Nearly four years ago, Prime Minister John Key announced a major reform of the welfare system. He defined the problem with the existing system in the following terms:
The stand-out feature of New Zealand’s benefit system is how passive it is. For the most part it simply hands over benefits and leaves people to their own devices. Most beneficiaries are not expected to be available for work, or to take up work if it is offered to them. Naturally, many don’t.
The benefit system also lacks a focus on intervening early. We know, for example, that the longer people stay on a Sickness Benefit the more it gets entrenched. (Key, 2011)
He reported that around 328,000 people of working age (one in eight) were receiving a benefit. More than 170,000 had been on a benefit for at least five out of the last ten years. Two hundred and twenty thousand children were living in benefit-dependent households. He summed up the problem as being one of ‘poor outcomes for beneficiaries, for their children, for society and for taxpayers’, outcomes not intended by the architects of the welfare state.
Key’s remedy was not to abolish the welfare state. To the contrary, he observed:
I’ve often said that you measure a society by how it looks after its most vulnerable. But you also measure a society by how many vulnerable people it creates. At the moment it is creating too many vulnerable people and trapping them in a life of limited income and limited choices.
His remedy was instead to turn it from a passive to an active state that does not treat people as passive recipients of welfare, focuses on what they can achieve, and challenges them to achieve it while providing support, training and opportunities to return to work sooner rather than later.
Budget 2015 continues to implement this direction.
Bryce Wilkinson is a Senior Research Fellow with The New Zealand Initiative in Wellington.