Articles By Lindsay Mitchell

Greatest Risk - NZ Listener Article

Lindsay Mitchell: Greatest Risk

July 11, 2014, NZ Listener

Growing up in 1960s New Zealand, houses were smaller and families bigger. Paradoxically, overcrowding and child poverty weren't a major issue. Most families had two parents and many could even afford a stay-at-home mum. A very small percentage of families experienced financial hardship associated with an absent father.

What changed? [More...]

Welfare reforms to help children

Monday, March 5, 2012

Susan St John, spokesperson for the Child Poverty Action Group, used John Key's response to a parliamentary question, to attack the complex Family Tax Credit system. She is right to point out the inherent negative incentives to both worker and employer - the worker gets penalised for extra effort and the employer can keep her wages low by treating the tax credits as a wage subsidy.

But the question put to the Prime Minister by Green MP Metiria Turei , asked why was the government "intent on forcing single parents with little babies as young as 12 months" into work? The answer is to discourage women from adding babies to their benefit. They are being told that they cannot avoid working simply by growing their families.

St John uses the question to open her column, yet never returns to address it. Instead she recommends that, to avoid the complexity of the Family Tax Credit system, sole parents should be allowed to stay on the DPB and keep more of any earned income. But if they continue to add children to their benefit the chance of them earning any extra income is remote.

The new policy of requiring a mother to be available for part-time work when an additional child turns one represents the first attempt by a New Zealand government to stop beneficiaries exploiting the DPB (and other main benefits). Each year around 5,000 children are added. At any given time this results in almost a quarter of the DPB population having had extra children on welfare.

In 2006 deputy chairman of the NZ Medical Association Don Simmers told a conference that too many women were contemplating pregnancy on a benefit. More recently I spoke with the head of an organisation working with beneficiary families who was in no doubt that women plan a pregnancy as the prospect of pressure to work looms (there was a work-testing regime in place in the late 1990s). She believes the new policy will make a difference.

Some American states attempted to deal with the same problem by introducing 'family caps' which limited cash assistance to a fixed number of children and no more. The results were mixed and such a move here would be met with objections about depriving additional children, especially from the Child Poverty Action Group.

So the government went with the one year exemption option. Metiria Turei describes this as "forcing" mothers into work but that claim doesn't stand up under scrutiny. Nobody is forced to have a baby on a benefit - a benefit provided, incidentally, because she is already unable to independently support her children. Never before have women been better able to control their fertility. If she chooses to get pregnant and have the baby she will be doing so fully aware that if a part-time job is available when that baby turns one, she will be expected to accept it (along with the childcare assistance needed to do so.) The choice is ultimately hers.

Freedom of choice is what the reforms are essentially about re-balancing. True freedom of choice can't encroach on someone else's. Most voters are behind the reforms because they feel unfairly treated when one group is allowed to make a choice that they are denied. Why is it fair for single parents to be supported to stay at home indefinitely when most partnered parents go back to work quite quickly? It becomes especially gruelling for working mothers to then hear that putting their young children into daycare is a form of "child abuse", an argument advanced by the opposition to reject the reforms.

Children who spend many years on the DPB generally have much poorer outcomes. This is well-documented. To knowingly exacerbate this situation by adding more children to a workless household can't be defended at any level. In the interests of children the government is entirely justified in trying to break this habit.

The Sham that is Labour's Welfare Policy

Tuesday, November 15, 2011

In an effort to differentiate themselves from National, Labour is promising to extend the In Work Tax Credit (IWTC) to beneficiary parents and scrap any work-testing of the domestic purposes benefit (DPB). The first can only be a cynical vote catcher because the IWTC was a Labour creation after all.  Or are we to accept that it was a good idea in government but not in opposition?

Promoting the second promise Annette King says that there shouldn't be an 'arbitrary' youngest child age for requiring a sole parent to find a job. Yet, in the same breath, she is also promising an extension of paid parental leave to 26 weeks. Isn't that an 'arbitrary' figure? In any case Australia and the United Kingdom, the two countries we generally compare ourselves to, have welfare rules based upon a work requirement set against the age of the youngest dependent child.

Labour is also refusing to deal with the significant problem of women adding children to their benefit.  When tackled about this Labour Leader Phil Goff defensively told Mike Hosking  that most women on the DPB came from a marriage break-up and were there for only a short period of time.

The Ministry of Social Development's  Statistical Report used to record whether someone on the DPB had been divorced, separated, separated from a de facto or never married when they became dependent. But it stopped doing so in 2001. There is no source of data that backs his claim. Requests under the Official Information Act to obtain this information have been refused.

Next he doesn't define a short period of time. Is it 6 months? 2 years? Three years? That's a subjective quantification. But again, his claim is either ill-informed or deliberately misleading.

In his book The Poverty of Welfare Michael Tanner describes how welfare statistics can be highly misleading. He uses the example of a hospital ward where 12 out of 13 beds are occupied by patients staying one year. The other bed is occupied by patients that stay one week. Thus, over the year, 80 percent of the patients entering the ward stay only one week - or for a very short period. A census taken on any given day however would show that 85 percent of patients were in hospital for a long time.

Similarly then it is  possible to say that "most people go on the DPB for a short period of time" as well as "most of the people on the DPB have been there for quite a long time".

Ministry of Social Development research highlights this phenomenon with the following; "On average, sole parents receiving main benefits had more disadvantaged backgrounds than might have been expected. Just over half had spent at least 80% of the history period observed (the previous 10 years in most cases) supported by main benefits. This reflects the over-representation of sole parents with long stays on benefit among those in receipt at any point in time, and the longer than average stays on benefit for those who become parents as teenagers. Had the research considered all people granted benefit as a sole parent, or all people who received benefit as a sole parent over a window of time rather than at a point in time, the overall profile of the group would have appeared less disadvantaged."

But what does Phil Goff do?

He uses the picture that paints less disadvantage because it suits him to politically.

This is precisely why he should get nowhere near the levers of power again. He demonstrates that he has no intention of fixing what is a huge social problem for New Zealand by refusing to tell the whole truth about it.

The Church in the Welfare Debate

Friday, July 9, 2010

The emergence of a 'shadow' welfare working group is an interesting if somewhat predictable  development. Predictable because any welfare debate is destined to become highly political and the idea that all views can be heard and accommodated is farcical. That's  inevitable when any social service  -  health, education or welfare  - is primarily  the domain of the state.  The only money  government has is that which it generates from the public,  and who then benefits from its redistribution  is a highly contentious matter. All parties wanting a slice of the pie, either directly or as advocates for others, naturally become very nervous and defensive when there is a prospect the status quo may be upset.

Sharing this disquiet is an unusual mix of Catholics, Anglicans and secular politicians and academics.  Often these groups would be in conflict with each other, for instance on the subjects of abortion and same-sex marriage. But, in the matter of welfare, they are joined. And it isn't the left wing politicians and academics that have shifted ground. It is the churches.

Most churches today  call for more state intervention and cash transfer in the name of poverty alleviation . Whether that method actually works (there is plenty of empirical and researched evidence that it only leads to more workless homes) rarely gets an airing .

Mainstream churches have increasingly leaned on the state to provide assistance traditionally supplied by the family, community, charities and themselves. This seems an abrogation of what Christian principles and teaching would demand. Because helping one's brother should be an act of love - not a transaction furnished by the compulsory removal of one man's resources to give to another. When did we last hear the churches talk about the role of families  in the welfare debate? Yet in so many instances  people on benefits today would, in the past, have been supported by family. A recent case on TVNZ's Close Up featured a teenager who had suffered a nasty attack and been unable to work because of psychological after-effects. ACC, after a year and a half, told the now 19 year-old she needed to get "off the couch" and back to work. That would be both therapeutic for her and relieve ACC of the weekly $400 compensation pay-out. Her mother remonstrated to the media that this was cruel and unreasonable. Presumably only a couple of years earlier the child had been a dependent and the mother's concern. Why wasn't she still? Why wasn't the family of the young woman financially supporting her?

Where is the church protest against the subsidisation of fatherless families? Catholics are strong proponents of marriage yet almost half of the babies born each year are now born outside marriage. This new phenomenon leads to a good deal of dependence on welfare either immediately or at some point down the track. The only church apparently concerned about this is a non-traditional variety - Destiny.

In some cases churches are direct beneficiaries of state money. Presbyterian Services and Salvation Army both receive substantial government funds to provide services. This leaves them acting as agencies and instruments of the state instead of independent and autonomous organisations. They naturally become corroborative and collaborative.

As for the left-wing politicians and academics making up the band, they will  broadcast their usual complaints. Their resentment of freedom from economic regulation, freedom to accumulate wealth (ignoring the creation of jobs and economic growth in the process) and unequal incomes (except their own of course). 

With the prospect of work-testing single mothers  looming, they want a debate about the value put on caring. Monetary value that is. But for the collective to put a monetary value on caring it must define the parameters  and payment required to fulfil those parameters. Thus more conflict is born. People will squabble over how much care a child should receive and from who. 'Rights' expand to encompass propositions like a child has a right to have its mother at home when he or she gets home from school. Those who agree  want the money to make this happen taken from those who do not agree. The only fair solution to this conflict is to leave the parent free to make their own decision about care. Free to make it and free to fund it.

There may be a role for government to play when the level of welfare a person needs is beyond a family's ability to provide, or there is no employment available for the primary carer. But some in society, including this group, expect far more.  The continuance of the state as the be-all and end-all of welfare and well-being will only result in a further expansion of the sense of entitlement that has eroded family and individual responsibility. It is disappointing to see the churches join this cabal. It compromises their moral and intellectual authority.

There is None so Blind etc

Welfare commentator Lindsay Mitchell responds to Tapu Misa. 29 March 2010

Tapu Misa, writing about the National government's welfare reforms in her Monday column, said my problem is with “unwed teenage mothers who keep swelling the ranks of the DPB”  because the idea of the DPB is “too seductive to pass up. Who would choose this as a lifestyle option? Not the seventh form girls at the Auckland private school I spoke to recently. They'd never even heard of the DPB.”

But that's hardly surprising. The teen birth rate of girls in the poorest decile, girls who don't attend private schools, is almost 10 times that of girls in the wealthiest. Girls attending private schools have families with high expectations of them and opportunities abound. Girls in the poorest decile will have much slimmer career prospects and motherhood stacks up alongside reasonably well. This doesn't necessarily mean they make an active decision to get pregnant and go on the DPB or EMA (which they can do from age 16).  What they fail to do is avoid getting pregnant with no means of supporting the child. The availability of a benefit most certainly influences their actions.

Misa says there is no evidence for the claims that welfare payments provide incentives for childbearing, or discourage marriage.

But there is. Research for the US Department of Human and Health Services by Anne Hill and June O'Neill showed that a 50 percent increase in the value of welfare payments and food stamps led to a 43 percent increase in unmarried births. Numerous other studies, and not just American, have identified a similar association.

She continues, “Women don't need to be dragged kicking and screaming off the DPB, they need good childcare and secure, well-paying jobs”.

If women want "secure, well-paying jobs" they need to plan for that eventuality.  Nothing has more potential to interrupt an education or absolve one of the need to get an education better than the certainty of a welfare income that pays more than the minimum wage.

Quoting Economics Professor Susan St John, Misa writes “…when the job conditions are favourable and unemployment is low, benefit numbers fall”.

So what did we see with the DPB during the economic boom? A drop from a 1998 high of 113,000 to 97,000 in 2008. The current number is 109,000. Most are single parents. The core of long-termers, especially those who start young and stay longest, was unaffected.

Australian Professor Bob Gregory's research is used to show that women do want to get off welfare but when they succeed, fail to stay off it. But the most astounding aspect of his study is his estimation that women stay on welfare for an average total of at least 12 years. This did not include benefits they might transfer to when they no longer had dependent children in their care, which supports my view that welfare has transformed into far more than a last resort safety net.

It is unclear to me what Tapu Misa is trying to achieve with this column. Work and strong families are an integral part of Pacific culture. A denial that welfare can undermine both is self-defeating. But if she doesn't want to find the evidence then a private girl’s school is absolutely the best place to go looking for it.

Reforms Could Arguably be Worse than the Status Quo

24 March 2010

The National government's  long awaited welfare reforms are at best a rehash of previous efforts to reduce the cycle of  dependency. At worst, they may increase it. What better way to worsen inter-generational dependency than tell people on the DPB that if they want to avoid working they should have more children?

Of course not all would take this course of action. Some do want to work. But then, people on the DPB who do want to work are not the problem.

Around 5,000 children are already added to an existing benefit each year,  so even without work-testing there is an established pattern of behaviour created through cash incentives. Additional children mean increased income. The reform fact sheets issued by the Ministry this week showed that a DPB recipient with two children living in Auckland would typically receive $580 a week. That is 14 percent more than someone  working full-time on the minimum wage earns . It isn't difficult to understand why people would seek to stay on a benefit.

If the birthrate of benefit dependent women rises, more children will be raised long-term on welfare. These children are far more likely to become beneficiaries themselves, hence inter-generational dependency will increase.

National introduced work-testing last time they were in government. Over  the period it applied  the DPB caseload dropped by 3,000 or 2.7 percent. Hardly a resounding success.

Their reforms to the sickness and invalid benefit are barely worthy of the word 'reform'. The medical certificate required to gain eligibility will be re-designed. But it was re-designed in 2007 under Labour's reform programme, Working New Zealand. Additionally we are told that applicants for the invalid's benefit  who are expected to be able to work part-time in the next two years will instead receive a sickness benefit. That is the existing criteria for eligibility.

National's plans very much resemble what John Howard introduced in Australia in 2006. According to the Sydney Morning Herald, "The reforms introduced a much tougher social security regime that aimed to end long-term welfare dependency and cut the growth in welfare the year after the reforms the same numbers were added to the disability pension rolls as in previous years. These rose from 712,000 in July 2006 to 757,118 three years later."

In the United Kingdom new applicants for an incapacity benefit are now put through a rigorous work assessment resulting in a majority being sent to the dole queue. Yes, that may shift the problem, but it means those beneficiaries are subject to the same work obligations as other unemployed people.

Finally, while there is nothing wrong with making unemployment beneficiaries reapply for the dole after a year, 84 percent of current recipients don't reach that milestone.  This reform has received probably the lion's share of attention (and has been wrongly described as a time-limit), yet the unemployment benefit is the least worrying in terms of its contribution to long term  and inter-generational reliance on welfare. Since the 1990s the numbers on the dole have plummeted and have only recently climbed due to the recession. The unemployment benefit largely reflects the labour market. When there are jobs, the numbers will fall. In a recession, unfortunately they will rise.

The main drivers of a culture of dependence are the DPB, which has morphed into an alternative lifestyle for uneducated and unskilled females, and sickness/invalid benefits which allow  demoralised , depressed and ailing long-term unemployed people to languish.

Reducing dependence requires a government to not just move people off welfare but discourage them from going onto welfare. Nothing in the Future Focus package achieves that. It simply makes beneficiaries jump through more hoops. And the promise of an unconditional benefit until their youngest child turns six is not a deterrent to prospective domestic purpose beneficiaries. To a young female,  6 years away - or longer if she has more children -  is a lifetime.

Condemning women to live with violence

September 2009

The accepted wisdom is that welfare benefits enable women to escape violence. This assertion is frequently used to reject any moves to reform the DPB. But turning this belief on its head, the evidence shows that welfare is actually making many women more vulnerable to violence.

Women who are beneficiaries have a four-fold risk of experiencing partner violence according to the New Zealand Crime and Safety Survey 2006, published last month as part of the Families Commission report, Family Violence Statistics.

In answering the question, who was most at risk of partner violence, the survey found risks were considerably higher for people in sole-parent households; Maori women had risks 3 times the average for women overall; women who were beneficiaries had risks over 4 times the average; women living in the most deprived areas were at higher risk; young people aged 15-24 were at higher risk, as well as those living as flatmates or in rented accommodation. Those living in sole parent households have an incidence rate of experiencing partner violence more than 5 times greater than those living as a couple with children.
The profile typically fits the thousands of young, disproportionately Maori, single parents living on the domestic purposes benefit, in deprived neighbourhoods, in state or other rental properties. The new information is hugely important because it confirms that far from relieving women of partner violence, one of the stated original purposes behind the DPB, receiving a benefit actually heightens the risk of it.

Why? Because a welfare income is regular and secure.  It comes with free, or subsidised, accommodation and all sorts of financial back-ups. This makes single mothers attractive to men who have no interest in supporting a family (but do want a roof over their head and sex on demand.) These are often men who like to control women financially and physically. Unfortunately they often have short fuses and are entirely unsuited to living with young children.

Soon-to-be ex Green MP Sue Bradford recently said, "To remove it [DPB] would be one of the most evil things we could do to our women and children." It would mean a return to times when women "were dependent on men often (suffering) humiliation and physical violence."*

Yet the domestic violence frequently a feature of relationships supported by welfare was acknowledged by the 1996 Ruka Ruling. The Court of Appeal agreed that a woman who was living in a de facto relationship featuring violence and a lack of emotional or financial support from the partner, should be entitled to continue receiving state support - usually the DPB. This means the taxpayer actually pays for a woman to live with violence.

Every year thousands of uneducated and unskilled young women enter the welfare system and begin receiving benefits that raise the risk of experiencing partner violence. So long as the status quo remains, the welfare system is condemning many mothers and their children to the very lives Sue Bradford likes to think it frees them from.

Clearly there is a need for some sort of assistance when a woman decides to exit a dangerous and dysfunctional relationship. But if assistance became temporary only, the recipient stops being the proverbial goose that lays the golden egg. Women would make far more cautious choices about partnering and deadbeat men would cease to have their exploitive expectations met.

* Quoted in The Epoch Times, August 8, 2009


Increased Welfare Payments Impact on Fertility

January 12, 2009

New British research, from the Institute of Fiscal Studies, has shown that increased welfare payments have coincided with a boost in births and drop in contraceptive use among the group most affected by the higher payments. New Zealand fertility trends reflect those in Britain and it is entirely possible that the same trend is occurring here.

New Zealand’s birth rate grew from an average of 2.00 births per woman in 2004 to 2.11 in 2007; the UK rate over the same period increased from 1.68 to 1.79. In both countries, efforts to reduce child poverty have included increased income support payments. In New Zealand, Family Support (now renamed Family Support Tax Credit), available to working and non-working low income families, increased in 2005 and 2007. Similar increases were introduced in the UK, albeit earlier than here.

The UK research also found that the increase in government support coincided with a rise in births among the low-education group relative to the high-education group. In the absence of comparable New Zealand information, those mothers who predominate amongst the poorly-educated and low income - teenage, Maori and Pacific - have all experienced increased representation in welfare dependence statistics. New Zealand’s teenage birth rate has been rising steadily since 2003, as has the number of teenage mothers claiming a benefit. In 2006, almost forty percent of all births were to mothers from the three most deprived deciles.

The UK researchers also found evidence from the UK General Household Surveys that there was an increase in the proportion of women in the low-education group reporting that they were not using contraception because they were trying to get - or already were - pregnant. In 2006, the New Zealand Medical Association deputy chairman, Don Simmers, told a conference that too many women are contemplating pregnancy on a benefit.

This research raises an important question for all developed nations with generous income support regimes. Do efforts to ensure income adequacy simply increase fertility rates among low-income and poorly educated women, thereby counter-productively increasing the size of the poverty problem?

In light of recent local political developments here, the release of this research is very timely. In New Zealand, lobbyists are currently making submissions to government to increase payments to beneficiaries with children. The Child Poverty Action Group (CPAG) recently took a case to the Human Rights Tribunal claiming that not paying the In-Work tax credit to parents who are beneficiaries was discriminatory. The Tribunal has ruled that while there is an element of discrimination operating, it is justified in order to achieve the government's goal off getting people off welfare and into jobs. The Tribunal accepted that work has long-term benefits for families and is the best way out of poverty for parents and their children.

Undeterred, CPAG are now making submissions directly to the new government to achieve their goal. This is understandable given there is a new Associate Minister for Social Development, Tariana Turia, who had previously been very supportive of their case.

The implications of this new research, in the absence of our own, should, however, be carefully weighed by policy makers before responding to these calls.

More is broken than just the tax system

January 2010

Writing in Friday's New Zealand Herald, Susan St John succeeds in showing how complex and counter-productive the state's attempts to redistribute wealth have become. But because the writer believes in the notion of state responsibility for income equality she is merely hoping that the government can come up with a better design on the back of "an adequate and comprehensive review."

Perhaps, instead, it is time to examine the beliefs behind government-mandated redistribution - or put more crudely, robbing Peter to pay Paul.

There are two broad ways that wealth gets redistributed. Through taxation and transfers, or through work and shared profit. Over the past 40 years the trend has been towards the first method. State cash transfers have grown steadily. That growth has brought with it more and more complexity as more and more people want a piece of the pie. It is undeniable that whenever a new 'benefit' is introduced it isn't long before there are calls to extend it, either by generosity or by eligibility. A recent example is Paid Parental Leave. Not happy with the current status, lobbyists now want 52 weeks instead of 14 and fathers to be paid as well. (Notice here that the prime lobbyist, the Families Commission, is also, after a fashion, a recipient of cash transfers.)

So why is it that government continues to increase the rate of transfer - from the frugal nineteenth century beginnings of welfare through to the recent Working For Families - yet inequality, according to St John, keeps growing? It is now apparently at an unacceptable level.

The problem lies in the method. When people work for their income there is a return to both employer and employee. The sum of wealth is added to. When people do not work but receive income from the state, the sum of wealth is diminished. This means there is a very obvious limit on how much the state can transfer.

Add to this the disincentive factor. It is reflected in the vast number of people now receiving some form of welfare. If the state is offering cash, the need and desire to work is reduced.

Which is how we have arrived at the current "mess", to use Ms St Johns description. But the only question being asked is, how can the state keep giving people money and keep them working? Trying to solve that conundrum has resulted in the very complicated interface between the cash transfer and taxation system.

Somehow New Zealand has to pull back from the current pathway and fiddling with the tax system isn't the answer. Taking money off people just to give it back (and more) is patently silly and inefficient. Paying people benefits from a very young age thus locking them into the cash transfer system for years is socially and economically counter-productive.

There are better ways to organise a society. Better economic brains than mine have put up ideas worth exploring. Flat tax, tax-free income thresholds, negative income tax, private social security provision, individualised social security accounts, etc.

But underlying all of these ideas is a philosophy of minimal government intervention. If simplicity and equity are paramount we need less taxation, less taxation machinery, less churning and less transfer - not more.

Lindsay Mitchell looks at Social Welfare Reform
in New Zealand and Overseas
ph/fx 04 562 7944
mob 021 132 5968