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Holmes interviews Paula Rebstock

Sunday 14th November, 2010

Q+A's Paul Holmes interviews Welfare Working Group's Paula Rebstock


PAUL The government set up the Welfare Working Group to have a look at why we have so many beneficiaries, why so many depend on the state, and how to get people off the benefit and back to work, productive living. Its final recommendations are due in February. Now, the chair of this Welfare Working Group is Paula Rebstock. She says we have no choice but to change; beneficiary numbers are unsustainable. And Paul Rebstock, of course, is the former head of the Commerce Commission. But her group has already been accused of beneficiary-bashing, and leading that criticism is a group called the Alternative Welfare Working Group, a collection of volunteers from the Church, from academia, and beneficiary groups. They've been holding meetings up and down the country and writing their very own, very different report on the needs of the welfare system. So it's already a big, contentious debate, this. We'll be talking to Paula Rebstock in a moment. First the alternative group's Mike O'Brien, an Associate Professor of Social Policy at Massey University, spells out what they are worried about.

MIKE O'BRIEN - Associate Professor of Social Policy, Massey University

Given what we've seen both from the terms of reference that the committee had and from the conference they did and from the issues paper they've produced, the emphasis is very much on paid work, which downplays the important work that parents do caring for children, which families do caring for sick and disabled members. I think there's some really critical questions emerging about possibilities, for example, of time limits, sanctions and so on, and the question about the social insurance model, which is being touted as one of the solutions, is a very strong reaction, and strong evidence from overseas too that that does not provide a way forward for effective welfare programmes. It still leaves the same groups we're currently talking about probably in a much worse position. There is a very real sense, I think, in which not just the working group itself but also the way in which it's constructed has created almost a sense of crisis around welfare, and the evidence about that is fairly thin, in many respects. For example, a recent piece of work from within the Ministry of Social Development suggests the fact that benefit numbers for sole parents are plateauing, so they're levelling out.

Yeah, 338,000 is a significant number, but I think the really critical question is not the narrow focus on cost, but a range of much broader questions about how do we provide a range of services that enable people to move from a benefit into work, and then sustain that and support that, and secondly - and I think the piece that's missing from a lot of the current debates - is not just moving people from benefits into work, but what do we do around supporting those who are not, for various reasons - care of children, are of people with chronic mental illness, and so on - how do we support those to ensure that they too have an adequate level of income?

PAUL And of course Mr O'Brien is pointing to some of the great difficulties the whole welfare debate presents. But now we welcome the head of the official Welfare Working Group, former Commerce Commission chair Paul Rebstock. Good morning, thank you very much for coming on. So, you've been doing a bit of thinking, then, about welfare. What are the main problems you think we've got?

PAULA REBSTOCK - Welfare Working Group

Well, the issue really that we've been asked to address is the fact that despite even before this last recession, we had one in 10 New Zealanders of working age on a benefit, and the rates of long-term benefit receipt were very high, nearly 200,000 people who had been on a benefit for five of the last 10 years.

PAUL This is before the last recession, 200,000 had been on a benefit for five years?

PAULA That's right, yes. And if we do not do anything to address the current trends, in a short while we will have as much as 16% of the working-age population on a benefit. Now, the issue here is not just about the fiscal cost of this. This is about the cost to those individuals and their families and to the wider community of that many people not being in the paid workforce.

PAUL Let's talk about the financial cost, first of all. Somewhere in the literature I've read from you, you were saying the long-term cost is going to be 50 billion dollars, and that that is unsustainable. Where do you get that figure from?

PAULA The 50 billion dollars is the cost of the current beneficiaries. So we know roughly-

PAUL Over what period, though?

PAULA For the period of the time that they are likely to be on benefit, because we have very good information about how long people tend to stay on the benefit, with different characteristics, and that is an estimate just for them. So actually, if the current trends continue, the number would be considerably larger than that.

PAUL So that's based on what it's costing us over the period that the current number of people are on a benefit?

PAULA That's right.

PAUL All right. Do people get off welfare?

PAULA People do. Very large numbers do.

PAUL 50% are off before the end of the year, aren't they?

PAULA Yes, and the interesting thing about that is there's a very steep rate at which people come off benefit after they've been on it. However, if they're still there after six months, they tend to stay for very very long periods. And we see that highly concentrated in certain groups of people. So the thing that we realise about that is, as well, it's awful to see it concentrated in certain groups of people, we know exactly where we need to invest early in order to deal with these issues around long-term dependency.

PAUL Where must we invest early?

PAULA Well, we need to invest early with young people. We have a small but very significant group of young people who go on the benefit before they're 18 years old, and they make up a very large part of the group that stay on for more than five of the next 10 years.

PAUL It may be just an old man talking, but it seems to be if you give an 18-year-old the benefit, the 18-year-old is going to be reluctant ever really to leave it.

PAULA Well, and the problem with young people is they don't have a past record and history of working. It is an area where we know a lot about what works with young people. And simply putting them on a benefit without sufficient support, and with a requirement for them to take personal responsibility, is not a recipe for success.

PAUL What are long-term costs of a young person staying on a benefit? I mean human costs.

PAULA Well, the human cost is they tend to live in poverty for very long periods and so do their children. Not only that, we know that with young people there's a high incidence with mental health disorders, a high degree of depression, anxiety, there's a clear path into the criminal justice system. This is an area where, in a country as small as New Zealand, we should be able to address these issues.

PAUL Yes, and we want to address the issues, but people have been trying to address these issues, Paula, for 20 years, since Ruth Richardson really had a look at it, and we've still got this massive welfare dependency, massive welfare bill. What can you actually do, given this is a recession.

PAULA Well, I think we have to ask ourselves some pretty frank questions about whether we really have tried to address it, because if we look at the number of beneficiaries that are there, only 20% of them are receiving active assistance, and only 20% of them actually had any expectation put on them to do something about moving off a benefit. Now, this is a serious issue. Up until very recently, anyone on a sickness, an invalid's benefit, did not face expectations or were provided support around getting into work, except for on a fairly limited basis.

PAUL But it's also true that, as you say, some of these people have psychiatric problems. There are always gonna be people who can't work, there are always gonna be misfits.

PAULA Yes. Well, there will be people who need long-term support, and they should be provided with long-term support. And we're certainly hearing from New Zealanders that they expect that to be provided in a fulsome way. However, we do know that with the rise in sickness benefit, which has continued to increase over very long periods now, even when the health of the population has been improving, there is very strong evidence that being unemployed actually tends to cause health to deteriorate and get worse. We need to confront these issues.

PAUL In the old days, Muldoon, for all his sins, we had the work schemes. And indeed, for example, the railway line south out of Hastings is beautifully planted with agapanthus and all kinds of wonderful plants, it looks very pretty, and these were the make-work schemes. But the thing about them, they might be economically unorthodox now, and unacceptable now, but they got people into the habit of getting up, turning up and doing a job. Isn't that the more important thing?

PAULA It is very important that people are available, ready to work and searching for work. And we do know that it is true that any job, as long as it's a safe job, is a good job if it's done well. And there is clear evidence in New Zealand that those jobs can be a stepping stone to improved incomes and better work prospects in the future.

PAUL So that means a bit of government intervention, that means government providing these, presumably.

PAULA Well, I don't know if it does, and I think this is a really important point. If we look at how the labour market in New Zealand has performed, it is true we've been in a recession and we're now moving into a slow recovery and jobs have been an issue, but since 1986 this economy has created more than 500,000 jobs. Now, it responded as well as almost any economy in the world to the economic environment. We had one of the highest employment rates in the OECD. I think that it is a little bit of a cop-out to say that we can't deal to some of the issues around long-term benefit dependency because of the job market.

PAUL Oh, come on, Paula, the jobs simply aren't there. I mean, if you look at 2006, there was a 30,000 net gain of jobs. In 2008 it had gone down a bit - 9,000 net gain. God knows what it is this year.

PAULA We actually are experiencing a gain in jobs. The labour statistics that came out last week show that. I'm not saying that we haven't been in a recession, Paul, but this is the time right now to prepare people for the recovery. They need to be ready to take the jobs that are there.

PAUL Yeah, but if you've been on welfare for a prolonged period of time, you're probably not gonna get the IT job. In the old days we had the railways, the railways could absorb quite a few people. The world's gone high-tech, the world's gone IT, and so forth. It's hard for people on welfare with broken work histories and perhaps broken education to find any of these-

PAULA We need to work with those people to help them to be ready, and we need-

PAUL But do they want to be worked with?

PAULA Yes, many of them do, a great deal of them do. But we need to find new and innovative ways to work with them, we need to turn to the communities that they're in to work with them, we need to allow some of the community and private-sector organisations to help in the delivery of these services. We know that when we do that, and we work alongside employers to manage some of the risk of taking on people who don't have a strong work record, that we can get people into work. I talked to someone last week who's working with sole parents. The Work and Income had set them a target of 40%. They achieved 80% success rate in getting these women into work in a period when there's slow job growth. We can work with these people. There are many people who want to work, they understand the importance of that to themselves and their children and their communities.

PAUL I spoke to Danielle, and I don't want to embarrass Danielle at all. She's from Kawerau, she's a young Maori woman from a small town. She finished school-and she's recently won New Zealand's Next Top Model competition. Now, she's very bright. But she finished school, she tells me, and then essentially she went to bed for a couple of years, slept most of the day, then she'd get up and have a walk around, see some mates, go home, have tea, and go to sleep, because there was no work, there was nothing in Kawerau. So what's the situation for someone like that?

PAULA We do have places where there is limited work, there's no doubt that there are areas where that is the case. But I think when you're talking about a young person you have to ask yourself 'is it right that we allow a young person to go on a benefit and do not require them to be in educational training and working towards being able to find sustainable employment?' Now, I think you would find in most countries that would be an unacceptable thing, to put a young person who'd never worked on a benefit and let them go to sleep for two years.

PAUL What would they do in other countries?

PAULA They would say, 'If you need assistance from the government, we're wiling to invest in your education and training, but in return for that, we expect you to take advantage of that and to be ready for work when the time comes.'

PAUL So there has always to be a quid pro quo.

PAULA I think there must be a quid pro quo. There's a quid pro quo, though, on the government as well. The government invests and provides the support; the community works with the government to assist these people; and the person accepts personal responsibility to find themselves to a point of independence.

PAUL A couple of quick questions to finish. Are you a rabid welfare cutter?

PAULA No. And this is not about cutting welfare payments. In fact, benefit levels have been taken off the terms of reference. This is about encouraging people to take personal responsibility, the Crown coming to the table and providing the support that they need in order to transition them into work, working with employers to help them manage the risk around taking on people with a weak work history, and the community playing its part and finding innovative approaches to the delivery of services.

PAUL Is it about reducing the numbers of people on welfare, ultimately?

PAULA Ultimately it very much is about that.

PAUL Are you gonna recommend time limits, as Clinton tried in the States?

PAULA Um, time limits is one of the options that have been put to the working group. In two weeks' time we're putting out an options paper which will canvass options broadly. Um, there will be a wide range of options in that. The working group has not decided yet what it will be recommending. We will decide that after we've done the consultation on a very broad set of options.

PAUL Yes or no - is the government going to have to make some tough choices?

PAULA I think governments always have to make tough choices, and this area is no different to any other.

PAUL Paula Rebstock, thank you very much for coming on.


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