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On How The State Aims To Dictate What The Unemployed Are Allowed To Buy

At first glance, ACT deputy leader Brooke Van Velden might seem an odd choice to oversee workplace relations. However, if the aim is to atomise workplace relations and reduce them to the level of individual firms and individual workers – just the way things were in the heady days of the Employment Contracts Act 30 years ago - then putting ACT in charge of proceedings makes perfect sense.

In fact, ACT’s toxic workplace policies dovetail neatly with their approach to welfare. Tucked away in ACT’s coalition agreement is a threat to use the state’s power to dictate how beneficiaries can spend the limited money at their disposal. ACT is promising to:

Implement sanctions, including electronic money management, for beneficiaries who can work but refuse to take agreed steps to find a job.

Electronic income management is a method by which the state decides what goods and services beneficiaries can, and cannot, spend their money on. A couple of months ago, Louise Upston (now the Minister of Social Development) described how this de-humanising system would operate:

National will introduce a traffic light system.... At the red level, new sanctions include money management, with Work & Income New Zealand having a greater role in managing a beneficiary's money, mandatory community work experience of up to three months, as well as financial sanctions including benefit reductions or suspension."

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In practice, the threat of electronic income management will create a fresh incentive for employers to reduce wages and conditions, in the sure and certain knowledge that the new government is intent on compelling people to accept whatever is on the table. Or else.

In that respect, electronic income management is a mirror image of the new government’s “Three Strikes” law and order policy. As Upston explained in September, there would be “three strikes” allowed (i.e. of not meeting the obligations to "prepare for, or find work") before the “red level”was reached, along with its related array of threats and punishments - such as electronic income management and benefit reduction.

Crackdown, amid a slowdown

Keep in mind that unemployment is on the rise right now, which means that more people are chasing fewer jobs, even before this punitive new regime comes into effect. New Zealand is currently in the grip of an economic slowdown that has been deliberately engineered by the Reserve Bank in order to reduce inflation.

Meaning: As the system throws more people out of work in order to reduce (a) their spending power and (b) the size of the public service, the state also intends to punish the people displaced, lest they become reliant upon the welfare safety net to pay the rent and to put food on the table. It is how centre-right governments roll. They take no responsibility for the economic structures they create and police. Instead, individuals are held entirely responsible for any social misfortunes they may encounter.

The immediate aim of course, is to force beneficiaries to compete with each other, in a race to the bottom on wages and conditions. The spectres of electronic income management, of benefit cuts and term limits on lifetime welfare entitlement (as advocated by New Zealand First) are entirely consistent with the new government’s approach to workplace relations. More on that below.

Beneficiary-Bashing Goes Digital

Across the Tasman, the conservative Howard government invented electronic income management in 2007, with the original idea being to prevent Aboriginal First Nations Peoples from spending their money on booze, tobacco and pornography. Beneficiaries in certain parts of Australia are prevented from even being able to withdraw money – say, for a bus fare – lest they spend that cash in ways that the state frowns upon.

In short, the idea of electronic income management has emerged from Australia’s racist, paternalistic attitude to indigenous people. (Its roots go even further back to 19th century beliefs about the feckless, undeserving poor.) In the intro to a2022 article, Auckland University social sciences academic Louise Humpage and colleagues said this about electronic income management:

Income management is a form of conditional welfare, quarantining part of a social security benefit so recipients cannot purchase adjudged non-essential goods such as alcohol and cigarettes. Compulsory income management for benefit recipients was first introduced as a highly racialised policy targeting indigenous Australians in 2007, before being extended to a broader range of Australians.

In 2012, as Humpage went on to explain, New Zealand adopted compulsory income management for 16–19 year-old parents who receive Young Parent Payments (YPP) and 16–17 year-olds who cannot live with or be supported by their parents/guardians and thus receive the Youth Payment (YP). But here’s the kicker that Humpage identified:

Of 1338 people on YP/YPP Payments in March 2021, 53% were indigenous Māori [despite comprising only 17% of the population] and 92% were women.

As she remarked:

There has been remarkably little debate about the racialised and gendered nature of this policy, which is underpinned by concern about presumed ‘problem’ behaviours amongst benefit recipients, including a weak work ethic, and modelling ‘welfare dependency’ to their children. Like many conservative governments around the world, New Zealand’s National Party-led government used the Global Financial Crisis to justify not only significant social security reform from 2008, but strengthened targeting of young people... Despite the young being at far greater risk of income poverty than older people.

Well, this country is once again being led by people with the same mindset. They remain fixated on combatting the supposed “weak work ethic” of the poor, and the alleged risks of modelling welfare dependency to the young – just as they were in the hey-day of the last National-led government.

Electronic income management is being set up to become a reality for a wide group of New Zealanders, many of whom show little sign of (a) lacking budgetary skills (b) displaying anti-social behaviours or of (c) habitually making irresponsible purchasing decisions. Regardless, all will be facing the threat that their purchasing decisions will be taken over by the state if they do not accept whatever employment offers are made to them – irrespective of whether the jobs in question are poorly paid, casualised, part time and/or clash with their childcare obligations. As PM Christopher Luxon has previously indicated, the disabled will also face the same “disciplines” and punishments.

Before this country goes headlong down this path, there surely needs to be public debate about what electronic income management is actually aiming to achieve – assuming there is a goal beyond simply forcing people to accept whatever work offers are made to them. What for instance, will the nationwide “traffic light “ system of surveillance and compulsion envisaged by Upston cost to set up and to monitor? (Presumably special Payment Cards will have to be created, and issued.) In addition, beneficiaries subjected to the scheme will be allowed to shop in some retail outlets, and not others. What does the Retailers Association think about that?

Costs and Benefits

Some years ago, Dr. Luke Buckmaster, now the director of research at Parliament House in Canberra, wrote a brief paper about the Australian experience ( and the mixed outcomes) of electronic income management. Among other evidence, Buckmaster cited a 2012 Australian government evaluation that had found:

Little evidence...that income management is resulting in widespread behaviour change, either with respect to building an ability to effectively manage money or in building ‘socially responsible behaviour’ beyond the direct impact of limiting the amount that can be spent on some items.

Instead, the federal evaluation suggested:

The early indications are that income management operates more as a control or protective mechanism than as an intervention which increases capabilities.”

Such findings raise important questions about electronic income management. Do changes in behaviour occur and endure, and do they outweigh the financial costs and social stigma involved? What behavioural changes and/or increased capabilities – if any – result from this humiliating exercise in paternalism? Lastly, some of the research findings from Australia have indicated that the outcomes might have been improved if instead, the beneficiaries being targeted were simply given better access to quality public services.

Meaning: The people subjected to electronic income management might respond better if the monitoring and compliance costs involved were put into providing hand-ups (i.e. access to supportive social services) than into smackdowns intended to coerce them off the benefit, with little or no regard as to whether the transition actually improved the standard of living of many/any of the families subjected to it.

Finally...

Electronic income management is being sold to the public as a bracing measure that will instill discipline and reduce benefit dependency. However, there is little research evidence that fresh capabilities are created – or that they endure once the domineering hand of the state is relaxed. More to the point, there is little evidence that irresponsible long term welfare dependency is such a widespread social problem as to require such a draconian response. Nor do all jobseekers deserve to have this sword placed over their heads to impel them to try harder. Many people on benefits would prefer to be in paid employment, if adequate jobs existed.

In particular, the many Māori and Pasifika people who are now disproportionately represented on the welfare rolls used to be supported in well paying, stable jobs before the neo-liberal economic reforms came along, and wiped out jobs across entire communities. To the extent that welfare dependency exists, it has been almost entirely a by-product of government policy. It has not been the choice of the individuals ACT is so keen to blame, and to punish.

The grey area that now exists is where the wages and conditions on offer are so poor that the costs (including the costs of transport and the compatibility of casualised work patterns with childcare responsibilities) outweigh the advantages of being in paid employment. It says a lot about the low wage structures and poor quality jobs created by the free market reforms that the pittances available on welfare can offer comparable returns. Nothing in ACT’s coalition agreement addresses this chronic, low wage flaw in New Zealand’s economic settings.

Instead, the new government seems intent on using the threat of electronic income management (and related benefit cuts) as a truncheon to compel beneficiaries to accept whatever wages and conditions an employer cares to offer.

Footnote One: The work by Humpage et al evaluated the impact of electronic income management on the young people being subjected to it by the last National government. The state’s underlying values of wealth maximisation by individuals, as Humpage pointed out, sharply conflict with Māori values and obligations to whānau.

Footnote Two: Moreover, the electronic income management approach is skewed along gender lines as well. Humpage et al again:

Patriarchal gender norms result not only in a gender pay gap, but also in women with children having weaker ties with the labour market than men with children.

In some everyday contexts, as Humpage also pointed out, the paternalistic nature of electronic income management actively works against the interests of the women subjected to it:

Despite high compliance with the types of responsibilised behaviours that [electronic income management] aimed to encourage, it restricted the young mothers’ ability to adequately care for their children. For instance, it placed most of their discretionary income on a Payment Card that could not be used at shops that sell baby clothes and other baby products and hindered their ability to buy expensive items like baby seats or furniture either online or at second-hand shops. Although some changes were made retrospectively, policymakers had clearly not accounted for the parenting needs of [female] recipients when designing [the system.]

As mentioned, ACT now intends to roll electronic income management out to punish all adult beneficiaries who – for one reason or another – do not, or cannot comply with the state’s work requirements. In the process, the system’s known blind spots on race and gender are likely to be magnified.

Footnote Three: As indicated, the new government’s welfare policy will work in tandem with Workplace Minister Brooke Van Velden’s kitbag of regressive workplace policies. More successful economies (Germany, Australia etc) long ago saw the wisdom of fostering active partnership structures between unions and employers. New Zealand remains an outlier. It continues to demonise all forms of collective bargaining and actively resists any steps to promote a more productive balance of power between workers and management.

If anything, we’re going backwards. The scrapping of fair pay agreements, the re-introduction of 90 day trials, the weakening of personal grievance protections, the promise to eviscerate the legal rights of workers in the gig economy, the freezing of minimum wage increases etc are all ways in which the new government aims to turn the clock back 30 years or more.

Patti Smith’s POV

Bleak as the outlook may be… As Patti Smith says in this song: “The people have the power to redeem the work of fools.”

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