The Labour-New Zealand First coalition has signalled significant changes to our welfare state. The agreement between Labour and the Greens, for instance, commits the Government to overhaul the welfare system with the aim of lifting families out of poverty and ensuring that "everyone has a standard of living . . . that enables them to live in dignity and participate in their communities".
Reviewing the welfare system is timely. There have been major economic, social, cultural and technological changes since the last major reviews of the welfare state, such as the Royal Commission on Social Security in the early 1970s and the Royal Commission on Social Policy in the mid-1980s.
Our society is now more diverse, pluralistic and complicated. The population has grown, aged and urbanised. Income and wealth inequality have increased, while substantial gender inequalities persist.
Family patterns and structures have evolved. There have been significant changes to information systems, employment practices, remuneration patterns, the nature of work, the age of retirement, the operation of housing markets, and the range of social services.
We require a welfare system that meets the needs and suits the conditions of the 21st century. New and emerging social problems often require different policy approaches. We must draw on the best available evidence to seek new solutions and design fairer and more effective public institutions.
The problems with the current welfare system are manifold. Here are five.
First, the level of social assistance available to citizens is often inadequate. Consequently, many individuals and families experience significant and often persistent material hardship. Unfortunately, the design of our formal child support system exacerbates these problems by minimising the effective financial contribution of non-custodial parents to their offspring.
Second, the system of income transfers is excessively complex, unduly burdensome for users, unnecessarily punitive, and poorly integrated with other policy arrangements, such as the tax system.
There is also a plethora of separate welfare benefits. Some of these might be unnecessary if first-tier benefits, such as Job Seeker Support and Sole Parent Support, were better designed.
Third, there are glaring inconsistencies. While the value of New Zealand Superannuation is indexed to both consumer prices and average wages, welfare benefits are only indexed to prices. Meanwhile, the regime of tax credits for low-income families is only partially indexed to prices and the Accommodation Supplement is not indexed at all. Such policy settings are neither principled nor fair.
Much the same applies to our policy responses to sickness and accidents.
Fourth, the welfare system contains many perverse incentives. It also lacks adequate drivers for good performance. For instance, there are few, if any, organisational incentives for staff in the Ministry of Social Development to ensure that those eligible for social assistance receive their full entitlements or that high take-up rates are achieved.
Finally, the various components of the welfare system poorly cohere. The previous government, for instance, lauded the idea of social investment. Yet exactly what social investment embraces and excludes remains unclear, as does the appropriate mix of targeted and universal assistance, cash and non-cash assistance, and narrow spectrum and broad spectrum interventions.
Overhauling the welfare system will be difficult. Inevitably, it will raise controversial philosophical issues, such as the appropriate balance of collective and individual responsibilities and the related balance of rights and duties. Fiscal considerations, too, will loom large. Realistically, significant improvements are bound to entail additional public expenditure.
For success, any review will require an inspiring overarching vision, well-defined goals, clearly stated principles, in-depth analysis, and vigorous public engagement across the political spectrum, including with Māori, Pasifika and other groups with specific needs and concerns.
Likewise, the review must be sufficiently comprehensive to enable better system-wide coherence while also being adequately focused, thereby avoiding the risk of over-reach and potential paralysis.
Plainly, too, the review must be properly co-ordinated with the mission of the Tax Working Group, the proposed Child Well-being Strategy, and the Government's poverty reduction targets and planned housing reforms.
Arguably, a thoroughgoing analysis of income adequacy must be a fundamental component of any welfare system overhaul. This will require proper cross-party discussion about what constitutes a minimum acceptable standard of living for different family types in 21st century conditions. Ideally, such a debate should be informed by robust empirical research concerning not only the actual cost of essential household items in different geographical locations, but also the additional costs to enable citizens to participate fully in their society. The entire welfare system should then be calibrated to meet the agreed income thresholds.
Equally, the reformed regime of social assistance should include a principled system of indexation with periodic independent reviews.
New Zealand's welfare state needs repair and renewal. For legitimacy and longevity, any reformed system will require cross-party support. This, in turn, will depend on a society that honours justice, values compassion and seeks the best for all its citizens, both now and in the future.
This commentary was originally published in the Dominion Post on 20 February, 2018.