These reports reveal that the short-term insurance function of our welfare state has been swamped by long-term welfare recipients whose time on a “benefit” is now measured, not in days or weeks, but in years or even decades. The average time that one of the 351,700 current “clients” - as MSD calls beneficiaries – is projected to be fully supported by a benefit is now more than 13 years!
That was the estimate in 2023. It’s been getting worse. One year before, the figure was more than 12 years. For Māori, the expected years on a full benefit increased over 12 months by 13 months – from 15.1 years to 16.2 years! This seems almost mathematically impossible, but unfortunately it isn’t.
How did this happen? Things started to get out of control in Aotearoa NZ as a direct consequence of our 1980s neo-liberal policy revolution known as Rogernomics. Before then, we truly did have a wage earners’ welfare state, with miniscule unemployment and minimal need to actually call on the social insurance programmes that were in place.
Rogernomics - with its trinity of mantras: privatisation; liberalisation, deregulation - ripped the stuffing out of the productive economy. One manufacturing job in three disappeared, and there were massive layoffs in inefficient state-owned enterprises such the railways and forestry. The unemployed went on the dole, of course, but also individuals and families began piling into other welfare programmes, such as the Domestic Purposes Benefit for single parents, and even sickness and disability benefits.
Willingly or not, families, and then generations, became locked into life as a beneficiary, with the long-term consequences that we are only now becoming aware of.
What’s to be done? So far, nothing. The Minister in charge of MSD from 2017 to 2023 was the very able Carmel Sepuloni, who told the Herald that she “did not recall being briefed by officials” on the matter. Well, she could have asked. She could have even read her own ministry’s Annual Report.
But, to be fair, a very close reading would be required. The numbers I cited above actually do appear in the MSD’s 200-page 2023 Annual Report (on page 77), but in just a few quick lines, with no documentation, detail, or discussion.
So, what is to be done? Reading the Herald article last week, I was struck, not just by the scale of the numbers, but also the tone of the discussion of the situation faced by beneficiaries. Throughout, it is framed in the language of victimhood. Young people “struggle” [unsuccessfully]; Māori are “disproportionately impacted”; thousands are “trapped in poverty”, with “profound impacts on well-being”.
Well, if you have a policy which is by now incredibly expensive - more than $10 billion/year, including tax expenditures – and yet does gross harm to the people affected by it, then, surely, the answer is screaming out to be said: Just. Stop. Doing it.
And so we should scrap the system. The key is to eliminate means-testing. At present, if a beneficiary takes on even a part-time job at minimum wage they will thereby lose all or nearly all of their benefit. That indeed is a poverty trap.
We could at the same fiscal cost replace the entire social security apparatus, including superannuation, with a Universal Basic Income (UBI) of around $600/fortnight, paid to every adult, whether they work or not. Yes, that is somewhat less than what beneficiaries get now, but not a lot less, and it would liberate the productive energies of several hundred thousand able-bodied citizens.
Our 21st century welfare state is supposed to eradicate poverty, but it perpetuates it. A UBI wouldn’t eradicate poverty, either, but it arguably would reduce it, and bring about other good things. I think Michael Joseph Savage would approve.
Tim Hazledine is Emeritus Professor of Economics at the University of Auckland
