Heather Roy's Diary

Social Welfare And Statistical Massage

Last week Statistic’s New Zealand released the most recent Unemployment, Sickness and Invalid benefit figures. Unemployment had dropped to 3.4%. The Labour-led government issued statements about being proud of this great achievement. The Prime Minister in the Speech from the Throne claimed that New Zealand’s “unemployment has been reduced to the lowest rate in the OECD”. The problem is that unemployment figures are just one side of the story as the government chooses to ignore the rise in the number of people drawing other types of benefits when commenting on their success.

Sickness and Invalid beneficiary numbers have been steadily rising since Labour came to power in 1999. I thought it reasonable to go back ten years and look at the trends for these figures alongside the unemployment figures for the same period. Numbers receiving sickness and invalid benefits has been rising for the past decade. Unemployment numbers have increased then decreased during the decade. A table of these can be found at http://www.act.org.nz/benefitnumbers.

The number of people on Invalids benefits has risen from 55,428 in 2000 to 74,796 in 2005 – a 35% increase in just five years. The number on sickness benefit has risen from 32,294 to 45,646 – a 41% increase. And there is no sign of the trend slowing.

It is hard to believe that the population is becoming unhealthier given the falling death rate and rapidly rising life expectancy. Most people underestimate the degree to which life expectancy has risen. If current trends continue a young woman today will have a fair chance of living to 100.

So what is the explanation for benefit explosion if not declining health? One obvious issue is that the sickness benefit pays a little more than the unemployment benefit and the invalid’s benefit is a little more generous again. A single 18 year old for example with no dependents receives $165.27 per week if on an unemployment benefit, $173.34 per week for a sickness benefit and $252.86 per week if eligible for an Invalids Benefit. A doctor has to verify that the person does have an illness but doctors tend to give patients the benefit of the doubt for sickness benefits. Many people who say they can’t work are genuine and doctors don’t like to be harsh. However there have been reports of people being referred to doctors for a sickness benefit by WINZ. Some doctors have been unable to elicit a symptom let alone make a diagnosis on these patients and the suspicion is that they are being referred for administrative convenience. The government has little incentive to improve this process as it massages the unemployment statistics downward. And this government loves massaging statistics.

Some of the braver politicians including John Banks and Richard Prebble have commented that many of the people appearing in the Court news are sickness beneficiaries. Paradoxically many have committed crimes that involve considerable strength or dexterity. This observation suggests abuse of the welfare system although it is also a product of a rather confused attitude towards alcohol and drug addiction.

In order for people to go on an Invalid’s benefit the procedure is a little more complicated as the person has to be interviewed and examined by a doctor of Work and Income’s own choosing. These doctors are known as “designated Doctors”.I spoke at length to one doctor who told me that some of the claims made by applicants are breathtaking. One person wanted to be on a benefit so they could pursue “spiritual growth” through the use of LSD. However he also commented that some people stoically minimise their symptoms, so caution has to be exercised.

A relatively new problem is that people are staying on the Invalid’s benefit but the diagnosis changes. Again this hints at exploitation of the system. The simple truth is that people follow incentives.

Improving incentives can take many forms. Ruth Richardson and Roger Douglas have already done much of the hard work. What is needed now, in the majority of cases, is help rather than punishment. Providing assistance with writing a CV, temporary help with childcare or transport, and offering training or work experience are all ways of enabling people to take that first step back into the workforce.

ACT has often been accused of wanting to punish beneficiaries, but the truth is that there are very few people who don't want to work. When it's easy to get well paid without working, the incentive is simply to take the State up on its offer, but our welfare system no longer pays easily - or well. There are undeniably still people who prefer an unearned income to working nine-to-five, however, and that means we need to place restrictions on government's generosity.

Requiring able bodied people to work part-time makes sure that the potential labour force benefits from the structured routine, skills and self esteem that come with earning your own money. "Work for the dole" was introduced by New Zealand First when in coalition with National, but was one of the first good ideas to be dismantled by Labour's "ideology machine" after the 1999 election.

But it isn't just about beneficiaries - incentives work for businesses too. Allowing more flexibility in employing staff, and recognising that sometimes it doesn't work out, would let employers "take a risk" in hiring someone who may or may not be suitable for the job. Minimum wage laws make it hard for businesses to offer low skilled people their first step on the ladder to increased skills and higher incomes. The Green Party's "Clean Slate" law means that employers can no longer be sure that a potential employee isn't "more than meets the eye".

As at 30 June 2005, 7% of our working age population were receiving the Sickness, Invalids or Unemployment Benefits. The prescription to bring that figure down is simple - make it easier for people to take the step from welfare to work, and less risky for businesses to employ new staff. For those genuinely unable to work, government should continue to provide assistance, but a requirement for able-bodied people to work part time would make sure they were ready and able to be placed into a job when one was available.

Internationally, centre-left governments have led the charge on welfare reform. In the United States, President Clinton introduced changes, which broadly reflect ACT policies, and Tony Blair has introduced look- alike reforms in England. The tide has been running for welfare reform since President Kennedy appointed Senator Daniel Patrick Moynihan to work on social welfare in the 1960s. I still hope that New Zealand's Labour Government will introduce better incentives - for the sake of those receiving welfare, as well as for the taxpayers who fund it.

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