Tag Archives: Beneficiary

Question 15: Why do big business and the government want to cut welfare spending?

1 Oct

Big business wants to cut the costs of welfare for two reasons. Firstly, benefits above the barest minimum are seen as a barrier to lowering wages. The costs of welfare are also seen as a barrier to the government’s programme of cutting taxes on business and the rich. Cutting social welfare and cutting taxes for the rich usually go hand in hand.

Protests against benefit cuts in 2012 that echo those of the early 1990s

In 1991 the then Minister of Social Welfare Jenny Shipley blamed “high” benefits for making it difficult to lower wages. Explaining her support for benefit cuts she claimed: “Benefit payments have been high enough compared to wages that for many people there has been little financial encouragement to take on paid work and employers have been unable to attract workers at rates that would maintain the viability of their business.” Commenting on what basis the benefit levels were decided she said: “Quite frankly, the research I rely on is the marketplace. If the marketplace cannot pay, there is no such thing as an arbitrary, isolated, adequacy level.”

The current government is also testing the water to impose time limits on benefits by forcing people to reapply after one year. Business Roundtable chairman Douglas Myers told the HR Nicholls Society in Melbourne in 1992: “The absence of any time-limit on the dole (following which people might be obliged to undertake training or qualify for restricted assistance) reduces the pressure on wages to adjust to competitive pressures.”

By targeting the most vulnerable the government hopes to get support for large scale cuts to basic welfare for everyone. They can then use those cuts to finance tax cuts for business and the rich. And they are happy to lie to achieve that goal. John Key claimed in February 2010 that the government would save $10 million over their lifetime if 100 sole parent beneficiaries were moved off benefits and into work. In March 2010 he upped the ante and claimed that getting 5 percent of DPB recipients (around 2150 sole parents) with a child over six off the benefit would save $200 million. This calculation assumed the full cost of DPB over another 6.5 years on the DPB. This number doesn’t actually match time usually spent on the DPB. What he also “forgot” is that nearly exactly the same amount would be spent or lost on Working For Families, In work Tax benefits, child care subsidies, payments from the other parent (which goes to the State) and the like if (as can be assumed) they work 20 or more hours a week. Working for Families alone would cost $170 million over the 6.5 years. That’s the way our benefit/wage/tax system is set up. The biggest disincentive to working is the 100% marginal tax rates for income earned by beneficiaries over $80 a week. The proposed increase in this level to $100 (for those on the DPB and invalids benefits only) will do very little remove the real disincentives that exist to working more hours while transitioning off a benefit. This $20 increase is the first increase in the limit in two decades!

People on unemployment and sickness benefits will still only be able to earn $80 a week before their benefits are reduced by 70 cents for every dollar they earn. Promising to allow beneficiaries to earn up to $100 a week before their benefit is affected was one of the only good parts of National’s pre-election policy and they have reneged on it. National’s 2008 Benefits Policy Backgrounder notes: “After paying tax on their extra income, and losing part of their benefit, beneficiaries can be in a position where they are losing up to 92 cents of every additional dollar they earn. This is a disincentive for people to work even a few hours a week.” The law change introduced by National will force sickness and unemployment beneficiaries to do exactly that.

As the economist Susan St John commented when releasing these calculations: “Reminiscent of the welfare attacks of the early 1990s, there is a disturbing lack of empathy for the hardship endured by the people who cannot work or who can only work part-time while on a benefit. Many are sole parents already carrying a huge load of caregiving work, others suffer ill-health that makes them unsuited to full-time or even any work. Then there are the alarming numbers of young people who are now pounding at the doors of tertiary institutes as the job market fails to absorb their growing numbers.”

The intrusive and punitive work test regime will set up a costly new layer of bureaucracy to police those forced onto benefits by an economic system that has failed to create enough jobs. Solo mothers on the domestic purposes benefit will be expected to work a minimum 15 hours a week if their child is over the six. For some reason Widows are exempt from this requirement even if they have no dependent children – probably reflecting the governments elitist concept of deserving and undeserving poor. If you husband drops dead you are “deserving” and won’t be work tested. If you are abandoned by a violent husband, or get pregnant outside of a good middle class family – you are “undeserving”. Sickness beneficiaries will also be assessed for part-time work and required to seek work if deemed able to work at least 15 hours a week. The package also offers case managers a new range of penalties, including cutting payments by 50 percent and suspension of payments in full. The requirement that sickness beneficiaries must present medical certificates at four, eight, thirteen and 52 weeks to verify their condition will impose considerable extra costs on everyone now on a sickness benefit, mindful that a full examination with blood tests can easily cost nearly $100 a time.

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

Question 11: How many people became unemployed in the 87-93 recession? Who did it affect most severely?

8 Aug

Official unemployment rates went from less than 4% in 1987 to a peak of 11% in 1993. For Maori and Pacific people official unemployment rates hit 25-30 percent. The numbers forced onto benefits more than doubled.

Nearly every working family was affected in some way. Economist Brian Easton calculated that “In the three and three quarter years from 1988, the equivalent of 43% of the labour force registered with the Department of Labour as unemployed (multiple registrations not included).” Clearly there wasn’t a sudden explosion of some mass laziness psychosis that made us all quit our jobs and go on the dole. We had been hit by an economic hurricane imposed on us by a big business elite that controlled both major political parties.

The number of people forced onto benefits exploded in the early 1990s from around 140,000 on all forms of means tested benefits (unemployed, sole parent, Invalids & sickness) in 1985 to 340,000 by the mid 90s (about 13% of the working age population from 16-64). Total numbers remained high until peaking in absolute terms in 1999 with 370,000 on these benefits. Numbers dropped to 260,000 by the end of the 2000s (or 8% of the working age population) with the modest economic recovery. Today the numbers are climbing again as the recession kicks in. At the end of 2009 there were over 315,000 on these benefits – 66,000 on the unemployment benefit, 109,000 on the DBP and 140,000 on either the Sickness or Invalid benefits (9.5% of the working age population).

The extreme policing of access to the unemployment benefit by WINZ in recent years was designed to make the figures look good for the government. The number receiving it dropped to below 20,000 in March 2008. At the same time, according to the Household Labour Force Survey there were a total of 96,000 unemployed.

It is not surprising that during a period when numbers on the unemployment benefit were falling much faster than measured unemployment, the numbers on Sickness and Invalid benefits continued to rise significantly. Among the main drivers of these latter benefits has been the raising of the age for national superannuation, the elimination of the transitional retirement benefit that had been available to older workers from 1994 to 2003, ACC using any pretext to remove anyone from their responsibility (and on to benefits) if they could, and the casualised work environment that has intensified work to the point that few can survive if they have any disability. I have personally witnessed major hotels driving elderly cleaners with years of service out of work because they couldn’t keep up with the growing targets they were required to meet.

The official unemployment figure is itself is a conservative measure. You are only counted as unemployed if in the survey period you didn’t work at all – not even one hour, unpaid, in your parents’ dairy. You are not counted as unemployed if you are too ill, in training, or had done no more than look in the newspapers for work during the previous month.

There is a broader measure of unemployment called the “Jobless” that is a more accurate measure of actual unemployment in society. This counts the workers who have given up looking for a job, those not working but who hadn’t “actively” sought work, and those who are working part time but want more hours. At the end of 2009 this number was over 276,000 or 12% of the workforce. The Jobless number is usually nearly twice the official unemployment figure.

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

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