New Zealand A Non-Starter

NEW ZEALAND A NON-STARTER

Figures released today from the US National Center for Policy Analysis show how successful Canada and the United States have been in reducing welfare dependency. The number of individuals receiving welfare in the United States fell 46 percent from 1994 to 2002 and Canadian welfare rolls fell 38 percent over the same period.

By comparison, New Zealand's welfare rolls have remained virtually static despite a big drop in unemployment. Of the working-age population, in 1991, when unemployment was high, 20 percent were on a benefit. In 2002 the percentage was 19.8 percent.

Welfare is the government's single biggest expenditure item. Excluding superannuation, it still accounts for more than the spending on either education or health. This means that salaries for staff working in those areas must stay relatively low on an international scale. This makes New Zealand extremely vulnerable. This vulnerability is worsened when other countries seeking to import teachers, nurses, pharmacists and doctors are making real inroads into their welfare bills, allowing more to be spent on respective salaries.

Equally, reduced welfare spending allows tax relief. The Center reports, "In an age of mobile capital and labour, provinces have strong incentives to keep their personal and corporate tax rates competitive in order to attract investment. Indeed, Alberta and Ontario not only cut their welfare rolls faster than all the other provinces, they also benefited from stronger economic growth spurred by tax relief."

There is a race going on, not only between provinces and states, but globally, to attract labour and capital. It is heightened by the pressing need to support rapidly aging populations. There is a race going on and New Zealand hasn't even left the starting blocks.

Source; Ending Welfare as We Know It: Lessons from Canada
http://www.ncpa.org/pub/ba/ba457/

Lindsay Mitchell
Petitioner for a Parliamentary Review of the DPB
forms available from http://www.liberalvalues.org.nz

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