Redesigning the Welfare State in New Zealand: Problems, Policies and Prospects

by Jonathan Boston, Paul Dalziel and Susan St John
Oxford University Press

David Preston

So far there has been no comprehensive independent assessment of the impact of the major changes in social policies implemented since the mid-1980s which sought to restructure the New Zealand Welfare State. The reasons for this gap are various. They include the small number of New Zealand academics who study social policy in any depth, the limitations of published information sources, and the fact that most of the people who have any detailed knowledge of the policy developments are employees in the public sector working under conditions of confidentiality.

Jonathan Boston, Paul Dalziel, and Susan St John have made a first attempt to fill this assessment gap. Their 1999 publication "Redesigning the Welfare State in New Zealand: Problems, Policies, and Prospects" looks at the changes, with a primary focus on the new initiatives implemented since the National and Coalition Governments came to power after 1990. The Editors provide topic articles plus an overall synthesis and assessment, with nine other individual contributors also providing articles on particular topic areas.

I would like to be able to say that, finally, we have the assessment that has been missing. However, the individual contributions to the collection are of varying quality. Further, the authors are almost uniformly opposed to the direction of the changes, and this tends to condition what is highlighted in a number of the assessments. Also, not all of the authors clearly distinguish problems that occurred because of the nature of the social reforms themselves, from problems that were a consequence of economic restructuring or of general economic and demographic trends.

The sections that follow group key points from each of the contributors into broad topic areas.

General Perspectives

Jonathan Boston summarises theories of the Welfare State and their application in a New Zealand welfare state in transition. Boston details the background to the New Zealand policy changes and the neo-liberal focus of policy direction. He indicates preference for an alternative social citizenship model with high taxes and universal entitlements. As many of the reforms focused on a more stringent targeting approach and lower taxes, he does not support the direction of these changes.

Manuka Henare describes traditional Maori views of social well-being which involve integration in the social, physical and spiritual environment. He comments that the free market is not a culture-free concept, and discusses tribalism in an urban context.

Paul Dalziel focuses on the loss of output per head during the second burst of restructuring during the early 1990s. He notes a failure of the longer-term trend in productivity growth to actually improve. Dalziel suggests that the social policy changes did not make the "supply side" contribution to economic improvement that the governments expected, while marginalising a larger proportion of the population. Dalziel does not really disaggregate economic and social policy, and perhaps considers that they should not be disaggregated.

Susan St John and Paul Dalziel examine the role of Government in bringing in social policy changes. They note the abandonment of the former Keynesian model of attempting to balance the macro-economy, and suggest that Government seriously misunderstood the nature of some of the sectors (e.g. Health) which they were trying to reform, and in particular the high transaction costs the reforms involved.

St John and Boston team up to discuss targeting versus universality. They run through the problems of targeting including high effective marginal tax rates applying to low and moderate income earners, and propose a larger focus on universalism. A curious feature of the discussion is a description of European social programmes as more "universal" than their New Zealand counterparts. In fact most of the European income support programmes are based on contributory social insurance, and these create a different dynamic which is not analysed here.

Employment and Work Obligations

Pat Walsh and Peter Brosnan examine what happened to New Zealand employment patterns after the Employment Contracts Act of 1991. The surprising conclusion is that there was very little change in the structure of employment. Trade union membership fell, and bargaining shifted to an enterprise basis, but most other trends reflected what had already been going on before the Act. They suggest that other changes such as the decline in industrial stoppages and the rise (1993 to 1996) in employment may have been more attributable to the general economic situation in the period. They do not clarify whether the Act played any substantial role in the decline in wage and price inflation.

Jane Higgins looks at the trend to "Workfare" in New Zealand associated with the Community Wage and Sole Parent work responsibility changes. She identifies it as part of a trend in a number of countries from "soft" to "hard" targeting, where the requirement to take up allocated work replaces education and training options for the unemployed and other beneficiaries. She also notes similarities with pre-1985 Job Creation schemes in New Zealand. Higgins is sceptical about how much will actually be achieved by the new policies, fearing a large element of job and income displacement of unsubsidised workers as a consequence.

Health and Accident Compensation

Toni Ashton examines the woes of health reforms, involving perhaps the most troubled of all the sectors. Ashton concludes that efficiency in the dominant Hospital sector did not improve, and notes that real per capita spending on health actually rose after the reforms, reversing a previous downturn. She does not examine the role of new providers including those targeting Maori health needs.

Susan St John discusses the ACC reforms, focusing mainly on the changes which occurred prior to 1998. She is unhappy about the decline in the scope of ACC cover in a system which gives no right to sue for injury, and fears that privatisation will lead to tighter claims control rather than improved outcomes for accident victims.

Education

Michael Peters and Mark Olssen review changes in compulsory primary and secondary education since the "Tomorrows Schools" changes of 1988. They are opposed to the consumer—driven focus of the reforms, and what they see as an Education Review Office focus on "effectiveness and efficiency being given priority over the principles of education."

What these education principles are is not clarified, though the authors advocate for the socially integrative role of a common public school system. Reasons for the pre-reform dissatisfaction about the performance of the school system are not examined. There is, for example, no substantive discussion of the unhappiness of Maori over the treatment of Maori language and culture by the common public system, and the outcomes for Maori children. Consequently, a major gap in the discussion is the lack of any analysis of the rapid growth of Kohanga Reo preschools and of Kura Kaupapa schools within the state system. Also surprising is the absence of any real discussion on the transformation of private schools into integrated schools in the public system.

Jonathan Boston essays a more balanced review of the funding of Tertiary Education, noting the differing philosophies around the developed world and the practical dilemmas facing governments. He examines the major changes in New Zealand in the reform period, including the rapid growth in tertiary enrolments, the major expansion in the role of private providers, the decline in per-student public funding, and the growth in fees and student loans. Boston’s own expressed preference is for a higher degree of public funding. He raises an issue that could have been analysed further — i.e. that in the long run it is largely the same people who will be paying for increased tertiary education whether via higher taxes or personal student loan repayments.

Housing

Laurence Murphy defines his housing contribution as a critique of "a policy regime that purported to empower consumers to meet their own housing needs via income support." His main target is the 1993 Accommodation Supplement and the Housing NZ market rents policy. His own preference is for a return to what he sees as a pre-1991 policy of concessional home loans, income-related state housing rents, and a separate DSW Accommodation Benefit. Murphy may not be aware that in relation to concessional loans he is actually calling for a return to a pre-1976 policy, since the shift away from a major concessional lending role by the former Housing Corporation actually began as long ago as the Muldoon Administration.

Murphy devotes much of his article to documenting the unsurprising conclusion that the financial position of State Housing tenants deteriorated following the implementation of the market rents policy. However, he does not provide any substantive analysis on what happened to the financial position of the larger group of other low-income people who became eligible for the enhanced Accommodation Supplement. He expresses fears that the spatial concentration of low-income people will increase with the new policies. This concern is rather ironic since one of the criticisms of the old policy was that it concentrated low-income people in state housing areas. However, Murphy does not provide any analysis of what has happened to the spatial location of low-income households (as distinct from the spatial location of state housing) since the Accommodation Supplement was introduced.

Income Support and Poverty

Robert Stephens discusses the increase in financial hardship following the benefit cuts of 1991. Material from the earlier poverty studies is reviewed and updated. He notes that New Zealand’s success in minimising poverty amongst the elderly has seen low-income households with children take their place in the disadvantaged household grouping. Curiously, Stephens describes the 1991 income support changes as a shift "from a degree of universal provision based on citizenship rights to targeting of vulnerable groups." This change in philosophy in the income support system actually applied only to the abolition of the Family Benefit. Social Welfare Benefits for working-age beneficiaries have always been targeted in New Zealand. What actually happened in 1991 was that benefit rates were cut, and conditionality for some benefits tightened, with some offsets in second and third tier targeted assistance.

Susan St John launches into the troubled waters of Superannuation policy, and notes the policy ups and downs of recent years. She supports the New Zealand traditional approach of a tax-funded public pension system as simple and cost effective — but politically vulnerable. Problems seen ahead are achieving an agreed policy as demographic pressures build up. The current pension without a surcharge is seen by St John as a recipe for intergenerational conflict as other age groups face more difficult situations and lesser entitlement to state assistance in a user pays and targeted environment.

The Editors’ Conclusions

The three editors review the outcomes of each of the reforms against government policy statements of objectives at the time, and conclude that "the objective of a fair and affordable welfare state has not been realised." The editors’ preferred alternatives comprise a mix of different economic and social policy changes, involving a higher tax level and a greater role for the state. This approach raises issues about the extent to which social and economic policies can be separately analysed, since a number of the authors’ preferred alternatives assume success in achieving a more fully employed and productive economy.

If it is not realistic to treat social and economic policies separately, then a social critique would need to contain a detailed analysis of economic policies and their alternatives. This degree of economic analysis is not contained in the publication, apart from Paul Dalziel’s contribution.

If social policies can be treated separately from economic policies, then the economic background of the 1990s, including its unemployment levels and constrained public sector resource availability, needs to be taken as a given in analysing social policy options and initiatives. This would require a more careful differentiation of problems and achievements which were a consequence of social policy changes, and those which were a consequence of economic, social and demographic trends. This differentiation is not always clear in "Redesigning the Welfare State."

What the authors have produced is a wide-ranging contribution to the debate on the New Zealand welfare state. The debate itself is likely to go on for some time before any academic consensus emerges.