘hermit kingdom’ outburst.
$60 Billion for the bosses to boost their profits, but not one billion to correct the 40 year deficit owed to beneficiaries!
No chance in hell that they will return to benefits pegged to 40% of the average wage.
Social Insurance is their answer because it makes workers pay for their own redundancy and it is time limited. The UK imposed this a couple of years ago under a Tory Govt.
Labour abandoned social democracy under David Lange in the 1980s.
It is now a Liberal Party heading in an authoritarian direction.
We saw this process destroy the UK Labour Govt under Tony Blair.
Therefore begging this Govt to return to the pre-1980s social democracy is futile.
NZ has one good thing going for it.
It is a weak dependent economy increasingly dominated by the US and China in a global terminal crisis of capital which is seeing the class contradictions explode.
The compounding economic, climate and pandemic crises brings the inevitable showdown between those who defend labour and nature on the one side, and those who defend dying capitalism.
The class lines are forming with those who put the lives of workers first, such as the Te tai Tokerau checkpoints, against those that sacrifice workers lives to keep their SMEs afloat.
Inevitably those who side with the bosses ‘freedom’ to exploit and burn the planet, will be the fascist fodder, led by expat Trumpites self appointed bishops and anticommunist farmers.
They are the small misguided mislead minority.
On the side of the vast majority, those who blame the bosses and not the beneficiaries, the solidarity in the unions between Maori, women, migrants and unemployed, is the base line of resistance capable of mobilising and uniting anti racist and antifascist movements.
At a time when the global capitalist system is destroying what is left of nature and with it humanity, our survival is in the hands of international worker solidarity and socialist revolution.
For humanity to live, capitalism must die!
The neoliberal centre-right Ardern-Robertson government, whenever confronted with demands to help the poor to live, to be housed, to eat, to be schooled, to be healed, resorts to the Micawber argument that every dollar spent on the poor is a dollar that must be taxed from others: “We can’t afford it!”
The behaviour of governments around the world during the 2008 GFC, and again since the Covid pandemic struck in 2020, shows that in fact they merrily conjure billions of dollars out of thin air when it suits them. It’s what they do with those dollars that matters. Creating money runs the danger of inflation (same cake, thinner slices). The Ardern-Robertson government had the Reserve Bank throw billions at trading banks over the past two years to lend as mortgages to prop up the New Zealand housing market. This has had the inflationary result of immiserating non-homeowners by putting the price of houses fantastically beyond their reach. The houses are worth no more than they were two years ago, or ten; it is the structure of price relativities that has changed, whereby those holding mere Kiwis discover they will buy only half as much House as they once could.
Had the Government, as it was urged, instead distributed those billions as helicopter payments to everyone on the IRD or MSD books, there probably would still have been an inflationary effect, but it would have been more evenly spread, along with the largesse.
The Government can easily print all the money it needs to restore all the welfare benefits to pre-Ruthanasia levels and entitlement as Mike Treen suggests. To balance that, the Government may need to collect tax, not to pay for the benefits, but to subdue any consequent inflation; it is not revenue, but currency withdrawal. It doesn’t need to come from higher taxes on the incomes of workers: rather, it would make sense to clip the wings of the asset rich with a property tax. Discouraging the rich thereby from spending so freely would balance the extra spending power of the poor, subduing inflation, keeping the Kiwi valuable for all.
Spot on as well.
Beardsley Ruml, Taxes for revenue are obsolete, 1945:
https://modernmoneynetwork.org/sites/default/files/biblio/BeardsleyRuml.pdf
The speech (about 8 minutes in):
https://ssgreenberg.name/PoliticsBlog/2019/03/25/beardsley-ruml-taxation-for-revenue-is-obsolete/
yeah the kind of ‘shovel ready projects’ receiving squillions were weird in itself- window-dressing and turd polishing were in when community gardens, public showers etc were not
I’m not convinced they actually believe their is deserving poor. It’s just another tool to bash working people.
We are left time after time watching more people with mental health issues and physical health issues become homeless or top themselves. The weakest amongst us, the down trodden, those who are truly poor.
Treated like trash by both main political parties – mainly because they don’t vote, and need help which they can’t ask for.
A underclass exploited by the tories for political gain. Ignored by the liberal left because to lift a finger to actually help, would mean accepting that the current economic system is broken. And then they have to do something about it. The labour party as it currently stands, is not going to do that.
And to make it worse, the tories want to ramp up the vicious economics which destroys lives, destroys communities, and destroys families.
Deserving poor as a concept is a sick joke, one which lets those who should be working for all of us, commit unspeakable cruelty in the name of helping.
One of the best articles, it is both contextually, and historically on point…
My personal experience is different from most of the points in this article.
In the mid 2000’s the minimum wage was around $11.00 per hour, or around $420 a week after tax; the adult benefit was around $145.00 a week after tax.
Nowadays, the minimum wage is $20.00 per hour, or around $650 a week after tax; the adult benefit is around $300.00 a week after tax.
Plus, the Accommodation Supplement is still in place.
So I believe that beneficiaries are much better off these days than they were fifteen years ago. Hence there is not a need for universal entitlements.
But that’s only my opinion.
Who was in charge during the mid 2000’s. What a effing disgrace. You can guarantee the unemployment figures were jimmied back then.
is anything actually being done????
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