Social welfare in New Zealand

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Social welfare has long been an important part of New Zealand society and a significant political issue. It is concerned with the provision by the state of benefits and services. Together with fiscal welfare and occupational welfare, it goes to make up social policy of New Zealand.

[edit] Liberal Government reforms

Among the early forms of social welfare in New Zealand was the old age pension, introduced by the First Liberal Government in 1898. The scheme was introduced to avoid what MP William Pember Reeves described as the "worst social evils and miseries" referring to the British workhouses where the elderly lived in spartan institutional circumstances. The pension scheme was non-contributory and was available only to the "deserving poor"; men and women who had became destitute though no fault of their own. A decade later a widows' pension was introduced for women with children who had lost their husbands. The Liberals also passed the Workers Dwellings Act in 1905 allowing the government to buy land, build houses, and rent them to workers and their families. The small-scale scheme that resulted from this legislation can be seen as a precursor to the much larger state housing introduced by the first Labour government in the 1930s.^[1]

[edit] State housing

Main article: State housing

The government provides State housing to those in need. The number of houses owned by the State has varied over the years and between different governments. Currently the level of rent paid in state hosuing is related to the level of income of the people living in the house (income-related rents) so that those on low incomes pay below market rents. Where a household's income is relatively high the rents are set at the market rate.

In addition to the provision of State housing the government also provides an Accommodation Supplement. This is payable as a contribution to rent, board or mortgage payments for qualifying people. However, you cannot receive an Accommodation Supplement if you are paying income-related rents in a State house.

In some instances a person may also qualify for a rates rebate to help with the cost of local government rates.

[edit] Unemployment benefit

[edit] Unemployment Act 1930

In 1930, while Prime Minister George Forbes was in London for the 1930 Imperial Conference, the United Government passed the Unemployment Act, promising relief payments to those who registered as unemployed. Upon his return to New Zealand in January 1931, Forbes announced there would be no payments made without work, meaning those registered would have to participate in government 'make work' schemes such as building roads and working on farms or in forestry projects. When the register was opened in February, 23,000 people put their names down; by June the number of registered unemployed had risen to 51,000 as the Great Depression worsened. The register did not include women, Māori, or boys under 16. In 1933 (by which time the number of unemployed had reached 80,000), MP Gordon Coates introduced the Small Farms (Relief of Unemployment) Bill to help turn unemployed workers into small farmers.^[1]

[edit] Social Security Act 1938

After winning the 1935 election the newly elected Labour government immediately issued a Christmas bonus to the unemployed.^[1] However, a regular unemployment benefit was not introduced until the passing of the Social Security Act in 1938; that benefit was "payable to a person 16 years of age and over who has been in New Zealand for at least 12 months and is unemployed, is capable of and willing to undertake suitable work, and has taken reasonable steps to secure employment"^[2]

[edit] Unemployment Benefit today

The criteria for receiving an unemployment benefit remain similar to the original 1938 legislation, the main differences being that the applicant must now be over 18 years of age and have lived in New Zealand for two years. The requirement for the applicant to take reasonable steps to find employment is more enforced though a "Job Seeker Agreement", a contract between the applicant and Work and Income New Zealand. Current benefit levels are between $115.94 and $249.10 a week depending on the applicant's age and living situation.^[3] From September 2007 there has been a number of changes to the delivery of unemployment benefits, the changes focus mainly on youth with a goal of having all 15-year-olds to 19-year-olds engaged in employment, training, or education. People applying for the unemployment benefit will be required to undertake work or training-related activities in the period between their first contact with Work and Income and their benefit commencing. They will also be required to look for and accept any offer of suitable work during that time.^[4] Similar new measures will also apply to people on Sickness Benefit and Invalid's Benefit, and the Domestic Purposes Benefit. Beneficiaries could have their benefits cut by up to 50% if they fail to comply. These new measures have been criticised by the DPA (formerly Disabled Persons Assembly) a spokesperson told the New Zealand Herald "Disabled people have been telling Social Welfare for years that we want to work, but we want the appropriate kind of work,"^[5]

[edit] Universal superannuation

The 1938 Social Security Act introduced a means-tested old age pension at age 60 and universal superannuation at age 65. In the 1970s the third National government created a superannuation scheme that paid 80% of the average wage to married people over 60.^[1] Currently superannuation is paid to all aged 65 and over and is taxable. The amount depends on the superannuitant's household situation. For a married couple the net of tax amount is set by legislation to be no less than 65% of the net average wage, although the current government has increased payments to ensure it is no less than 66% of net average wage. Rates are also payable for people living alone and for single people in shared accommodation.

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[edit] Family benefit

The 1911 Widow's pension provided to some extent for families without other means of support, but it was subject to means testing. A family allowance was introduced in 1926, payable at two shillings a week for each child over two years old, but still subject to means testing. The Social Security Act of 1938 extended and modified existing pension arrangements, and added a social security tax to pay for them ^[6].

“	A woman with two children received the equivalent of at least a full day's pay for a labourer as benefits, unlike wages, were not taxed. Most women received more as the average number of children born to mothers in the 1950s was 3.4.	”
—Ann Beaglehole, Benefiting Women: Income Support for Women, 1893-1993, p 10

On 1 April 1946, the family benefit was increased to 10 shillings a week and the means test was dropped. The social security tax was raised but this was compensated for by the dropping of the national security (war) tax. This increased family benefit was payable for all children up to the age of sixteen, or up to the end of the year when the child turned eighteen if they were in full-time education or unable to earn a living due to incapacitation ^[7].

Since the benefit was normally paid to the mother, many women gained their first ever independent source of household income.^[8] The family benefit was increased to 15 shillings per week per child in 1958-9, and was able to be capitalized up to a maximum of £1000 when buying, altering, or paying off a home from 1959-60.^[9]

Family benefits were abolished on 1 April 1991.^[10] In effect, they were partly replaced by more targeted allowances for low-income families.

On 1 April 2005, the Working for Families package was introduced. The package provides, among other things, tax-credits for working families with children, and aims to reduce child poverty in New Zealand.

[edit] Domestic Purposes Benefit

Main article: Domestic Purposes Benefit

The Domestic Purposes Benefit (DPB) was first introduced in New Zealand in 1974. It provides State financial support primarily for single mothers, irrespective of whether the father was contributing to maintenance payments (a feature of earlier legislation). There is a small number of fathers on DPB. While there is a Widow's Benefit for women with children whose partner has died, this is not available to men.

There are three forms of Domestic Purposes Benefit:

DPB: Sole Parent
DPB: Care for the Sick or Infirm
DPB: Woman Alone

The rate of payment of a DPB is greater than the rate paid for the Unemployment Benefit and the Sickness Benefit. The rate of payment for the DPB: Care for the Sick or Infirm is the same as for the Invalid's Benefit.

For people with a child collecting the DPB: Sole Parent benefit they are encouraged to name the other partner and to seek Child support payments. There is a financial penalty for Sole Parents (section 70A of the Social Security Act 1964) who do not seek child support without sufficient reason. Any child support payments are generally used to offset the State cost of the DPB payment, with any excess going to the sole parent.

[edit] Health benefits (Sickness Benefit and Invalid's Benefit)

[edit] Social Security Act 1938

Two types of health benefits were introduced with the 1938 legislation, the Invalid's Benefit and the Sickness Benefit.

The Invalid's Benefit is paid to those permanently incapacited or totally blind (excluding those already receiving an age benefit). Applicant must have been at least 16 years of age and residentially qualified. The applicant was residentially qualified when their incapacity arose in New Zealand or they were resident in New Zealand on 4 September 1936 and had lived in New Zealand for at least 10 years immediately before applying for the benefit. In 2007 the residence requirement was set at two years.

The Sickness Benefit is payable to those who are temporarily incapacited from working through sickness or accident, excluding the first seven days of incapacity. In order to qualify, an applicant must have suffered a loss of salary, wages, or other earnings, and have resided in New Zealand for at least 12 months. The rate of benefit at the time it was introduced could not exceed the loss of earnings through incapacity. The rate now is currently the same as the Unemployment Benefit. As with other benefits introduced in 1938, the applicant had to be over 16 years of age.^[2]

[edit] Controversies

In recent years the government has been accused of exaggerating drops in unemployment by transferring people to Sickness Benefits^[11], welfare commentator Lindsay Mitchell wrote in an October 2006 press release "There is a constant flow between benefits. Taking this into account the net gain from the unemployment benefit to the sickness benefit over the five years to April 2005 was 20,870. Over the same period the net gain from the Sickness Benefit to Invalid's Benefit was 26,302, bearing in mind the same beneficiary may have been transferred more than once."^[12]

On October 26, 2006 the government announced a number of changes to the welfare system. Then Minister for Social Development and Employment David Benson-Pope later stated that, when implemented, the reforms will move between 3,000 and 6,000 people off the Sickness Benefit.^[13]

[edit] Minimum Wage

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[edit] Major Changes to Social Welfare in New Zealand

[edit] Cutbacks of the 1990s

Main article: Ruthanasia

In the early 1990s the fourth National government embarked on a free market programme aimed at reducing state spending and 'dependence on the state'. Welfare benefits were drastically cut, and 'user-pays' charges were introduced for many formerly free public services. These policies were widely known as 'Ruthanasia' after Finance Minister Ruth Richardson, although the welfare portfolio was managed by Social Welfare Minister Jenny Shipley.

The impact of these changes was particularly pronounced as the unemployment rate was high due to the 1987 stockmarket crash and the cost-cutting programmes of the previous fourth Labour government, which had reduced the staff of many state services such as New Zealand Rail. The cutbacks have been partially reversed by the fifth Labour government, but inflation means that in real terms benefits are still lower than before the cuts.

[edit] Working for Families

Main article: Working for Families

In 2004 the New Zealand Labour-led coalition government introduced the Working for Families package as part of the 2004 Budget. The package, which commenced operating on 1 April 2005, has three primary aims: to make work pay; to ensure income adequacy; and to support people into work.

The Working for Families package includes several components:

Working for Families Tax credits
increases in Childcare Assistance
increases in Accommodation Supplement payments
changes to some benefit rules

Because parts of the package use tax credits it is also delivered by the Inland Revenue Department.

The package is thought to cover approximately 75% of all families with dependent children.

It was progressively implemented between October 2004 and April 2007.

[edit] Working New Zealand: Work Focused Support

Announced in October 2006 the Working New Zealand reform includes changes to the service delivery of Work and Income and changes to the Social Security Act 1964. Amending legislation was passed by the New Zealand Parliament in June 2007 including introducing a 'Purpose and Principles' section.

The government says ^[14] the changes will introduce an intensive employment support to every New Zealander who is receiving a benefit and is able to work.

Phase one of Working New Zealand: Work-Focused Support will involve:

extending employment assistance to Independent Youth, Domestic Purposes, Sickness and Invalid's Benefit clients
setting stronger work expectations for clients in some circumstances
providing targeted employment initiatives to reduce the high Maori Unemployment Benefit rate
offering a Job Search Service for all work-ready clients
continuing to align rules and criteria of different benefits.

From September 2007 there have been a number of changes to the delivery of welfare benefits, the changes focus mainly on youth with a goal of having all 15-year-olds to 19-year-olds engaged in employment, training, or education. People applying for the Unemployment Benefit will be required to undertake work or training-related activities in the period between their first contact with Work and Income and their benefit commencing. They will also be required to look for and accept any offer of suitable work during that time.^[15] Similar new measures will also apply to people on Sickness and Invalid Benefits, and the Domestic Purposes Benefit. Beneficiaries could have their benefits cut by up to 50% if they fail to comply.

Criticisms

These new measures have been criticised by the DPA (formerly Disabled Persons Assembly) a spokesperson told the New Zealand Herald "Disabled people have been telling Social Welfare for years that we want to work, but we want the appropriate kind of work,"^[16]

Susan St John and Louise Humpage have also commented that the changes "wipes away any notion that our social security system is about ensuring everyone can participate as citizens. Instead, it makes getting people into a job, any job, the fundamental duty of citizenship." ^[17]

Phase two is expected to include further welfare benefit simplification in 2008.