Welfare working group says what?

So the Welfare working group has come out with their first piece (main site, ht Welfare Watch).  Did they have any sort of point, or were they just getting paid on the basis of how many times they could mention “welfare dependency” and “getting people into work”? 😀

However, I jest.  I can’t judge their policies at present, as there aren’t any – they have just released a first document outlining the issues they think will need addressing before they think about policies.

I can say that I found the lumping together of sickness, invalid, and unemployment benefits a bit disconcerting.  And I can also say that, contrary to their language, I think the idea of welfare dependency is being overplayed as an issue – but if we get some cleaner evidence out I’d be willing to change my mind.

The thing that most scared me in the report was the discussion on “poverty” and getting people to “work their way out”.  I hate it when people go on about poverty traps, and then turn around and say we should get these people into work by “cutting benefits” or “tightening eligibility”. But note, they have not said this yet – and I am not keen to put words in their mouth.

Now hopefully they didn’t mean it this way.  Hopefully what they mean is that there are major issues in the labour market, which can make it difficult for people to move back in after a sustained period outside of the workforce.  If the welfare working group is interested in increasing the integration between the labour market, welfare policy, and education then that is a good thing.

But if, as I’ve heard a lot in the past, we are going to get told that benefit eligibility should be cut so that people have to get jobs, because “it will be good for them” I fear we are just going to hurt a lot of people – like we did in the early 1990’s, but without the excuse of international credit markets threatening to devalue us.

Note:  Also, try to remember that a social safety net is part of our social contract as a society – it is something we agree to as a group of disparate individuals.  If we want to debate the size and scope of this safety net as a society then that is reasonable.  But lets not move down the road where our sole focus falls on “benefit abuse” – as it leads us to forget about the far larger group of people who we are intrinsically willing to help.

And don’t forget that the “labour market” is only really voluntary if we believe labour has an outside option.  The benefit provides this outside option – and in theory it should be funded by a tax on land.  But I digress again 😉

Note 2:  Why are we so willing to focus our attention sharply on how injured people “should” be working (even if the opportunity cost of doing so is very high for them) – and yet we are unwilling to cut back on working for families, which is largely welfare for the middle classes?

If you are worried about whether government can balance the books, if you are concerned that there are government policies that are distorting investment and spending decisions, if you fear the fact that some transfers appear “unfair” – the primary target of your ire “should” be working for families, not invalid benefits.

UpdateSue Bradford and Dim Post comment.  I agree largely with what they are saying – but in defence of the welfare working group, they weren’t really providing “policies” just outlining the data.

14 replies
  1. Kimble
    Kimble says:

    “and yet we are unwilling to cut back on working for families” Are we? I am pretty sure I’m not. Cut away.

    Anyway, its a damn shame that people who would otherwise work for their own benefit are presented with situation in which the rational choice is to stay on a benefit.

    Maybe if we raised the minimum wage to something much, much higher than the benefit, these people would find work more attractive. There you go, now that wasnt a difficult solution to come up with. Lets raise the minimum wage to get more people into the workforce. <— Excerpts from an actual conversation. Eye-rolls all round.

    Unfortunately, there is nothing that can be done to reduce benefits or restrict access to them that will not get spun by Labour and the Greens as some sort of punishment.

    If you are damned if you do, and damned if you dont, then, damnitalltohell, go ahead and do the do, and damn the damners.

  2. Phil Sage (sagenz)
    Phil Sage (sagenz) says:

    “Why are we so willing to focus our attention sharply on how injured people “should” be working”

    Read some of Iain Duncan Smith and Frank Field on getting people out of poverty. I would rather spend a $ keeping a family together and working than helping someone laying in the hammock. It comes down to a stable society where people have self respect. Statistically there are far too many people on incapacity and sickness benefit.

  3. Matt Nolan
    Matt Nolan says:


    Damn the old damners aye.

    I’m a big fan of magical transparency regarding policy coming out – discussions around welfare seem to be ripe for politicking.

    Also, how can we have a discussion of welfare without looking at WFF … WTF

  4. Matt Nolan
    Matt Nolan says:

    @Phil Sage (sagenz)

    “I would rather spend a $ keeping a family together and working than helping someone laying in the hammock”

    Fair enough. But it may be that, given the institutional surrounding, you have to spend $0.20 on someone in a hammock to get $0.80 of funding to someone who is genuinely ill – if that is the case, then that is the trade-off we should be discussing rather than “potentially” ignoring (which is where these policy documents can end up going …)

    “Statistically there are far too many people on incapacity and sickness benefit.”

    I’m willing to be convinced here – but all I’ve seen is a line that is increasing over time, without discussions around population growth and the changing demographic nature of the population. I’m currently not convinced is all.

  5. Matt Nolan
    Matt Nolan says:

    @Eric Crampton

    When the goal is to provide incentives, or ensure efficiency, I completely agree.

    But where the goal is to provide a minimum safety net, I think we have to allow some form of “outdoor” relief.

    Also, Mill constantly had things right … he just couldn’t help himself.

  6. dragonfly
    dragonfly says:

    Matt, this is an oddly compassionate post for a dry-as-dust economist (I mean, you’ve even agreed with Sue Bradford. Unthinkable!) :). I agree with you though. For most people on benefits the experience is an anguished and involuntary one, and in many cases tracks back to a history of disadvantage and deprivation. Cutting benefits (not mentioned so far by the working group, but surely that is only a matter of time) is going to ensure further generations of children suffer the same disadvantage and deprivation as their parents did. I’m not saying there are no problems with welfare dependency, or that there should be no change at all, but I am all for some basic level of humanity. It always disturbs me how beneficiaries are regarded by so many as not really human. I guess that’s what happens if you lead a privileged life and never interact with any of these people. That’s one of the reasons my kids go to ordinary, average schools.

    There is certainly an issue with Working for Families (disclaimer: I don’t receive that), but I sometimes wonder if a consequence of the state taxing the life out of people at the most expensive time of their lives is that it may find itself under pressure to give some back.

    The elephant in the room here is superannuation and the other benefits that accrue to the retired (and no, contrary to popular opinion, the elderly have not paid adequate tax to cover being on a benefit for 20-30 years with free trips to Waiheke thrown in). We throw goodies at those who already have more than enough and attack those who have drawn the short straw. The unfairness of that takes my breath away.

    I remember reading somewhere once that the aging of the working-age population is contributing to the increase in numbers of people on sickness and invalids benefits. I can’t imagine what the solution to that is, but I’m sure the Welfare Working Group will come up with something.

  7. Kimble
    Kimble says:

    I dont find it odd at all, dragonfly.

    “It always disturbs me how beneficiaries are regarded by so many as not really human.”

    Social stigma in any economy that has a social welfare system is VERY important. The trade-off is between the beneficiaries feelings versus the strictness (harshness) of the system. Having a social cost to being on a benefit helps restrict it to those willing to accept that cost.

    If there was zero social stigma around being on a benefit (and I mean absolutely none, this is very important to understand if you want to understand this point), people would be much more likley to accept it as a way of life, be on the benefit much longer, and be much less likley to move themself of it. This is why you hear a lot of concern that people are shamelessly claiming a benefit even though they can work. Think of PhilU at Kiwiblog as a prime example. It is not the benefit that he is getting paid that concerns people, it is his shameless free-riding and the fact that he thumbs his nose at the system at every opportunity.

    To avoid this behaviour you would have to create harsher and more strict rules around access to and length of time on the benefit. Stricter rules means more real costs for people who are in the position to have to claim a benefit.

    If there really was a social stigma around being on a benefit, and that stigma permeated all social groups, even economically prudent parties would be willing to have a more generous social welfare system. And the people needing to claim the benefit wouldnt have to wear these extra costs.

    Now, what you identify as dehumanisation, dragonfly, is simply that stigma evidenced in some limited social groups. Is it a huge leap of logic to expect that these groups wouldnt be as fervent in their beliefs if some of those beliefs were even dimly reflected across many other social groups?

    It is not privelage or distance from these (benefit acceptance) social groups that causes the feelings. It is actually the absence of privelage and close proximity. It is evidenced to the point of cliche that the “caring classes” are actually the privelaged ones.

    Quick thought experiment: Who is more likely to support a very generous welfare system, a rich woman of leisure from Remuera, or the panel beater from Te Atatu?

    This is why I love economics: the key to a successful welfare system is social stigma for welfare beneficiaries.

  8. Matt Nolan
    Matt Nolan says:


    Hi Dragonfly,

    This is a pretty standard way for an economist to look at the issue. Most economists are pretty big proponents of having a minimum income in society.

    Don’t forget, economics is beautiful.


    The stigma does provide a welfare cost though – we need to ask what sort of trade-off is appropriate.

    @Eric Crampton

    I suspected as much – I just decided to interpret indoor relief more widely as “incentives to get back into work”.

    Although, there are some days I wish I could just head down the road and spend 18 hours working on some poorly manufactured, handmade, products for a subsistence wage – just to get a break from the intensity of economics.

  9. dragonfly
    dragonfly says:

    Kimble: Your point that more social stigma may enable higher benefit levels is an interesting one, and something I had never thought of. It does make sense, I have to concede, and the trade-off may not be unreasonable. However, if this is the case, why are pensions simultaneously high and carrying far less stigma than other benefits, even for those over 65 who are working, capable of working, or in possession of considerable assets? Another example is student allowances for the children of wealthy farmers (my daughter flats with such a student) which are only moderately stigmatised. In fact, it appears that the more truly disadvantaged and needy someone is the more stigma attaches to the benefit they receive. (I’m not entirely disagreeing with you here – in fact the examples I have given illuminate the desirable effects of stigma, but I do think it’s more complicated than you have portrayed.)

    Your thought experiment is too simplistic for me. You are probably right that a rich woman of leisure from Remuera is more likely to support a very generous welfare system than a panel beater from Te Atatu, but change the words “very generous welfare system” to “adequate safety net”, and I think the answer could change.

    We spent years on the edge financially, and it was our experience (and the experience of others like us) that the kindest and most generous people were the less wealthy, because they could empathise (that is, they were socially proximate). In the days of Trade and Exchange and going around and haggling about second-hand stuff it was usually the wealthier people who were mean, unbending, ungenerous and ridiculous in the prices they asked (I realise that at some level this is an unfair over-generalisation, but on average this was the way we found things to be). In this case social proximity and lack of privilege resulted in more caring behaviour, and social distance and privilege resulted in less caring behaviour, counter to your thesis.

    Having said that, I agree with you that there is category of wealthier people who do support generous welfare. They can afford to pay the taxes to fund it and unfortunately they vote for the rest of us to pay extra taxes as well. They’re also usually busy in local body elections voting for arts funding, theatres, rose gardens and red scoria footpaths.

    You postulate (if I have understood properly what you said) that dehumanisation is not dehumanisation, but a necessary stigma attached to those who receive welfare benefits. Given that only certain categories of beneficiaries are highly stigmatised, I think that perhaps it is the other way round – the dehumanisation is real, and is a consequence of the social separation of the privileged and the unprivileged, and the resultant stigma is applied in inverse proportion to socio-economic distance.

  10. Kimble
    Kimble says:

    “if this is the case, why are pensions simultaneously high and carrying far less stigma than other benefits, even for those over 65 who are working, capable of working, or in possession of considerable assets?”

    I think most people view the pension as reverse taxation. You sow and you water, and then at the end you get to reap. The truth is something different, but since when has that meant anything? The assumption is, they earned it, and even people who dont need the pension benefit from it.

    [Notice, however, when specific cases are brought to peoples attention, how much that person is looked down upon.]

    Student allowances are too obscure to be really stigmatised. And it is difficult to stigmasize student, in any case, as they are (ostensibly) working to improve themselves. This is not something that is inherent in the use of income by most welfare beneficiaries.

    Thought experiments ought to be simplistic, and mine served its purpose. I deliberately framed the issue as “generous” rather than “safety net” because safety net is something BOTH would agree upon, while generosity is not. I dont think the answer would be 180 degrees different if the new language was used.

    I loved the T&E! Though I didnt have the same experience you did, or maybe I just didnt notice it. How do we know that the rich people you encountered werent rich because of the traits you are describing? Just saying. Anyway, what you are talking about is empathy, and empathy is something that works on the small scale but cant be replicated by the state.

    I have my own anecdotes and experiences. It has been my experience that the most ardent anti-beneficiary people are not the rich; they are the working poor (and ironically, pensioners!). This is why the rhetoric of the Greens and their type fails to resonate with me at all. The uber-capitalists I most often encounter are not the main beneficiaries of capitalism. They are often very close to the average wage.

    I disagree that pensioners and students are considered true beneficiaries, and that this is why their benefit does not carry the stigma of the DPB or dole. I say the dehumanisation that concerns you is a (perhaps over-) compensation on the part of some people for the sense of entitlement they see growing within NZ culture.

    I disagree that wealth makes people care less for the less fortunate, in fact I argue the opposite. I can point to any number of first-world economies with strong welfare systems and a greater number of third-world economies with appallingly bad systems or no system at all.

    I think if the welfare system was a true “safety net” it would get very wide-spread support. And further to this, those who are anti-beneficiary simply view welfare as having exceeded its role as JUST a safety net.

    I think for any safety net to work, there needs to be a counter-acting force. Historically what has worked best in civilised societies as a counter-acting force to free-rider behaviour has been social stigma.

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