The Welfare Working Group Options

The Welfare Working Group has released an options paper. This is an excellent way to do policy development – getting experts involved, and having them release issues papers and options papers so people can have their say.

Before we look at the options, some facts the WWG have highlighted:

1. There are 356,000 working age (18-64 years) adults on a benefit in New Zealand (as at 30 April 2010). This represents one in eight people of working age.
2. Of those on a benefit as at the end of April 2010, nearly 80 percent do not have a work expectation attached to the receipt of their benefit.
3. Just over 170,000 beneficiaries had spent five or more out of the last 10 years on a benefit (not necessarily a continuous spell).
4. About one in five children (around 222,000 dependent children aged under 18) were living in benefit-reliant households (as at 30 June 2009)
5. The proportion of the working-age population receiving a Sickness or Invalid’s Benefit has risen steadily from about 1 percent in the 1970’s to 5 percent in 2008.
6. Between 2004 and 2007, when 10 percent of the working age population were on benefit, 15 percent of employers found it difficult to fill labouring, production and transport vacancies

With regard to (1) it is worth remembering that those working are also supporting all those who have retired also, and we have an aging population.

Generational welfare is a big concern with (4). I do not believe it is good for kids to grow up in a household where there is no adult in work.

(5) has been well canvassed, and needs action.

The report canvasses a massive range of options. It provides three or four choices in around a dozen areas. This is not small tinkering stuff, but potentially the largest social policy reform since the 1930s. Here are some of the options:

Focus on early intervention

1. Enhanced status quo with work expectation and target intervention towards those likely to stay on welfare for long periods
2. Social Insurance – A system with an actuarial assessment of risk and its future cost; in return for a premium, the management of risk is shared by the insured and the insurer. If the risk eventuates, the insurer provides benefits.
3. Insurance based strategies – a benefit system structured around helping people with high risk of long-term benefit dependency into paid work. Policy and delivery decisions being made with respect to the expected life-time costs.

Promoting a greater focus on paid work

1. Guaranteed Minimum Income – An unconditional tax credit with a uniform tax rate that would replace all benefits and supplements
2. Enhanced status quo – Maintain categories of benefit, but increase the work expectations within those categories
3. Expansion of the Unemployment Benefit – A benefit system that includes one benefit for all people who have current or future work capacity (and no means to support themselves) and one for people who have no work capacity over the long term
4. A work-focused benefit system – structure on a focus on paid work for people with current or future work capacity, clearly communicated reciprocal obligations on the Government, the delivery agent, and the beneficiary with an expectation of temporary benefit use and stepping up work expectations and obligations of beneficiaries as their time on benefit increases

Changes to DOLE

1. Improved diversion and triage – Improved diversion strategies so that more resources are invested in helping people to secure paid employment before applying for a benefit; and better triage for those entering the system
2. Future liability and investment model – Reduce the life-time costs of benefit receipt by better targeting and designing active employment interventions.
3. Six month threshold – A threshold, for example, six months, at which point a person identified as at risk of long-term receipt would be placed in either paid or unpaid work (including voluntary work) to enhance chances of entering paid work.

Drugs & Alcohol

1. Treatment – A threshold, for example, six months, at which point a person identified as at risk of long-term receipt would be placed in either paid or unpaid work (including voluntary work) to enhance chances of entering paid work.
2. Obligations – Clearer obligations regarding drug testing and sanctions relating to drug use, combined with treatment services.

DPB changes to reduce child poverty

1. Enhanced status quo – Clearer obligations regarding drug testing and sanctions relating to drug use, combined with treatment services.
2. Align to ECE – Part-time work obligation from when the youngest child is three years old; full-time work obligation from when youngest child is six years old.
3. Align to parental leave – Part-time work obligation from when the youngest child is three years old; full-time work obligation from when youngest child is six years old.
4. Align to unemployment benefit – Part-time work obligation from when the youngest child is one year old; Unemployment Benefit from when the youngest child is six years old.
5. Youngest Child – Tie the beginning of work expectations to the age of the first child rather than subsequent children of a parent who enters the benefit system.

Childcare

1. Childcare for low income sole parents (permanent) – Provide more childcare assistance for low income sole parents who are in employment.
2. Childcare for low income sole parents (temporary) – Provide time-limited subsidies to sole parents who move into paid work. This could either be paid to the provider or the beneficiary.
3. Expand out of school services – Expand out-of-school care for school-aged children. This could be targeted just at sole parents.
4. Personalised childcare support – Provide help to sole parents to locate and arrange childcare as part of case management. Some funding could also be available.

Help for people when they move into employment

1. In-work payments to beneficiary – Provide long-term beneficiaries with an allowance for the initial period of employment.
2. Provider-delivered in-work support – Building on current programmes, have a more significant pool of funds that can be used to support work outcomes by long-term beneficiaries.
3. Transition assistance for sole parents – Cover the cost of transport, childcare and other direct costs for first year of employment up to a cap.
4. Transition allowance for sick and disabled people – Cover the direct costs associated with sickness and disability, including workplace modification, as a sick or disabled person moves into paid work.

Strong signals to discourage semi-permanent use of the benefit system

1. Increasing conditions with benefit duration – Increasing conditions with benefit duration to send signals about the temporary use of benefit. This could include ensuring people are active while on a benefit, including a limited work-for-the-benefit, for example, 2 days per week or 16 hours after 2 years continuous duration.
2. Income Management for long-term beneficiaries – A component of benefit payment may be strictly managed when people with work capacity are on a benefit almost permanently and they demonstrably fail to use the benefit appropriately, for example, failing to provide essentials for children.
3. Step down – Components of benefits withdrawn when people with work capacity are using the benefit system on an almost permanent basis, for example more than a year.
4. Strict time limit – Each person without an exemption from work expectations is funded for a certain period, for example, up to a limit of five continuous years on a benefit. Reliance on hardship assistance beyond this period.

These are just some of the options being canvassed. Some will be popular, and some won’t be. Some are stick, and some are carrot. Some will save taxpayers money and some will cost taxpayers more money – at least in the short term.

My initial thoughts are:

1. I like the idea of a more flexible system where one can look at the likely life-time welfare cost of a beneficiary, which may mean spending more money early on to help them transition off welfare.
2. Work testing for those with some capacity to work, is very important
3. Childcare assistance should be targeted more at lower income families so you gain more financially from re-entering the workforce
4. I like the idea of a transition allowance for those going from benefits to working
5. I support some benefits being time-limited as this sets clear expectations. However some sort of emergency relief benefit would have to remain available with some flexibility.

If you have a view on what options are most preferable, then have your say. There is an online response form here. You can also e-mail submissions to welfareworkinggroup@vuw.ac.nz.

A lot of people are upset that the Government has brought back a spending cap on third party spending in elections. Well, did any of you make a submission – either to the issues paper, the options paper or the select committee? I did, but not many did submit against a spending cap. If more people had bothered to take the time to submit, then there may have been a different outcome.

So don’t be silent. Take the time to read the document, and tell the WWF what options you do and do not like. Because Sue Bradford is sure as hell going to do so, and I guess many of you don’t want her voice to be the only one heard.