Return to Jobsletter Home

To the last Jobs Letter

To the next Jobs Letter

To this Letters Diary

To this Letters Features

To the Index







    Essential Information on an Essential Issue

    Letter No.63

    17 July, 1997

    Employment Minister Peter McCardle sells his integrated employment strategy.

    The introduction of a Code of Social Responsibility for beneficiaries was signalled in the first coalition government Budget late last month. Just what `responsibilities' it will include, and what will be the penalties for breaching the code are unclear, although the groundwork for this approach has already been laid in the stricter work tests brought in by the previous National government. The `word in Wellington' is that the philosophy of the Code will be woven throughout all the government's income support measures, and also be evident within the design of the new employment and training strategies.

  • As Winston Peters bluntly sketches the Code: if a beneficiary is able to work, then part of the contract will be that they are "actively seeking work". If they are "seeking taxpayer support to look after children" then the beneficiary will be expected to look after them properly, and ensure, for example, that they attend school. If someone receives taxpayer support because "they find it hard to organise their finances" then they will be expected to seek and follow budgetary advice.

    Social Welfare Minister Roger Sowry is reported as saying the parents would breach the Code if they refused to pick up their drunken kids from late-night parties. Jenny Shipley thinks beneficiaries should be obliged to get their children immunised.

  • There doesn't seem to be much consensus in Wellington about what the code will entail by way of sanctions. Some coalition Ministers are privately horrified at the thought that there might be benefit cuts for parents who are not looking after their children properly, or actively seeking work. This would be widely seen as further punishing the children. Both Winston Peters and PM Jim Bolger however have not ruled out such reductions. Bolger has hinted at small pro-rata cuts to make people send their children to school, saying the principle already applies to work-tests to the unemployed.

  • Economist and commentator Brian Easton says that the Code of Social Responsibility for beneficiaries presages a further undermining of the welfare state, and will continue to separate those who receive certain forms of state assistance from the rest of the community. Easton: "It will indicate how far we have moved from the simple, fair and achievable social welfare system which was once a matter of international pride, to a system which looks increasingly like that of the 19th century poor law, or today's America, where social assistance is based on grudging minimalist charity."

    Easton believes that once we start bifurcating society into "deserving" and "undeserving", there will be pressures to shift more people into the latter category perhaps encompassing those who receive health assistance, the physically and intellectually disabled, and the retired. Easton: "One suspects the government would be most reluctant to accept standards of social responsibility for its own behaviour comparable to the standards it requires of those unfortunate enough to depend upon it ..."

  • While Treasurer Peters is drawing up the actual details of the NZ Code of Social Responsibility, it is worthwhile considering the content of an example of such a contract from overseas.

    In the US state of Mississippi, beneficiaries have to sign a "personal responsibility contract" which imposes very explicit obligations, including: children must attend school regularly (and failure to comply means the benefits are cut by 25%); parents must make sure children are immunised (again, failure means a 25% cut); parents do not get extra income support for children born 10 months after the family has signed up for assistance; parents with children as young as 12 months are deemed work-eligible; benefits are progressively reduced for every refusal to participate in approved work programmes.

    Beneficiaries in Mississippi hand over all rights to collect child support to state authorities. In return, the state agrees to provide cash support, training, work programmes, employment advice, and an "employability development plan". The state also promises to provide adequate transport to work, and childcare.

    Sources New Zealand Herald 4 July 1997 "Welfare with `tough love hooks' by John Armstrong; New Zealand Herald 5 July 1997 "Behaviour codes is needed to make NZ First relevant" by John Armstrong; The Dominion 10 July 1997 "Charity for the deserving only" by Helen Bain; Dialogue No.95, July 1997 "The Irresponsible code" by Brian Easton


    "Nobody begrudges state-funded support for those in need, but it is important to realise that this support does not excuse people from their responsibilities to themselves and their own family. Our expectations are fair, simple and achievable ..."
    -- Treasurer Winston Peters, from his Budget speech

    "The code takes welfare back to Dickensian attitudes ..."
    -- Alliance leader Jim Anderton

    " Assistance for the needy is absorbed by idle and useless persons rather than acting as temporary help for the self-respecting and the struggling poor ..."
    -- complaint from the inspector heading a 1888 inquiry into charitable aid in Auckland. His report uncovered "the usual mass of vicious and fraudulent imposters" and saved £375

    "It's all very well for Mr Peters to talk about the virtues of `actively seeking work', but where are the jobs? There is no use in a `Code of Social Responsibility' where the responsibility lies completely on the side of the beneficiary and not at all with the Government and society."
    -- Sue Bradford, Unemployed Workers Rights activist.

    "The Code may sound innocent but could be very insidious. It could be open to abuse and arbitrary decision-making over the lives of families who depend on benefits.
    "Are the children going to be punished if the parents make what a social welfare bureaucrat decides is a mistake in their child-rearing or budgeting? Rather than encouraging and supporting people, it could grind them down further ..."
    -- Major Campbell Roberts, president of NZ Council of Christian Social Services.

    "It just suits the myth that government is trying to create that beneficiaries are living the life of Riley while neglecting their children and staying on the benefit until they get a retirement pension..."
    -- Annette King, Labour's social welfare spokeswoman.

    "Just because a person is on a benefit does not mean they are a bad parent. I just do not believe that."
    -- Roger Sowry, Minister of Social Welfare

    "This is exactly the wrong way to go. It assumes that people on benefits are mostly malingerers. They are not.
    "I believe we should be doing exactly the opposite of what the Budget plans. We should be removing the restrictions on state support and moving towards a universal basic income for everyone, no questions asked. Yes, it would mean higher taxes on those in paid work not the tax cuts that the government has been promising. But its been well said that the measure of a civilised society is in how it treats its weakest members ..."
    -- Simon Collins, editor of Wellington's City Voice.

    "In welfare jargon, the debate is about a shift from benefits being a "unilateral right" to requiring "reciprocal obligations" from those getting a payment from the state ... National sees a hardening of attitude in the electorate towards welfare entitlements, and believes that this rightwards shift in thinking by NZ First is an opportunity for a centre-right coalition to dictate the social policy agenda rather than Labour..."
    -- John Armstrong, New Zealand Herald political editor

    "If you were to borrow from your brother, your sister, your mother, your father, they expect something in return. Here, you are borrowing from a stranger ..."
    -- Treasurer Winston Peters, in a radio interview, as quoted in the Dominion 10 July 1997

    Highlights of the first coalition government Budget

  • The Budget did not launch the work-for -dole scheme as promised in the coalition agreement, but a $10.2m "down-payment" will be spent on increasing numbers of long-term unemployed involved on Community Taskforce work to 7,000-10,000 people by the end of next year.

  • The Community Taskforce scheme is referred to in the Budget as "the Interim Community Work and Training initiative". Community Taskforce in future will be grouped with the Job Link and Job Intro programmes, Taskforce Green and the Training Opportunity Programme (TOP) to become the Community Work and Training Scheme. The total number of participants on these programmes at any one time this coming year is estimated to be between 13,00017,500 job seekers.

  • Programme priorities have been radically re-ordered in this Budget, in line with the new McCardle employment strategies. Money previously going to Job Seeker schemes, Community Employment Initiatives, and Local Employment co-ordination will now be combined into a new overall strategy of "minimising the duration of unemployment and maximising participation in community work and training". Total budget for these re-ordered range of strategies: $138m. The Budget predicts that about 250,000 individual job seekers and 6,000 community groups will be assisted through these strategies.

  • The new emphasis on funding "outcomes" and not "programmes" is clearly spelt out in the Budget. In terms of NZES performance, outcomes are defined as the percentage of job seekers in various categories who achieve "stable employment". Stable employment is further defined as "placements of job seekers into full time work, part-time work over 20hrs or temporary work who move into employment and stay off the register for three months or more".

  • $1.5m will be spent expanding the army-based Limited Service Volunteers Programme to 1250 young job-seekers over the next year. This project's total budget will now stand at $2.7m.

  • The Student Job Search budget allocations remain basically the same at $1.9m.

  • The Education and Training Support Agency basically maintains its budget at $21m. The Training Opportunities Programme outcomes remain the same at providing training places for 15-16,000 people.

  • The Careers Service keeps its existing budget of $5.4m.

  • All funding for training support and employment placement services for people with disabilities has now been shifted from Social Welfare Department to the Labour Department .

  • The average number of people on the Training Benefit was 12,300 people in 1996/97, a reduction of 500 people on the previous year. Despite the emphasis on training options for the unemployed, the Budget is planning for a further 1,500 drop in people on the Training Benefit, with the new average for 1997/98 being 11,000 people.

  • The average number of people on the Unemployment Benefit in 1996/97 was 142,400, an increase of 2,400 on the previous year. This years Budget expects an average of 140,000 people on the Unemployment Benefit each month, a drop of 2,000 people.

    Economic growth is the coalition government's primary employment strategy. The Minister of Employment, Peter McCardle often begins his speeches with the assertion that it is economic policies, not employment policies, that determine the number of people out of work at any one time. He is on record as saying that the GDP growth we need is 2.5%-3% to absorb new entrants into the market, and to actually reduce number of unemployed, we need more growth than that.

    How does the latest Budget predictions shape up? Treasury is projecting growth of 4.2% in 1998-9, easing to 3.5% in the year to March 2000. This may be an optimistic assertion. The Reserve Bank forecast is for 3.6% growth in 1998-9, and a further 3.8% increase in the year after that. The chief economist of the BNZ, Tony Alexander says that the "market concensus figure" is 3.5%.

    The impact of the Peters economic policies on jobs is certainly debateable. Former NZ First MP and strategist Michael Laws perhaps sums up the scepticism: "Only a Treasury-inspired document could halve the budget surplus by 55% and still expect the market to believe an optimistic 4%-plus GDP growth rate for the next financial year ..."

    The NZ Federation of Voluntary Welfare Organisations notes that there has been little publicity about major cuts to the funding of government departments' operations. The Federation reports that over the next 3 years, taking inflation into account, the Department of Social Welfare faces a 10.8% cut in departmental spending the money which pays for staff, training, technology, maintaining equipment and premises. Also noted: similar cuts in other departments, including the Police. The Federation: "This downgrading of the public service must effect not only its own performance, but also its relationship with the voluntary sector, and ultimately our workload ..."
    Source Dialogue No.95, July 1997 "Boring Budget"

    Unemployed Workers Rights activist Sue Bradford says that Treasurer Peters' first Budget does nothing for unemployed people and beneficiaries except further abuse them. Bradford: "The government should be proactively working in with communities for full wage employment creation, not blithely talking about increasing Community Task Force and Limited Service volunteer numbers. Unemployed people do want to be part of society, but we want real jobs, not make believe, unpaid work ..."
    Source fax from Sue Bradford to the Jobs Letter 26 June 1997 "Unemployed Reaction to Budget"

    One of the perverse effects of the government encouraging more unemployed people to look for jobs will be a rise in the official unemployment rate. This is because, with a stagnating economy and fewer new jobs being created, many people who are being pushed into more actively seeking work, will simply end up moving from one level of unemployment statistic to another.

    When the Household Labour Force surveyor questions someone who is out of work as to whether they are "actively" looking for a job, they have to say "yes" before they are counted as officially "unemployed". If the person isn't really looking for work, and feels discouraged about their job prospects, then they go onto another list and are counted as "jobless". If the new government policies force beneficiaries to more actively look for work, and if the new jobs are not forthcoming, then the end result will be a rise in the official unemployment rate, as people move from the "jobless" list to the official "unemployed".

    In May 1997, the official "unemployment" rate was at 6.4% and 116,000 people. The official "jobless" rate was at 10.6% or 201,000 people.

    Winston Peters' Budget announced that the government will be scrapping its tariffs well before the year 2010, the date when NZ is to have zero tariffs as part of its commitment to the APEC group. A special tariff review later this year could result in a swift move to zero tariffs soon after 2000. This has drawn ire from industry groups, particularly in car manufacturing and the textile industry.

    Apparel and Textile Federation chief executive Marcia Dunnett says that the government was, in effect, sacking 10,000 apparel and textile workers by pushing through the tariff reductions, while not cutting other costs for businesses, such as compliance costs. She wants to see the government lower the costs of doing business in NZ, particularly in lowering government-imposed costs such as ACC.

    Automotive Component Manufacturers Association president David Tibby says that the earlier tariff review is effectively abandoning local vehicle manufacture without recognising other market distortions besides the tariffs. He says the government is ignoring the impact that the loss of the local assembly industry would have on about 5000 people manufacturing components.

    Source The Dominion 2 July 1997 "Textile tariff cuts draw industry fire"

    Jane Kelsey, Auckland academic and internationally-respected critic of "the NZ experiment" has accepted a personal "chair" at Auckland University in an appointment which will enable her to continue her research projects on contemporary NZ economic, social, justice and Treaty policies. Commenting on her appointment, Professor Kelsey says : "It confirms the commitment of the University to its public good role and that it takes critical scholarship seriously, which is very important in the current climate ..." Kelsey's next book is tentatively titled Islands of the Future Globalisation, Sovereignty and Identity in Aotearoa NZ, and is due out early next year.

    China's time-bomb: unemployment. With the ceremonial handover of Hong Kong to the Chinese People's Republic on July 1st, attention is shifting to the huge social and economic upheavals facing the Chinese nation. As China readily adopts most of the economic reforms recommended by its new Western business partners, it is now also facing the inevitable Western-style problems of unemployment.

    Chinese state-owned enterprises are increasingly unable to compete with a range of businesses run by newly independent entrepreneurs. These state enterprises may nominally employ thousands of people, but this doesn't necessarily mean these people actually have any work to do, or have even been regularly paid in the last few years. China consequently has a huge "hidden" unemployment rate, including a floating population of migrants, now estimated by the western media to number at least 100 million people, who are drifting around the Chinese continent searching for paid work.

    Joanna McGeary reports in Time magazine that China's leaders have been paralysed by their failure to stop the spiralling losses of the state factories, and their need to maintain social security through the communist system that guaranteed lifetime employment. McGeary: "Failing to act could destroy China's economic miracle ... pushing ahead with reform depends on how much pain and suffering people will take before they resort to rebellion ..."

    Source Time magazine 30 June 1997 "One country, many systems" by Joanna McGeary

    Jobs will become the focus of next year's Group of Seven economics summit which will be held in Britain. UK Chancellor, Gordon Brown, has pledged that he will use the British presidency of the next G7 meeting to focus on a detailed discussion of employment issues. In the run-up to the 1998 summit in Birmingham, Brown will chair a special jobs conference of employment and finance ministers in London (in January or February), designed to explore ways of "combining strong economic growth with social inclusion."

    The jobs conference will concentrate on six main themes: new employment opportunities for the long-term unemployed and other groups excluded from the labour market; welfare reform which encourages employment and balances rights with responsibilities; reforming tax benefit systems to ensure they support jobs; policies to deliver lifelong learning through educational opportunity for all; policies to support small businesses, the major source of future job creation; and action to open products and labour markets.

    Source The Guardian Weekly 29 June 1997 "Brown pledges to give G7 jobs focus" by Mark Atkinson

    To the Top
    Top of Page
    This Letter's Main Page
    Stats | Subscribe | Index |
    The Jobs Letter Home Page | The Website Home Page
    The Jobs Research Trust -- a not-for-profit Charitable Trust
    constituted in 1994
    We publish The Jobs Letter