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    Benefit Reform
    Minister Steve Maharey outlines his plans for social assistance

    from The Jobs Letter No.128 / 31, July 2000

    stevemaharey.jpg - 6376 Bytes

    Social Services and Employment Minister STEVE MAHAREY outlines his vision for social assistance, and his plans for benefit reforms.

  • The Government wants to build a modern social security system which is tailored to the needs of individual beneficiaries and which offers people opportunities to increase their skills so that can earn a decent wage in a decent job.

    New Zealand's social security system is like a venerable ocean liner - a ship of state, but it has received nothing more than a new coat of paint now and again over the years. It is high time that we looked at the system itself to determine if it is the right vessel to carry us into the new century.

    A significant proportion of the working aged population is in receipt of a benefit, even at a time of economic growth. Many people keep re-cycling through the benefit system, having difficulty staying in sustainable paid employment. Some segments of the population experience social exclusion. While there are multiple causes to these problems, the design and delivery of social assistance is one area where Government can make a difference. The Government is of the view that we should aim to have more people in sustainable employment, and that we should support social participation for those for whom employment is not an outcome (or not an outcome at this stage).

    The present system is difficult to understand, to access and to deliver. Some people are unnecessarily locked into the system, are not encouraged to take opportunities or to develop their own capability, or are locked out of the system because they do not know how to get support that is available. There are poverty traps so that some people are no better off if they earn income from employment. There are particular problems for Maori and Pacific people in accessing assistance.

  • The Government's present work programme is informed by the need to develop a system that promotes human capability and supports people to be in paid employment, where this is possible. The future system should have smoother programme interfaces and should reward effort. It should be more responsive to local realities and should be more tailored to individual circumstances. An effective social assistance system will be more responsive to the needs of Maori and can play a significant role in closing gaps.

  • The Government is committed to replacing the Community Wage with an unemployment benefit (UB) and a non-work tested sickness benefit (SB). This delivers on specific policy undertakings and represents a first step in reshaping social assistance. The Government will also be moving to make changes to the work test and sanctions regime, which will simplify them, and to a re-orientation of "community work".

    There are links between this work on benefit reform and social assistance, and other work the government is undertaking on the Employment Strategy, the Government's Response to the Hunn Report; the Closing the Gaps initiative, and the Regional Development Strategy.

    Because society has become more diverse and the economy more open, this government is reviewing aspects of the benefit system to ensure that there are not disincentives for people to re-enter the workforce. At a high level our goal should be to have more working aged people in sustainable employment, and to support social participation for those for whom employment is not an outcome (or not an outcome at this stage).

  • In terms of the working aged population, we are facing a number of problems:

    — more people are on a benefit for longer periods;

    — a significant proportion are re-cycling back through the system, having difficulty maintaining sustainable participation in paid employment; and

    — we are experiencing social exclusion of segments of society, particularly the most vulnerable groups, including Maori, Pacific peoples, and the disabled.

    There are multiple causes to these problems, related to factors as diverse as:

    — the state of the economy (e.g. UB numbers largely mirror changes in GDP);

    — changing social values (e.g. the value put on work participation);

    — the design and delivery of social assistance programmes; and

    — the extent to which other policy areas help prevent or reduce the impact of certain outcomes (e.g. morbidity, skills development etc).

  • The government can influence or control some of these factors more than others. Improving social assistance design is one area where improvements can be made which will contribute to improved outcomes. The system could better support human capacity development and paid employment, especially for those at risk of long term unemployment, in low paid employment or with a marginal attachment to the labour market.

    The current system has difficult interfaces which create barriers. The interaction of tax, benefit and supplementary programmes has created poverty traps, so that some people are no better off if they earn some income from employment. In some instances, they can be worse off.

  • Aspects of the system are dated. It was developed in the 1930's to deal with a simpler society, where needs were more likely to be short term. The system has not responded well to the changing nature of employment and to fluctuating incomes - through more casual work, part time employment, seasonal work and contract work.

    " The Government's approach is about investing in New Zealanders - it benefits the individual because they are more likely to gain a sustainable job and it benefits the country because the lifeblood of a modern economy is skilled workers.."
    Steve Maharey

  • We must recognise that globalisation has brought changes to the employment market. This means that we need to offer New Zealanders opportunities to increase their skills if they are to gain stable jobs in our modern economy. Our social security policy must be related clearly to our employment policy in areas like training, regional development, research science and technology and small businesses.

  • Our vision for the social security system is one where individuals are offered assistance targeted to their particular needs. The vast majority of unemployed beneficiaries want to work and will do so if a suitable job is available. However many of the longer term employed will need extra assistance to increase their work skills and to retrain them for employment in a modern economy.

    It is the job of the social security and employment system to provide security for those who need it, and opportunities for those who can take them. The Government's approach is about investing in New Zealanders - it benefits the individual because they are more likely to gain a sustainable job and it benefits the country because the lifeblood of a modern economy is skilled workers.

    The Government is seeking a social assistance system that is more effective in supporting better social outcomes. It should aim to promote security by focusing on the development of human capability and on supporting people, wherever possible, to be in paid employment, rather than passively paying benefits.

    It should address barriers to participation in the economy and society rather than add to them, so there is improved reward for effort. It needs to be more responsive to local realities, should be more tailored to individual circumstances through the development of case management. Different parts of the system should work together and interfaces (e.g. benefit/tax and benefits/housing assistance interfaces) would be well designed and managed. It should support and be supported by effective delivery.

    People should know what they are eligible for, and how to get it, with the system helping them through various stages so they can be confident that they will get what they need when they need it. This will contribute to reducing poverty.

  • The approach the Government is taking replaces the current emphasis on compulsion, with a focus on sustainable results though working with people to increase capacity and generate opportunities. There is more focus on skill development. There is more recognition of the need to be more responsive to the local environment, and to the particular needs of the individual - one size does not fit all.

  • The preferred end point is a simpler system underpinned by a core benefit so that unnecessary rules and differences in treatment are removed. Add-on payments oriented to encourage people to take up opportunities and the likes of post placement support and exit management could be part of an investment in human capacity. Effective child-care assistance (including out-of-school care) is an example of such an add-on.

    Further work is required to develop policy options. There will be trade-offs between some aspects, for example, simplification on one hand and greater individualisation on the other. Policy options will also need to recognise fiscal constraints as well as delivery and implementation limitations.

    Sources - Steve Maharey "Social Assistance and benefit reform - What are the Issues ?" special to The Jobs Letter 28 July 2000; "Maharey announces first stage of benefit reforms" - Steve Maharey 17 July 2000.

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