Benefit tightening won’t reduce unemployment

Gareth MorganTax and Welfare

It is tempting to call the National Government’s Social Security Amendment Bill the most irrelevant sideshow in the circus that is tighter targeting of social benefits.

It is tempting to call the National Government’s Social Security Amendment (Benefit Categories and Work Focus) Bill the most irrelevant sideshow in the circus that is tighter targeting of social benefits.

Anyone would think these politicians and the bureaucracy implementing the latest raft of tests for benefit eligibility haven’t a clue what they’re doing.  While it’s irrelevant in terms of achieving anything apart from political populism, sadly it is very damaging for anyone in need of a Winz benefit.

Among other things, the bill replaces the current policy of cutting the benefit by 50 per cent for four weeks, if a beneficiary turns down ‘suitable work’, to a complete forfeit for 13 weeks for some beneficiaries.  And benefits will be cut for parents who fail to enrol their children in early childcare for a minimum number of hours a week or fail to register their children with a GP.

Forcing people into any job won’t contribute to reducing our working age populations’ reliance on income support. Those working on low paid incomes get benefits nowadays anyway, that’s how absurdly disjointed benefits have become from the market value of low skilled labour.

The numbers on benefits move in line with business cycles.  When the economy is growing and employers are short-staffed beneficiaries go to work – even those most maligned of beneficiaries, sole parents.  National is conducting a witch hunt and it is not just disappointing in terms of the intellectual vacuum that underlies its social policy, it’s a despicable display of victimising the less fortunate.

If it showed the same intellectual rigour in economic policies that encouraged investment instead of property speculation, that used market forces to lift incomes and employment – and desisted from beneficiary bashing – its credibility would be enhanced.

Forcing mechanical engineers to be bouncers, is just a game of musical chairs replacing one bouncer with another.  Unless the economy gets going you are not going to see fewer people on Winz’s books.  Why is this basic tenet of Economics 101 beyond political opportunists?  It is so disappointing that the economic literacy of our politicians is so bereft.

It is so disappointing that the economic literacy of our politicians is so bereft.
Could we say, at a pinch, the bill shares the jobs around, giving everyone a job for some of the time and preventing any one person becoming dependent on a benefit long term? Unfortunately it does the opposite.

In the absence of this “forced work” policy it is unlikely unemployed engineers would compete with unskilled people, they’d simply wait out the cycle. Under National’s purge they’ll be forced to take unskilled work. We know what’s going to happen – the unskilled workers will bear the brunt of the weak labour market, not only unemployed due to new competition from skilled workers, but prevented from acquiring on-the-job skills of great value to them and no value to engineers.

Forcing skilled workers to take on unskilled work means this bill works against the interests of the very people most at risk of being unemployed for much of their lives. How stunningly unintelligent.

The facts show that most people on benefits return to work and get on with their lives.  Long term benefit dependency is not the norm.

National’s reactionary populism is a giant step backwards in policy sophistication and is depressing. Lowest common denominator thinking is one step from chaos. Can’t these finance sector cowboys-turned-politicians see that the growth in income and wealth disparity that New Zealand has experienced since the financial deregulation of the mid-1980s, is the villain of the piece?  At least as much as the economic downturn is.

The issues behind long term benefit dependency are more complex than a lack of willingness to work.  Lack of skills and training, low self-esteem, mental illness, addictions and other health problems, and other physical impairments are the drivers.

Does “punishment” solve these issues? The reality is some long term unemployed won’t be offered jobs, no matter what the policy. What’s important is giving them a quality of life that does not undermine their health and abilities further and offering effective support to acquire skills.

What is needed then is a system of income and other support that accepts the reality of the workplace, helps people to improve their prospects in a way that does not undermine their self-respect and importantly protects children from the difficulties experienced by their parents.

And of course, a system of income support that is low cost to administer would be good too.  None of this is delivered by the Social Welfare Amendment Bill.

Benefit tightening won’t reduce unemployment was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.