Poverty solutions will test government resolve

Dr Bryce Wilkinson
The National Business Review
5 December, 2017

Government welfare must do a better job of breaking the cycle of disadvantage.

That message was common cause amongst the audience at the launch this week of the New Zealand Initiative’s latest report Welfare, Work and Wellbeing: From Benefits to Better Lives.
Myself, as author, and Sue Bradford, who wrote the foreword, spoke to it in front of a diverse and knowledgeable audience of about 100 people.

My presentation focused on the pipeline of intergenerational misery that has become entrenched in recent decades. Shamefully, fifteen percent of babies born in 1990-91 had come to the attention of Child Youth and Family for abuse or neglect reasons by age 18.

By age 21 their average outcomes for educational attainment, crime, and early entry to the benefit system were shocking.

Those concerned about lifetime economic inequality – and who is not – could usefully start right there.

Risk factors

A related risk factor is the beneficiary status of a child’s caregivers. Nearly three quarters of all beneficiaries up to age 25 had had a parent on a benefit during childhood.

Family structure is another risk factor. Risks are particularly high in unstable or dysfunctional households.

The children of mothers who were themselves abused or neglected as children are particularly at risk of being abused or neglected.

The troubles of those who become beneficiaries as teenagers are particularly likely to endure.

Around 75% ($57 billion) of the future fiscal cost of benefits is attributable to those who first become beneficiaries as teenagers. That represents prolonged misery.

Looking forward, this statistic also points to the potential for an enormous ‘win-win’ for the most disadvantaged and taxpayers alike.

Programmes that really do help people overcome their predicaments will also reduce the fiscal burden on taxpayers.

The report sees two imperatives. Both involve pursuing the search for finding programmes that work.

Pipeline of abuse

One imperative is to stem the pipeline of abuse, neglected or otherwise disadvantaged children. The other is to get better at helping those already in dire circumstances.

The shocking thing is that for decades governments have spent billions of dollars annually without worrying much about its value. Our system has been presiding over increasing misery.

The proportion of the working age population on a sickness or invalid’s benefit in 2012 was six times higher than in 1970. Research has not uncovered a good reason for this.

The Labour-led government needs to continue the last government’s drive to identify programmes that really work to help people overcome their predicaments.

One structural problem has been that no single agency has been accountable for ensuring that these people get the mix of assistance that they really need.

The new ministerial portfolios and supporting agencies, of Social Investment and Vulnerable Children, aimed to address this issue. However, their capacity to overcome the accountability and associated cross-agency co-ordination problem is far from assured.

It will take strong ministerial drive and backing for these new agencies to make a big difference.

Throwing more money

Based on the general election campaign, both Labour and National appeared to be willing to throw more money at the problem to ‘lift children out of poverty’ in the short term.

Of course, benefit levels are a political decision. More generous benefits should help those that receive them. The inescapable trade-off is that they increase the fiscal cost and make it harder to ensure that work pays.

Raising the fiscal cost of main benefits makes targeted programmes less affordable. Yet different households have different needs. For some, such as those with poor skills, mental health, gambling or drug addiction problems, shortage for money is more a symptom than a cause of their situations.

Also, higher rates of benefit won’t reduce the high proportion of the working age population that is languishing on a benefit – the $75 billion problem.

Targeted programmes that work are still needed.

Can the Labour-led government make real progress where it counts?

Widespread scepticism

There was widespread scepticism within the audience about this. Politicians and bureaucracies are risk averse. That works against risky trials and innovation, though those trials are a promising way of figuring out what works.

This scepticism was offset by considerable optimism and knowledge about the capacity of non-governmental NGOs to find innovative programmes that work, if freed up to do so.

The problem is that government commands the community’s money, whereas the NGOs have the capacity. Risk averse bureaucracies and easily seek to micromanage state-funded NGOs. They could seek to direct funds to where Wellington head offices think they should be spent rather than where NGOs can see it should be better spent.

These concerns were shared across the ideological spectrum of those in the room.

There seemed to be common ground that arrangements that reduced the directive role of central government and empowered local communities to find the best solutions to local problems were needed.

Greater localism is a long-standing theme of The New Zealand Initiative. Central government can do some things well, but not everything.

All in all, perhaps the most positive aspect of the launch was the extent of the common ground across the ideological spectrum. For constructive discourse about a major societal problem it was a great start. I suspect everyone there hopes that can continue.

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