With the financial crisis forcing governments around the world to tighten their belts, the call for welfare reform is growing stronger.
In Australia, teenage parents could lose welfare payments six months after the birth of a child under a “tough love” scheme designed to prevent them getting stuck in a life of dependency.
The quarantining of welfare (whereby 70% of a beneficiary’s income is used for food, housing, clothing, health care, and in the best interests of their children) is to be extended after the initial trial showed income management has had a positive impact on the lives of vulnerable families.
The ‘Work for the Dole Programmes’ will be extended and eligibility rules for disability benefits tightened, along with a crack down on benefit fraud.
As we look to Budget 2011 and General Election on November 26, it will be interesting to see how committed our Government is to comprehensive welfare reform. The problem that we face as a country is that as a result of ad hoc changes to the system over the years Welfare no longer provides long-term security only to those who are genuinely unable to support themselves.
Many able-bodied people, capable of working, stay on welfare in the long term.
Runaway Benefits
According to the Treasury, the total cost of welfare (excluding Superannuation) for this financial year is $13.2 billion, expected to rise to $14.1 billion in 2015, eclipsing health to become the country’s highest area of government spending.
According to Social Development Ministry statistics, the total number of people receiving welfare benefits at the end of March was 331,529, of which, 113,077 were receiving Domestic Purposes Benefit, 85,055 Invalids Benefit, 59,940 Unemployment Benefit, and 59,582 Sickness Benefit.
About 13,875 people were receiving other benefits including the Widow’s Benefit, the Independent Youth Benefit, and Emergency Benefits. More than 125,000 beneficiaries have been receiving welfare continuously for more than four years, while 60,000 person have been recipients for more than 10 years.
Most people signing up for welfare support do not stay there long. The largest proportion needs a helping hand when times are tough but once they sort themselves out, they move back into employment.
However, welfare becomes a serious problem for the society when it incentivises family breakdown and intergenerational dependency, which can have a devastating impact on children.
Examples of misuse
A classic case was reported in January. Former gang leader Darryl Harris who had been on a sickness benefit for 26 years – supposedly for cannabis addiction. Taxpayers had been paying Mr Harris and his wife a benefit continually since 1984. In addition to a benefit, they had received $30,000 in special needs grants since 2000, to fund new tyres for their 2007 Chrysler saloon, and build a fence around a swimming pool at one of their properties.
Then there was Ronald Brown, a career criminal jailed in February for drug offences, who had been on unemployment and sickness benefits for 20 years, in spite of owning six luxury vehicles and a bar in Auckland.
The Government convened the Welfare Working Group last year to review social welfare to see if the system improved social outcomes and is sustainable.
The Group was asked to recommend changes to reduce the country’s long-term welfare dependency problem. What they found was that only one in three of those receiving benefits are required to undergo any form of work requirement.
Is it any wonder that long-term welfare dependency is such a major problem for New Zealand?
Prescription for reform
The Welfare Working Group’s 43 recommendations provide a prescription for comprehensive reform, encompassing many of the initiatives being introduced by other governments around the world. They include introduction of more stringent benefit assessments and stronger work requirements, simplifying the system by moving to a single benefit, introducing income management for the most vulnerable families, requiring teenage beneficiaries under the age of 18 to live under adult supervision, requiring drug addicts and alcoholics to undergo rehabilitation, and introducing stronger penalties for non-compliance with work requirements. They believe the number of welfare recipients could be reduced about a third by 2021.
Welfare, as it is today, is unsustainable.
Dr Muriel Newman is Director of the New Zealand Centre for Political Research, a web-based forum at www.nzcpr.com
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