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NZCPR Weekly: Lifting Children Out of Dependency

NZCPR Weekly

Lifting Children Out of Dependency


This week, NZCPR Weekly examines how well New Zealand's welfare system lifts sole mothers and their children out of dependency, (printer-friendly view >>>), NZCPR Guest Tommy Thompson shares his experience of introducing ground breaking welfare reforms in Wisconsin, and the poll asks whether National's welfare reforms go far enough. Please don't forget to pass this newsletter on to anyone interested in welfare reform...

The release of the National Party's welfare policy has brought a predictable clamour from the defenders of the present welfare system. Such was the protest that one could be mistaken for thinking National was proposing to abolish welfare entirely! Hardly.

National is in fact merely proposing that single parents on the domestic purposes benefit undertake 15 hours of employment, training or job-search activities, once their youngest child is aged six.[1] This is hardly earth-shattering or radical thinking. It is of course, a sensible change and long overdue.

At present there are 96,000 sole parents on the domestic purposes benefit, 36,000 of whom have children aged six or more.

Although this is a very small step towards real reform it is at least a step in the right direction and marks a fundamental shift from what we have had for the last nine years.

Ensuring a social safety net is in place is a key responsibility of government. New Zealand's social welfare system was designed to ensure that those who are incapacitated and genuinely unable to support themselves are provided with long-term security. But for those who are capable of earning their own living, welfare support should be temporary and designed to give them a hand up to work and independence.

These were the principles upon which our welfare system was based. It was recognised by the architects of the system that long-term reliance on benefits for people who are able-bodied is very damaging, especially when children are involved.

The problem is that if benefits are readily accessible and work requirements are weak, it is all too easy for welfare to become a trap, and a rort. With only the unemployment benefit being subjected to a work test, the domestic purposes benefit - as well as the sickness and invalid benefits - have locked many people in welfare dependency who are quite capable of working for a living.

Ministry of Social Development figures reveal that in the twelve months to the end of June, although New Zealand faced a critical shortage of workers, the number of sole parents on the domestic purposes benefit fell by only 27. This is an astonishing indictment of a welfare system that is unable to make people independent of state support and highlights a major problem that we face. Not only do we have proportionately more sole parents on benefits than most countries in the developed world, but very large numbers remain on welfare for extended periods: almost 70,000 have been on the domestic purposes benefit for over a year with 34,000 over 4 years, and 11,000 over 10 years.[2]

In the recently published report "A Fair Go for All Children", the Children's Commissioner identified some 170,000 children who live in single parent poverty.[3] The report finds that work is the key to reducing child poverty: "Supporting parents in work and ensuring they gain financially from their employment is critical to reducing child poverty".

For years the OECD, which monitors welfare programmes in member countries, has raised concerns over New Zealand's high rate of single parent welfare dependency - the second highest in the OECD. They have found categorically that sole parent welfare dependency is the prime cause of child poverty, with the risk of children growing up in poverty being at least three times higher in jobless sole parent families than in families where someone works for a living.

The OECD believes that New Zealand's reliance on the Domestic Purposes Benefit is excessive because the incentives for mothers to move back to work are not strong enough. As a result, they have found that we spend far more than most OECD countries on income support for sole parents.[4]

An examination of those OECD countries that have far lower rates of child poverty and single-parent unemployment than New Zealand highlights the key difference between us. None of them have a separate benefit for sole parents. Denmark, Spain, Sweden, Switzerland, Portugal and Austria, to name but a few, have welfare systems that provide sole parents with a range of additional supports - largely through family or child payments - but there is no special stand-alone benefit.[5] In those countries there is a strong recognition that the only way for sole parents and their children to avoid the poverty trap is through the workforce.

In comparison, countries like Australia and the UK, which have stand-alone single parent benefits similar to our domestic purposes benefit, also struggle with high rates of child poverty and sole parent dependency. It is therefore clear that the problems we face in New Zealand have been caused by the domestic purposes benefit having been established as a stand-alone benefit by the labour Government in the seventies. If we had stayed with the old system of supporting single parents through other benefits, New Zealand's rates of child and single parent poverty would be at the low end of the OECD rankings.

During the nineties, when the United States was facing similar problems of increasing child poverty and sole parent dependency, moves were made to find a better system. One of those at the forefront of change was Tommy Thompson, the Governor of the State of Wisconsin. Wisconsin, a farming state of 4 million people had more generous welfare benefits than many other states and as a result had one of the country's highest rates of sole parent welfare with more than 100,000 mothers on a benefit.

The reforms introduced by Governor Thompson were so successful that not only did he reduce sole parent dependency in Wisconsin by a whopping 96 percent, but his programmes formed the basis of President Clinton's 1996 sweeping social welfare reforms which aimed to "abolish welfare as we know it".

Tommy Thompson, the former Governor of Wisconsin and President Bush's former Secretary for Health and Human Services, is this week's NZCPR Guest Commentator. He explains how he went about changing the system:

"When I was Governor of Wisconsin I heard frequently from parents on welfare - especially mothers - about how much they wanted to leave welfare behind and build a better life for themselves and their children. These conversations led to a number of very important lessons. Firstly, the government has an absolutely crucial role to play in helping those who can't provide for themselves. However, we have to be smart about how we help them. We have leant that just giving money without any expectations creates a cycle of dependency that leaves many families mired in poverty and abuse, unable to take control of their lives. Secondly, the government's support must be focused on helping people find and succeed at work. This means not just helping them to find good jobs but also requiring them to take the jobs and to succeed in them." To read the full article, click the sidebar link>>>

While opponents predicted that the changes would bring disaster, the opposite turned out to be the case. By supporting sole parents in four key ways - through child care, transportation, jobs skill training and a requirement to work - more and more welfare families left dependency to enter the workforce and the world of self-sufficiency.

Wisconsin's successes were adapted by states across the US with the same positive results. Eventually, the realisation that the new system was working in unprecedented ways to help families escape the welfare trap, led to a complete overhaul of the system of support for sole parents by Congress, replacing Aid for Families with Dependent Children (AFDC) - the equivalent of our domestic purposes benefit - with a programme of assistance conditional upon work, Temporary Assistance for Needy Families (TANF).

As the Economist reported in an article "From welfare to workfare" in 2006, after peaking in 1994 America's welfare caseload fell by 60 percent over the next decade, from 5 million to 2 million families. Welfare mothers found work with the biggest increase among those who had never been married. Their employment rate leapt from 44 percent in 1993 to 66 percent in 2000 and the poverty rate, instead of rising sharply, dropped from 15.1 percent to 11.3 percent.

States responded to the new federal welfare targets and the greater flexibility provided by the new programme by overhauling their welfare offices, in some cases turning over the whole process to private firms. Many offices stressed work from the moment people stepped through the front door, sometimes signing them up for job-training sessions as soon as they applied for welfare. Some states required applicants to try job searches before they could be eligible for cash benefits, shifting much of the money they were doling out as cash benefits, into programmes that supported work - child care, health care, transport subsidies and so on.

Margie Davis of Project Match, a non-profit agency that offered job-search and other services in Chicago, explained how many women followed a well established path - a job, a better job, then a career: "After leaving welfare for a job at the checkout till, they got enough training and education, often with government help, to become nurses, teachers or social workers. Those jobs not only boosted their pay, but also provided better health insurance and schedules flexible enough to let them care for their children more easily. As a result, the quality of some women's lives has improved dramatically. As those lives evolve, I also get to go to a lot of weddings".[6]

National has signaled that it is time that New Zealand tackled the well-documented problems faced by sole parents and children living in entrenched welfare dependency and for that it should be commended. It is an area long-neglected by Labour whose policies have increased social dependence not reduced it.

But the question remains as to whether tinkering with the system will ever be enough. Maybe it is time to bite the bullet and replace New Zealand's stand alone sole parent welfare benefit - the domestic purposes benefit - with a system based on the successful models overseas that have prevented welfare dependency and the poverty trap becoming the significant problem that it is for sole parents and their children in New Zealanders today.

A grateful thanks to those who have supported the work of the NZCPR - I cannot continue without the backing of readers. If you would like to help, please click here >>> NZCPR POLL This week's poll asks: Do you think National's reform of the domestic purposes benefit goes far enough? To vote click here>>> (Readers comments will be posted here >>> daily)

FOOTNOTES: All articles can be found on the NZCPR RESEARCH PAGE - click here >>> 1 John Key, National's Benefits Policy 2 Ministry of Social Development, Benefit Factsheet DPB June 2008 3 Children's Commissioner, A Fair Go for All Children 4 OECD, Babies and Bosses 5 OECD, Benefits and Wages: Statistics 6 Economist, July 27 2006, From welfare to workfare

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NZCPR Weekly is a free weekly periodical from the New Zealand Centre for Political Research, a public policy think tank at www.nzcpr.com , established in 2005 by former MP Dr Muriel Newman.

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NZCPR Commentary

WELFARE REFORM Tommy Thompson

The most important thing we did was to change the message that we sent. Instead of saying "You are not able, we must take care of you forever", we said "We believe in you - we believe you share the same values, hopes and dreams that all of us have and we believe that you are able to support yourself. We believe that no matter what troubles you have, what difficulties you face, you can overcome those problems and difficulties and you can succeed. We as the government are here to help - as your partner." To read click here>>>

ENDS


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