Question 14: What was the real reason for the leap in the number of people on benefits during the 1990s?

21 Sep

The fundamental, unanswerable fact is that the huge rise in the number of people forced onto a benefit for periods of their working life is because of the inability of the government or their “free market” to create sufficient work. The rise in benefit numbers matches the fall in full-time work available in the economy.

The Household Labour Force Survey began in March 1986. At the time there were 1,370,400 Full Time jobs which equalled 54.2% of the working age population. By the September quarter 1991 here were 1,169,100 full time jobs equal to 44.1% of the working age population. That was a loss equalling 266,440 full time jobs if the percentage of the working age population with full time jobs had been maintained. It is no coincidence that the number of people on benefits went up by a similar amount. It was not until the end of 1999 that full time job numbers surpassed the March 1986 number although it was still only 47.5% of the working age population. In December 2009 it was 1,673,500 or 49.2% – still behind the 1986 percentage by the equivalent of 5% or 168,500 full time jobs.

People don’t need the “incentive” of benefit cuts to find work. This is a lie peddled to justify still further attacks on the welfare state. In fact, unemployment rose significantly in the two years immediately following the 1991 cuts as the economy was driven into a deeper recession by the cuts themselves.

We also need to always remember that there is a constant and huge turnover of people on benefits. During the recession of the early 1990s the average time on benefits did increase. But for even a longer-term benefit like the DPB, the increase was from only three years to three years and nine months between 1982 and 1996. 40 percent of people went off the DPB within a year of entry and only 25 percent remained in receipt of a benefit for at least six years. The average time on the unemployment benefit is only a matter of months.

The main victims of a recession are also the main beneficiaries in any economic upturn. The biggest falls in unemployment during the partial job recovery in the mid 1990s was for the longer-term unemployed with those registered two years or more declining by 54 percent between December 93 and late 96. The Maori and Pacific unemployment rates also dropped dramatically during the upturn.

As the upturn continued in the 1990s the number on the Domestic Purposes Benefit also trended down from a high of 115,000 in 1998 to a low of 97,000 in 2008. The growth of DPB numbers during the 1980s and 1990s was a product of fundamental changes in the nature of marriage and the family in New Zealand society. These changes were driven by the growing inability of working men to support a wife and family (even if she worked part time) because of the major decline in male wages and employment during that period. The decline in full time male employment was dramatic – from 901,000 in March 1986 to 748,000 by September 1992. Many of the so-called cheats are really just couples trying to cope with an impossible situation.

It is ironic that because of the introduction of in work tax payments to working single parents and low income families there is little or no savings from a person moving off the DPB and into part time work. Because of this fact even the hard hearted treasury officials advised against the work test regime on sole parents because the costs outweighed the benefits. The Regulatory Impact Statement from the Ministry of Social Development that accompanied the proposed welfare changes also conceded: “There is no research currently available which accurately quantifies the size of the behavioural response from these changes in policies. This prevents estimates, with the degree of accuracy required, from being made of the number of people who will move from benefit to work over a year, as a result of the proposed changes.”

It remains a scandal that nearly 10 percent of the working age population is directly dependent on a benefit at any one time even if only half of these receive the benefit longer than a year. However, the attempt to shift the blame for this state of affairs onto the victim to justify ever more degrading restrictions must be rejected. With unemployment endemic, cuts to benefits force workers to compete ever harder for the available jobs forcing wages down even further. If the government gets us to look on “solo mums”, “dole bludgers”, and other receivers of benefits as a pariah “underclass” then they will have succeeded in their goal of breaking down the social solidarity we need to struggle against the social crisis we face.

(Part of a series of extracts from “Exposing Right Wing Lies” by Mike Treen, Unite National Director)

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