A Kiwi con? New Zealand’s model of welfare reform.

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Tony French.

IMG_7401-our-taxes-for-welfare-not-wealthy. Takver. flickr cc.

Can anything good come out of New Zealand? Well, our Government thinks so. It’s fallen for what’s called the ‘investment approach’ to social welfare reform, a New Zealand initiative in operation there for nearly five years. Its appeal is that it is designed to curb welfare dependency.

It’s called an ‘investment’, as it seeks to limit future welfare spending firstly by identifying those most likely to stay on long-term welfare benefits, and secondly by intervening or investing early to prevent them and their children from lives of welfare dependency. From the mass of personal data already held, the government can make an ‘actuarial’ calculation as to who is likely to be a long-term welfare recipient, and, being faithful here to the language of financial matters, how much that dependency could end up costing the taxpayer.

A welfare investment approach for Australia?

The adoption of this ‘investment approach’ is a key recommendation of the 2015 McClure Report which looked at Australia’s welfare system. It liked what it saw in New Zealand, and now Christian Porter, our Australian Social Services Minister, has set aside $33 million from the Budget to investigate and develop an investment approach to welfare. Currently, he is setting up the preliminary surveys and identifying those most at risk of welfare dependency.

Does all this sound like a variation of that good old Australian game of bashing welfare recipients, or does the ‘investment approach’ to welfare represent a fresh new approach to tackling long-term welfare dependency? Could it actually have some merit?

There does seem good sense in early targeting of welfare spending on those identified as likely to be long-term welfare recipients, the data held being equally reliable in predicting who is also likely to end up in jail. Intervention early in life may just save some from future wasted lives, and beneficially too save the taxpayer a lot of wasted money. Early investment/intervention is potentially more effective than a lifelong liability. And that lifelong liability cost of the social security system, Christian Porter says, amounts alarmingly to $4.5 trillion.

So, who among us is readily identifiable as a long-term welfare beneficiary? Predictably, they are teenage parents, the young unemployed, and single mothers. And, if you hadn’t already guessed it, the data pool confirms their social outcomes are not promising, and their risk of blighted lives high.

In practice, the investment approach involves intensive case management for those deemed able to work but otherwise in risk of long-term dependency, as well as funding targeted schools with vulnerable children to provide, by choice, additional reading, maths, and behavioural programs.

Behind such measures lurks the inevitable authoritarian stick. To receive welfare, you have to agree to be looking for work, to be regularly drug-tested, to send your child daily to preschool or school, and to enrol your child in a healthcare program.

On the face of it, targeted intervention in New Zealand appears to be working. The number of single mother welfare recipients has dropped 35% in the last five years. Patrick McClure was convinced about how successful New Zealand had been in generating jobs and making considerable savings over the longer term.

Then there is the view the New Zealand welfare system is punitive and the ‘investment approach’ a failure, and that the ‘actuarial’ calculations of lifelong welfare sums are a fraud.

Problems with the NZ approach

For example, Minister Porter’s all-in $4.5 trillion lifetime figure for welfare. It’s a figure designed to shock, to make you think welfare will bankrupt the nation. But there is no cost-benefit analysis of welfare intervention, like a job-training program which is welfare but may have a positive outcome if the person begins a job. Welfare payments include more than the despised dole and single mother payments; they include family tax benefits, childcare rebates, paid maternity leave, and assistance to the aged, all presumably ‘good’ welfare payments which we wish to retain.

The only calculation that seems to matter is how many people stop receiving welfare and don’t come back. The investment approach is too keen on taking the usual suspects off their perceived undeserved welfare benefits. In New Zealand, targeted intervention includes payment for long-lasting contraception, and counselling on whether and when to have children. A ‘subsequent child’ policy discourages a recipient from having children while on the benefit; once the child turns the age of one, you have to be out looking for work.

Yet fewer than half of those whose welfare benefits have ceased in New Zealand go to a job. As for the rest, there is no ‘official’ count of where they went when they dropped off, but, given sharply increasing numbers of homeless people, the increased demand on foodbanks and rampant fringe lending may well indicate what really is happening.

23df19baeb464b6b9179ecf45db9934b. Peter Zervas. flickr cc.

The cost-benefit analysis of taking people off welfare has not been calculated. The only figure that counts is the simple one of how many fewer people there are on welfare. Noone is counting the resultant health problems and the cost to the community caused by poverty.

Despite the praises being lavished by our politicians on the performance of the New Zealand economy , a visit there soon reveals obvious social inequality. The top 10% of the population owns 60% of the wealth, the poorest 40%, just 3%. Much of the workforce is casualised, pay rates far lower than in Australia, and supermarket checkout operators collectively are the oldest anywhere on earth, packing your small but expensive bag of groceries.

Increasing poverty

This investment approach strategy may have created more social harm than good, putting more people off welfare, while failing to address the causes of poverty and inequality.

John Falzon, commenting about the introduction of such a system here, says we don’t have a welfare problem, but a poverty problem. Poverty, he says, is the result of changes to the economy, such as the loss of manufacturing jobs, while work, if available, is increasingly casual and insecure. Perhaps, too, there are just not enough jobs for everyone.

It has been said that 20% of those in work can produce all that is needed by the remaining 80%. If you are not one of those fortunate 20%, then you are apt to be regarded as a personal failure, dole-bludger, or welfare recipient, instead of collateral damage from a changing market economy. Taking people off welfare, and measuring that reduction as some kind of economic achievement or as welfare reform, seems deluded and dangerous, if the real costs to the community are disregarded.

You might assert that this investment approach to welfare reflects the ongoing flirtation with neoliberal notions, seen in a society with increasing wealth inequality, increased urban poverty, and health inequity. In contrast, the wealthy have greater influence on the settings of government policies than the poor. Consequently, it’s no surprise that there is continuing underfunding of government services to those seen as authors of their own misfortune. It’s then a take-them-off-welfare approach, instead of a jobs-plan approach.

The welfare investment approach sounds fine, in theory, with its philosophy based on targeted spending and measured results. Paul Kelly in The Australian of 21 September wrote that “investing in the vulnerable now, rather than leave them on welfare forever at large cost to the public and misery to themselves” has merit. The New Zealand Finance Minster Bill English says the goal “is to improve individual lives and encourage people to be independent”. He is the architect of the investment approach to welfare.

In implementation, however, the scheme is not above criticism, as it ideologically goes about picking winners and losers. Targeted welfare targets some, but may exclude others, like the older long-term unemployed. Their onerous social or mutual obligation actively to seek work may well be futile.

The actuarial cost of lifelong welfare may have been over-hyped, particularly when aged pensions probably account for 40% of the projected cost. Should targeted funds then be available to euthanase pensioners? Just think of the huge projected savings this would provide, guaranteeing you won’t come back onto welfare.


The reality is that the investment model only delivers its claimed financial savings if people move into work. But if there is little or no work, then welfare savings can only be achieved by restricting access to welfare to move people off benefits, through tightening eligibility and mutual obligation requirements. In other words, push more people into homelessness and social disadvantage consequences which have not been costed.

One suspects most people on welfare do want to work, but starkly realise that, if work is available, it is low-paid and casual, and hardly enough to support you let alone your family.

Perhaps the radical solution, rather than having welfare payments, is instead to pay everyone a living wage or Universal Basic Income.

I feel sure some actuary could calculate this proposal to be a cheap alternative to Minister Porter’s projected $4.5 trillion welfare bill.

Tony French is a Melbourne lawyer and member of the Board of Social Policy Connections.

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1 Comment

  1. Reducing dependency on social welfare is a task that requires a multi-faceted approach. Getting people back to work requires that there are jobs available that match the skills (or lack of skill) of the individual targeted. Work for unskilled laborers is diminishing as society moves to robotic/mechanical alternatives while semi-skilled manufacturing work has all but dried up in this country. To minimize dependency on welfare, Government must look to creating unskilled and semi skilled work. Welfare recipients must then be trained and encouraged into those jobs with welfare payments reducing as wage earnings increase. As a bonus benefit all workers must be given access to higher learning and development of higher skills. The task would initially be costly to the taxpayer and may take a generation or two before the benefits would be noticeable, but eventually welfare payments may only be needed for those unfortunate enough to be unable to take up employment due to mental or physical handicap.

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