Michael Fletcher: Welfare system needs radical shake up

The new Government must restore faith in our welfare system. Photo / Mark Mitchell

Opinion

After nine years of National's so-called welfare reform, there is a certain irony in the fact that one of the most urgent tasks facing the new Government is welfare reform. In fact National didn't reform welfare at all - they simply introduced new benefit names, vindictive administrative procedures and placed everything at the behest of an illogical "fiscal liability" performance measure.

The outcome has been families living in cars, people not receiving their entitlements, women in court because they took out loans to support their children - and no improvement in Work and Income's ability to place people into real jobs.

The new Government faces two tasks. First it must restore faith in our welfare system. One of the earliest big data analyses of welfare was a Ministry of Social Development study showing that almost half of all New Zealand children born in 1998 had spent some time living in a benefit-receiving household by the age of 13.

The lesson is that welfare is for us all. It is not the "us-and-them" thing National would have had us believe. As we go into the future of work, with automation leading to increased job losses and a greater need for re-training, that is going to be even more true.

There will always be rules around welfare receipt, and some sanctions for failing to meet them. But there is no reason those rules can't be reasonable and fairly administered. Labour needs to get rid of the policies and attitudes that have made dealing with Work and Income an unpleasant experience and that have seen a massive growth in sanctions, three-quarters of which are for failing to attend an appointment on time.

Genuine social investment means putting more money into frontline services and into job subsidies and other programmes that help people into work, training and lead to higher living standards. (And no, Shane Jones, work-for-the-dole schemes don't work.)

Second, it needs to embark on a programme of genuine modernising reform. Our system is still based on its 1938 origins of the "male breadwinner, female carer" family.

In the 1970s we bolted on the DPB in an effort to accommodate the growth in sole-parent families. The result is a set of rules that doesn't match how we live or work now. More than three-quarters of couples with school-aged children have two earners, most need both incomes to get by. But, because it is assessed on joint family income, our current system typically provides nothing if one person in the couple loses their job.

For sole parents, the same rules often mean the cost of entering a new relationship is prohibitively high. You lose eligibility for the benefit; and your new partner is expected to support you and your children. You may get child support - but many get little or nothing.

Because of the way these rules work, sole parents on a benefit can find themselves at risk of running foul of the relationship status rules and winding up in debt, or court, or both. These are not the small number of out-and-out fraudsters, they are ordinary parents attempting to manage their lives as best they can. Modernising the system requires removing the relationship status criterion. There would be no "couple" or "sole parent" benefit rates, which require deciding who is and isn't in a relationship, just a single adult rate. This can be achieved, with nobody being worse off, by changing the design of core benefits, the accommodation supplement and the working for families tax credits.

Some may question why a married person should be entitled to receive a benefit if they have a spouse with a good income. But if a person is unemployed, genuinely seeking work and willing to demonstrate that to (a restored) Work and Income, why should it matter whether they are partnered or not? That is 1930s "man and his wife" thinking.

Removing the out-dated relationship status criterion is an affordable change that would fix one of the most significant inequities in our current system and bring it into line with 21st century family and labour market realities. It would also contribute substantially to the Prime Minister's child poverty reduction objectives by allowing sole parents to form relationships without the same loss of support and reducing poverty among working-poor couple families.

Michael Fletcher is a senior lecturer at AUT's School of Business.