Benefits system needs to evolve

Gareth MorganTax and Welfare

Image by Cathie Lendrum

Image by Cathie Lendrum

On Thursday last week, the Living Wage campaign was given a very public airing at AUT University with a collection of international speakers.

While much of the focus of this campaign has been on the hourly rate paid to low-wage workers, the international guests spoke more broadly of the rapidly changing nature of work under 21st-century globalisation. These issues extend beyond low pay.

Professor Guy Standing from the University of London is perhaps most famous for his book The Precariat: The New Dangerous Class. Standing’s thesis is that the way labour markets have evolved alongside globalisation has created workers whose conditions and lives are unlike those of any previous generation.

Standing calls these the “precariat” – people whose lives are characterised by insecurity and disconnection.

Low pay can create financial insecurity but casualisation of work conditions can, too – contracts that require workers to be on call at all times but guarantee no minimum paid hours per week are one example; flexible work definitions that allow employers to redefine work as unpaid training are another.

These conditions make it necessary for workers to have multiple employers, and they must self-fund the downtime needed to travel between each job and establish the networks needed to have multiple employers.

If you think these sorts of contracts and pressures are only in the third world, think again. There are plenty of anecdotes of this in New Zealand, especially in the hospitality and retail sectors.

The Fairwork Ombudsman’s Office in Australia has recently completed an investigation into the misuse of unpaid “internships” in Australia.

Nor are these work terms confined to low-skilled workers. Standing argues tertiary training has become commodified so much so that there is a global oversupply of tertiary-educated workers.

The result is that they too face a future of precarious work. Thus, the precarious class is one that extends well past the less educated.

To Standing, precarious work creates a group of people who are insecure in all senses – financial, self and social.

It’s not rocket science to see that lack of self-esteem and social connectedness on top of financial stress is a potent and troubling mix.

Standing believes in time this group, the precariat, will be the force that drives social and political change because of its growth.

The consequences need not be negative – indeed, innovation and entrepreneurship can emerge from people seeking to overcome these limitations.

But Standing sees the precariat as potentially easy prey to the extreme right, bringing risks of fascism and violent racism. His view is it should be possible to avoid this, but first we must acknowledge that precarious work is here to stay.

Once we overcome denial of this state of permanence we can go on to identify what precarious workers need for a good quality of life.

If we anticipate what these groups need and start delivering it, rather than sit back and see what happens, we’ll have a far greater chance of avoiding negative consequences.

Among the policies recommended by Standing is the anchor of a steady income via payment of an unconditional basic income (UBI) to all of working age – a replacement to targeted welfare that switches on and off.

In addition he advocates the payment of a living wage, which is something we try to emulate currently for some in work at least, through Working for Families.

Payment of a UBI is something we have proposed for New Zealand in The Big Kahuna, published in 2010.

Standing has been active in advising governments on the UBI, and the success of a three-year experiment in India was such that India’s Prime Minister has said he is now convinced of the need for unconditional cash transfers.

The study attributed the payment of the UBI to improvements in nutrition, the status of women, school attendance and performance at school, the amount of work done and worker productivity.

Standing also spoke of plans in Brazil to roll out a national scheme, based on good results from sub-national programmes.

In The Big Kahuna we documented at length the problems with our targeted welfare system, not least its inability to cope with the widely varying circumstances of people and their families.

The administrative costs of trying to fit everyone into an increasingly irrelevant model of working and family life currently costs $800 million a year in tax revenue.

Also to be taken into account are the unpaid debts that people accumulate and the cost of dealing with those.

Plus, people fall through the system unsupported and those who have the opportunity of infrequent, multi-employer work face such high penalties from benefit abatement that it simply makes no sense for them to accept the work at all.

As Standing has shown, this is the new and permanent face of work and we have to upgrade our public support systems accordingly.

Everyone knows it’s time New Zealand started thinking smarter. That extends especially to the sacred cows like our targeted benefits system.

The policy options in front of us are not confined to those politicians and voters signed up to many decades ago.

The world has moved on; it’s time we did too.

Benefits system needs to evolve 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.