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Bashing benes no solution to joblessness

Written By: - Date published: 10:30 am, February 22nd, 2011 - 24 comments
Categories: benefits, class war, same old national - Tags:

National’s grand plan for the economy in the age of peak, peak food, and climate change: lets give tax cuts to the rich and take from the poor. It’s classic Nat class war. They want to force 100,000 people off the benefit in the ludicrously long time-frame of 10 years. But they won’t be creating any jobs so other workers will be displaced and will be wages forced down.

TV3 says that the Welfare Working Group will propose more stringent working-testing of DPB mums and people who have found themselves out of a job and on the dole in this never-ending recession. Apparently, these bureaucratic and expensive measures will reduce the number of working age Kiwis on benefits by 100,000 over the next ten years.

100,000. Um. Benefit numbers have gone up 92,000 under National. So, their great reform is to try undo two year’s damage in ten.

The 10 year time-frame is a joke. It’s like Bill English saying his tax swindle would boost the economy by 1% by 2017 or the 50% greenhouse emissions reduction by 2050 target, or catching Australia by 2025. The end-point is so far away (and National refuses to set interim targets) that it’s meaningless. Key will be gone from politics in three years at the latest, let alone be hanging around to be held accountable for the pledges he has promised will be fulfilled in a decade or more. If they were to manage to beat Labour’s average annual decrease of 13,335 on benefits this year by getting people into new jobs, not just leaving them destitute, and I’ll be impressed. But set a vague target ten years out and what can we do but laugh at them?

But most importantly, it won’t even work. There are 86,000 more jobless Kiwis since National took office – pretty much exactly the increase in benefit numbers. There are more beneficiaries now because there aren’t jobs for them any more. So, what happens if you ‘force’ 100,000 more people into jobs?

They just displace other workers who go on the dole, in which case you don’t reduce benefit numbers at all. Or, more likely, they can’t find work – in which case they just go back on the benefit, and all that expensive work-testing is a waste, or they are left with nothing to support themselves and their families.

The bit about displacing other workers is crucial. We already know that people on benefits want to work – when there was ‘full’ employment under Labour there were just 2,400 long-term dole-takers. But chucking beneficiaries of the dole will make them even more desperate to work, no matter the wage. This ‘reserve army of labour’ will force wages to drop even faster than they already are.

That is the real reason for this attack on beneficiaries. The government isn’t dumb enough to think you can force people to take jobs that don’t exist but it is willing to expend tens of millions on punitive measures against beneficiaries because it knows that the more desperate it makes the poor, the more they’ll undercut each others wages. And the more the elite will prosper.

If National was serious about getting benefit numbers down it would be investing in job creation (it costs the government at least $18,000 a year to have someone on the dole). But they’re not. They’re quite happy with unemployment as high as it is.

24 comments on “Bashing benes no solution to joblessness”

  1. Colonial Viper 1

    All round wage suppression.

    Aren’t the ‘elite ruling class’ noticing that their kids and grand kids are all leaving the country and not coming back?

    Actually I take that back, a lot of people in the top 20% of income earners are noticing that they are losing the younger generations. But those in the very top tier 1-2% of income earners can insulate their children quite well from all these adverse economic effects, I suppose a lot of their kids will find taking over the reign from mum and dad an acceptable career proposition.

  2. ak 2

    The polls are in. Look, Spot, look. See John back-pedal. 14 week waifs make him queasy. No reforms before the election. Flip, John, flop. See Progression walk.

  3. Todd 3

    Forcing unemployed into work which displaces other workers is all about reducing wages. Well spotted. Basically if you’re not prepared to work for minimum wage or less, you will become unemployed and in some cases not eligible for a benefit.

    If you are employed and think that the Natz benefit bashing policies aren’t going to effect you, think again. This negative social dynamic is a new style of slavery in other words. Such policies have negative consequences for our economy and the welfare of all the people, not just the unemployed.

    Class distinction is an outdated and prehistoric utilization of favoritism because of bigotry. In many instances there is a clear link between such racism and unemployment within New Zealand. The policy suggestions outlined by the Benefit Working Group will create a greater divide between rich and poor. Such stupidity has no role in a proper functioning Civilization.

    Of course the Natz aren’t going to pull the really big sticks out until after the election, that’s if they get in. Labour might just adopt some of these policies as well. For now though it will be softly softly, bribes and propaganda. Conniving bastards!

    http://www.stuff.co.nz/national/politics/4685630/Key-pedals-soft-line-on-benefit-changes

    It was also expected to recommend that women who had more children when they were already on a benefit be required to go back to work when the baby was 14 weeks old.

  4. randal 4

    hey you cant be a winner unless there is a loser.the nats have transformed democracy from a system of finding a parliamentary majority into a club for bashing up the unfortunates of the world and they are getting away with it.

    • Colonial Viper 4.1

      Not a democracy any more, its a Plutocracy.

      Half billionaire Jackson got a law changed pushed through, one which suited himself and his companies, all in less than a month.

      You can’t get that done and I can’t get that done.

      Rule by the rich for the rich.

  5. just saying 5

    Waiting now to be infuriated by Labour’s mealy-mouthed response to the proposed welfare “reforms” and their failure to stand strong against the concurrent hate campaign being waged against the poorest and most vulnerable.

    Looking forward to hearing the likes of Metira Turei if she’s able to be any media coverage though.

    • Colonial Viper 5.1

      Your lack of faith is disturbing, young Jedi.

      Just remember that the Greens sit on 7%-8% for a reason – their message doesn’t yet resonate strongly enough amongst a larger audience.

    • bbfloyd 5.2

      js… with an attitude like that, you make yourself irrelevant before the opening whistle sounds.. you may as well just vote national and give yourself three years to whinge about them.

      • just saying 5.2.1

        I hope I’m wrong BB I really do. But I’m not going to stick my head in the sand.
        Btw – you did read the last sentence?

  6. Anthony C 6

    After a quick read of the report my opinion is that the authors live in lala land.

  7. Colonial Viper 7

    Time to give Rebstock and her Government Backers the fingers

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10707962

    Mothers would be forced to look for work once their first child turns three.

    But that age limit would be reduced to 14 weeks if a mother had a second child while on the benefit, in the only recommendation not unanimously endorsed by the working group.

    The proposed move is described as a way to eliminate incentives for beneficiaries to have additional children.

    • Vicky32 7.1

      Although it’s irrelevant to the topic. I saw Rebstock on One News last night – goodness, she’s ugly! (I know an ugly exterior doesn’t always reflect an ugly mind, but I suspect it’s so in this case.)
      Deb

      • M 7.1.1

        Deb, attractiveness is always a subjective area but I would go as far as saying that she’s very much in the mould of Judith Collins.

        These women may have been pretty/attractive once but I believe the hardness of their hearts and character has emanated outwards so that ther faces appear that hard and contorted that you could crack a nut on them.

  8. freedom 8

    the most offensive aspect in the reporting from the WWG are the slavering mouthfoamers in the Stuff comments. I do not believe i have ever been more ashamed to be a New Zealander if the majority are of this, apparently representative, mindset.

  9. SPC 9

    My own advice to the WWG was as follows.

    It’s within the unfortunate terms of reference set for the group, but of course necessarily ignores their chosen options direction.

    SUBMISSION to the WELFARE WORKING GROUP “24 December” 2010

    The number of people on benefits is a function of the structural economy and work capacity. Thus benefit dependency cannot be discussed in isolation from full employment policy.

    If I were giving advice to the government on how to reduce benefit dependency I would say that there are two parts to this, full employment and improving the work capacity of those on benefits. Sure benefit dependency, indicated by numbers on benefits has only increased (across the economic cycle) in areas unrelated to any work test, but work testing more people will not create more jobs.

    Managing the cost of welfare because of the lack of full employment
    The increase in numbers unemployed is a consequence of transition from a national economic policy of full employment and a tolerance for inflation to globalisation with an anti-inflation goal directing monetary policy. Thus there will always be a rising level of unemployment with each recession because there is less government capacity or will to prevent this.

    Of course it then grows to worrying levels (unaffordable as government tax revenue falls). This results in these welfare reviews.

    This can be managed by saving money (as we have via the Cullen Fund for future Super costs) when unemployment is low to provide for the budget cost of the higher unemployment in the future. In a sense this has been done in paying down debt – but placing money into an unemployment cost provision fund may prove more the more effective budget planning option. It is standard accounting practice to provide for anticipated costs when assessing whether there is a surplus or real profit to declare.

    RECOMMENDATION 1 – Governments (when with a budget surplus) place money into a reserve fund to provide for any future increase in unemployment cost with the next recession. This balances out the cyclical impact of unemployment on the budget.

    This would end the apparent panic some use as the premise to crush the weak under foot to make “their nation” stronger.

    Full employment and the free market model problem

    The capitalist free market model requires a spare pool of (skilled) unemployed available to take up new positions (allow economic supply transformation to market opportunity demand). So unemployment is maintained even during the “inflationary” peak of the economic cycle. The Reserve Bank model we have converges with this, as if there were not such a pool, demand for scarce labour would bid up wages (be inflationary).

    Naturally business groups support this approach (which suppresses wage demands and leaves a pool of available labour for their on-call demand) and there is regular comment from them in the media, complaining about labour “scarcity” when unemployment gets close to (free market ideal or systemic) full employment at around 3 to 4% unemployed. Similarly they support the RB primary focus being an anti-inflationary regime as this supports such a status quo.

    Thus focus on welfare reform is simply a way of hiding this truth and doing nothing about it apart from implying that it is the unemployed who are the problem.

    A policy for full employment

    Full employment is dependent on measures other than raising the OCR to manage inflation. During the most recent economic growth period the numbers on the UB fell to 30,000 (below 4%). If the RB had not increased the OCR to counter inflation, in part from the bubble in the housing market, we could have witnessed serious pressure on employers to raise wages to compete for scarce available labour. So this is not unattainable.

    To close the wage gap with Australia the government should try and engineer a return to this scenario. Measures that would help to achieve that goal include increasing housing stock levels with investment in new state housing (creating jobs and dampening the housing market). If the new housing is later sold back onto the market it is self-funding. In that way government can mitigate the decline in private sector investment and provide equilibrium to the housing sector. That is so affordable and so useful can we afford not to do this? Such a policy being an economic policy matter is separate to buying and selling state houses to meet changes in demand (or to move on tenants paying market rent).

    RECOMMENDATION 2 – The government build more state houses and finance this by selling them after they are built (as the market recovers).

    RECOMMENDATION 3 – The RB be enabled to apply a surcharge on mortgages rather than increase the OCR. This would mean rather than an increase in the OCR from 3 to 4% next year, a 1% surcharge on home mortgages would occur instead (possibly a higher surcharge on landlord rental properties). The RB Governor has in the past called to have this policy option available. This should keep our dollar competitive in the cross Tasman trade and maximise returns to exporters in general. While this would risk some imported inflation, it should help the government realise a quicker return to a balanced budget.

    Full employment and the training of workers

    Part of the welfare problem that we have is because (apart from educational failure at school level) of under-investment by companies/industry in on the job training (transfer to institution training at public expense). The cost of training falling on the state places budget pressure on the affordability of carrying a spare pool of unemployed workers to enable the market to perform at optimum levels (let’s be blunt hold down wage levels to reduce business unit costs).

    For the same reason that business holds down wage levels to be more competitive in the now global market (which has added competition pressures to all tradable goods and services) government, carrying more of the cost of worker training and the spare pool of unemployed, does the same for budget reasons. Thus we continue to under-pay skilled (in global demand) workers who deliver important public services and have by necessity imported (economic and lifestyle) migrant workers to ensure they can still be delivered (primarily health care). This has enabled business to avoid any need (evade responsibility) to train graduates on the job (or increase pay to retain workers) and now government does the same.

    Thus the welfare end-cost problem results from insufficient government investment and choice of economic labour market policy. If it were the more efficient economic option for the country it would be generating the productivity that the country needs to afford the consequent welfare costs. Well is it?

    Thus focus on welfare reform is simply a way of hiding this truth and doing nothing about it apart from implying that it is the unemployed who are the problem and not the economic settings for the labour market.

    Half of those on the dole under 18 back in 1999 spent 5 of the next 10 years on benefits. The growing number of youth who are Maori or Polynesian, indicates that educational outcome improvement related to successful entry to the workforce is going to be increasingly important.

    RECOMMENDATION 4A – An equivalent subsidy for apprenticeships wages as occurs for students (when not applying the full cost of tuition in the fees charge). This possibly restricted to those choosing this option rather than tertiary study or otherwise those longer term on benefit support (either as an alternative to training benefit courses or in succession to them).
    RECOMMENDATION 4B – The goal of people being in work or education or training till 18 be sustained and implemented in practice. The number of high school students (cNCEA level 2) working part-time for work experience and or work training increased. There be expanded 2 year programmes between the ages of 16 and 18, or one year programmes for those doing only part of NCEA level 3.

    Observation

    What welfare policy should be, within current wider labour market and economic policy settings (which suit the neo-right free market myth), is however presumably all that the government wishes to consider in this review.

    So ones first criticism here – is that those supporting a continuance of the status quo in the economic model should not just apply the focus on a review of welfare without admitting collective responsibility for the problem existing as it does. Otherwise we would be targeting the consequences of policy choices in isolation.

    The second criticism is that the sole policy guide should be to ensure we maintain a just and humane approach, not sacrificing this to make the flawed economic model work better (for some).

    Only if there is a government commitment to policies that would realise full employment – is focus on “benefit dependency” a valid concern. Otherwise it will have a negative extra cost impact on the budget. If only for the reason that reducing benefit dependency comes at a short term cost that is only mitigated by longer term savings once there is continuing full employment (on the UB).

    There is however a second economic problem.

    The second economic problem – work testing more beneficiaries if the goal of closing the wage gap with Australia is also to be achieved.
    To simply work test those on the DPB, SB and IB would flood the labour market and place downward pressure on wages. As that is not consistent with government policy to increase wages and close the wage gap with Australia, the programme to reduce benefit dependency would have to focus on providing opportunities for people so that they would be able to work, as distinct from simply work testing more and more people.

    Of course the WWG might feel the government was not really committed to increasing wages – the government has already indicated it wants to work test more and more people – so need not be bound by that constraint.

    I have raised some objections to the governments approach on welfare reform. This is either because it is inconsistent with their other stated policy goals or without a necessary and prior commitment to full employment. Having noted that I will proceed.

    The obvious on work testing

    Where work testing and providing opportunity to the benefit dependent meet, is in the area of realising work capacity.

    ACC has expertise in the assessment of value, in making people work ready rather than continuing to provide a non-work income. This applies in the area of medical intervention costs – the use of private hospitals in treatment of those on waiting lists unable to work because of temporary (SB) or permanent (IB) incapacity.

    This focus should include addiction treatment, but we have a pressing need for more investment in the provision of addiction treatment centres (for those in the criminal justice system, let alone those on benefits as well).

    So again, improving work capacity comes at a cost and without policies to realise full employment there will be no savings resulting from the cost/investment. Yet there are qualitative gains (hard to quantify) from reduced crime and improved family circumstance (where parents on welfare are addicts).

    In the case of those on the DPB, there may be incapacity issues apart from need for after school care.

    Part-time work for those on the DPB (those with primary school age children) will only take families and children out of poverty if there is an exemption from abatement. I note some submissions call for an end to any exemption from abatement – the Business Roundtable presumably think this would cut benefit costs and think having working parents raise up children in poverty is good for business as if business is unrelated to the society in which it operates.

    Widespread availability of after school care and access to training places (including adult education) and tertiary education (TIA) develop work capacity.

    RECOMMENDATION 5 – That there be investment in after school care and training and education opportunities for single parents.

    RECOMMENDATION 6 – Where those with addiction issues leaving them unable to work (SB) or (IB), then treatment could become a condition for a work tested benefit.

    Improving public health policy as a long term investment in reducing incapacity

    There is a significant public health issue underlying the growing number of the population with work incapacity problems – and this is not solved by work testing.

    Investment in Addiction Programmes

    A part of some employment problems (and associated welfare dependency and or crime and imprisonment) comes from addiction problems. Our lack of investment in this area is holding back the economy, undermining attempts to reduce recidivism and exacerbating the welfare problem. The longer the problem is not managed the more likely people are to end up on SB and even the IB.

    RECOMMENDATION 7 – That addiction treatment for parents is a condition for any benefit wherever this problem was identified as a family welfare concern (as distinct from work testing) and otherwise be available for those who wanted it.

    RECOMMENDATION 8 – Helping CYF Improve Performance (see 7)

    When CYF makes home visits – they should be empowered to carry a stick – short of taking the children out of the home – empowered to recommend that WFF tax credits (thus includes working parents) and the child credits paid to beneficiaries be withheld and used in direct support for the child until there is an improvement in parental responsibility. The adult part of the benefit covers the rent and power and where it does not this can be managed by a targeted supplement out of the child component for this purpose. This means the discretionary component is utilised for family purposes that ensure child well being – medical visits/nutrition etc. The hope is that the stick being available would ensure more successful family home visits to resolve problems more quickly. The term trial programme comes to mind. This may realise reduction in child poverty and improvement in child wellbeing, even before benefit dependency and or unemployment status ends.

    RECOMMENDATION 9 – Improve the uptake of the delivery of the Well Child programme. There is a need to ensure all children are enrolled with a GP and Well Child provider. The B4 School component compulsory for those starting primary school.

    Healthy People/Nutrition

    We suffer a rising SB and IB welfare problem as a consequence of salt, fat and sugar intake.

    RECOMMENDATION 10 – There is a need for limits on salt levels in processed food and a strong consideration of either a saturated fat tax (to encourage change to other fats) or regulatory moves. We should intensify public health campaigns warning about the diabetes problem resulting from fat and sugar intake.

    Healthy Homes

    RECOMMENDATION 11 – Make a regulatory change requiring rentals to have basic insulation and heating capability standards.

    The labour market and incentives (non-financial)

    The largest disincentive for those on benefits to take up work is the risk of an unsatisfactory placement. This risk only exists because people who leave jobs are stood down from benefits. This sometimes results in workers citing a personal grievance claim against an employer so they can get the benefit. Notably some employer advocates (and BR) seek to deny the right of those taking personal grievance claims from obtaining the benefit – that would not only increase the disincentive, it would also place workers in an untenable position if bullied in the workplace.

    So I strongly urge reciprocity for workers and employers with both able to test out the working relationship for the first 3 months before committing to it. This means the employer will get an employee they want and the worker can try out for positions on full working pay or go back onto a benefit should their placement not work out. This equivalent right for the worker would also be available to existing workers transferring between jobs and thus would improve labour mobility.

    RECOMMENDATION 12 – That all workers be able to receive a benefit after choosing to leave employment provided this occurs within 90 days of taking up the position.

    Work and Income and employers (financial incentives)

    The old wage subsidy idea would work well with the 90-day rule – in reducing both cost and risk to the employer in trying out a person on a benefit as a worker.

    Selective use of a wage subsidy should change as circumstances in the labour market change. While unemployment is high and the cost to the government is large, there should be targeting to those who have dependent partners and or children. This not only takes children out of poverty it also reduces the benefit cost the quickest. I would suggest a 6 month wage subsidy period, with a 6 month renewal at a lower rate.

    RECOMMENDATION 13 – Beneficiaries with dependent partners and or children should receive the wage subsidy to direct employers to hire them first (for societal reasons).

    RECOMMENDATION 14 – This wage subsidy being extended to the longer term unemployed when unemployment falls to lower levels and when most higher cost beneficiaries (with dependent partners and or children) have already been employed.

    Part-Time Work for the dole

    Working for less than the minimum wage is in breach of ILO regulations (so part-time work is the available option).

    So where is this a viable concept? Where work experience is of itself of value – for those who have not been in work. And where the work comes with on the job training. Where there is value to the worker on top of the dole they are receiving. This implies an aspect of voluntary choice.

    The problem is paid employment position displacement (which is why public work/NGO programmes are generally preferred in practice).

    RECOMMENDATION 15

    Work for the dole – Work experience (generally for those under 20).
    Work for the dole – On the Job Training (including graduates as unpaid “interns”).

    “Work and Income” compete in the market to provide workers to employers

    Work and Income offer placement of multiple candidates to employers to compete with private employment groups supplying labour.

    Employers who want to try out a range of employees before settling on a candidate, or who can accept a changing roster of (part-time) workers (some unable to work holidays replaced by others on the UB who can etc).

    The latter positions would be a help to those on the DPB who are available to work part-time and those with health issues who can only work some of the time. It would certainly improve their chance of finding work.

    This allows Work and Income to work test people and also their “clients” to get paid work. The two concepts work best together, rather than removed from each other as happens now – training for work by specialising in the field of looking for a job and being accountable for ones effort in failing to find work is dehumanising (probably has an adverse impact on peoples well-being).

    Work and Income has a clear speciality role to perform in the labour market that it has yet to take up.

    RECOMMENDATION 16 – Work and Income establish a core related business float, an employment agency for the above purposes.

    No name, nor number. In sympathy with all those at risk if they made submissions under their own names. You all know who they are and why that is. “SPC”.

  10. SPC 10

    There is a con to all this.

    Combining the benefits and then saying that work-testing will result in a 100,000 fall in numbers on the benefit is a deception.

    An extra 90,000 have gone onto benefits in the past 3 years, and about the same numebr will go off them as the economy improves.

    This reform will have nothing to do with it.

    • Draco T Bastard 10.1

      The only thing that NACTs reforms will do is increase the number of unemployed and the number of people living in poverty.

    • Colonial Viper 10.2

      So they are simply trying to placate their right wing base by acting mean and tough? This could back fire on them either way it goes. A crazy strategy.

      • SPC 10.2.1

        The impact on people now to be work-tested will be mean and tough, but little will change because of it.

        Rebstock (and government) seems to realise this and so is suggesting the one benefit idea.

        But the forecast cut in total numbers on benefits appears to be no higher than would occur with any econonmic recovery – with people going off the dole and jobs being available to those on the DPB/SB/IB (as they want and can do them).

        It’s cheapest to focus on creating jobs and let their availability diminish numbers on benefits (subsidy to 2 parent couples with children to find work is cost-effective at this time) and only active work testing people when labour is scarce – though improving work capacity should be done across the cycle. Those who want and need the jobs more get them under that system. Work testing some people will alienate them and the obvious rejection of them in the job market will make them more anti-social and increase prison population – as likely via violence/stress as theft/drugs.

      • McFlock 10.2.2

        Mutt & Jeff routine. Like the tax group, and the mining “stocktake”.

        The idea is to have rabid mouth-foamers put forward policy ideas that meet the approval of folk who think ACT started as a wuss-leftist front, then try and implement only half of it. It looks like a nice centrist “compromise”.

        If they look reasonable enough, they might get the 45% they need to win.

  11. millsy 11

    This report is good for only one thing: putting in the fire.

    If the recommendations in this reported are implemented, you will see hardship on a mass scale.

    I guarantee it.

    The living standards FOR ALL (except the wealthy) will probably plunge about 25 to 50% as a result of this, given the effect of pushing 100,000 people into low wage jobs will have on wages and conditions.

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