Monday, July 25, 2005



Failed policies

National looks set to try and revive the failed policies of the 1990's with a vengeance, with Judith Collins announcing that a National government would reintroduce work-for-the-dole. There's no question that this policy was a failure: a report by WINZ's Centre for Operational Research and Evaluation found that beneficiaries were in fact no better off on work-for-dole schemes than on a benefit, and worse, that the employment outcomes of those in makework schemes were noticably poorer than those not participating. It attributed this to the programmes having a "locking in" effect - rather than helping people to find work, they were instead trapping them in poverty and dependence. And National wants to return to this?

But quite apart from questions of effectiveness, there is also a wider question about the point of pursuing punitive welfare and employment policies aimed at forcing people off benefits and into work when monetary policy is working at cross-purposes to this. It's a long story, but the short version is that our monetary policy commits us to a certain level of unemployment in order to keep inflation down. When Brash was in charge of the Reserve Bank, that level was around 7% - and he would hike interest rates to throw people out of work whenever unemployment looked to be getting "too low" and wages (and hence inflation) threatened to rise. Bollard operates under a broader inflation target, and hence we can have lower unemployment - though we have still had worrying pronouncements about the labour shortage and wage claims needing to be stomped with higher interest rates.

That's a very brief rundown; Brian Easton has more here. Its unclear whether the Reserve Bank is actually pursuing an unemployment target (though Brash certainly seemed to be), but at the very least some arbitrary level of unemployment is a side-effect of our low inflation policies. Which means that all welfare policy can ultimately do is adjust the "churn" rate between the workforce and the dole queue; anything more - say, National's underlying goal of making sure that everyone who can work has a job - is frustrated by monetary policy.

Against this policy background, punitive welfare policies aimed at punishing the unemployed so as to provide an incentive for them to work are simply needlessly, mindlessly cruel. It is the equivalent of picking someone at random and then punishing them simply for being picked - unjust, immoral, and ultimately pointless.

As a society, we have chosen to have a certain level of unemployment in exchange for low inflation. Therefore, as a society, we have an obligation to care for those whose lives and prospects we are sacrificing. Policywise, this means trying to ensure that unemployment is not too great a burden and easy to escape from (or at least, not a trap). This suggests both decent benefit levels, and policies centered around umproving "churn": training, education, active job finding, and an array of grants, loans, housing and transport assistance to help people move or travel to work. Unfortunately, National's policies are moving in precisely the opposite direction to what is required.

21 comments:

And Labour looks set to try and retain the failed policies of the 2000s.

Posted by Sector 7G : 7/25/2005 02:08:00 PM

".....a report by WINZ's Centre for Operational Research and Evaluation found that beneficiaries were in fact no better off on work-for-dole schemes than on a benefit...."

It wasn't about them being better off ... its about getting them offf their arses and doing something to earn the taxpayer dosh they are getting.

Posted by Hobbo : 7/25/2005 02:39:00 PM

Erm, no Hobbo, if you look at the Australian report linked to by Russell Brown today, for instance, you'll find that WfD programs actually DECREASED the chances of an unemployed person getting work. Hence, keeping them on the dole LONGER. Costing more. That doesn't make sense no matter what your ideology.

Posted by Ghet : 7/25/2005 03:17:00 PM

good on you there boys.

the actual number of persons receiving an unemployment benefit for more than a year is only 0.8% of the total working population.

http://www.msd.govt.nz/documents/media-information/benefit-factsheets/fact-sheet-ub-05-jun-30.doc

meanwhile the total percentage of unemployed is dropping, and has been since 1999.

this fuss over work for the dole is essentially another beneficiary beat-up. why? because it isn't a real issue.

Posted by che tibby : 7/25/2005 03:21:00 PM

Che Tibby...Are people enrolled in courses say like at Te Whananga taken out of unemployment figures by any chance?

Posted by Sector 7G : 7/25/2005 03:43:00 PM

Couldn't agree more - to target beneficiaries when prevailing wisdom is that we require a certain number of unemployed is a bit shithouse. By the same token it shouldn't matter if some of these people effectively "choose" unemployment - in essence they're doing those working people who would otherwise be on a benefit a favour, by ensuring that those people receive a higher income.

As it is, I know a number of people receiving benefits who have been subject to a crackdown of sorts by WINZ in recent months - further victimisation of these people seems a bit unnecessary.

On top of that, anyone who has tried to get a benefit recently knows that you have to jump through quite a few hoops to get the dole in the first place. A lot of critics seem to be unaware of the actual realities for an individial dole recipient, not to mention how little they typically have to survive on.

Posted by jarrod : 7/25/2005 03:52:00 PM

enrolment in any tertiary organisation has nothing to do with the unemployment numbers.

another sheet on the MSD website gives the total number of persons on benefits minus the numbers on 'student hardship' benefits. the difference is negligible

http://www.msd.govt.nz/documents/media-information/benefit-factsheets/headline-benefit-numbers-05-jun-30.doc

I couldn't find a fact sheet on overall student benefits though. If anyone had those numbers it would interesting to the unemployment numbers have been shifted to Wananga.

90,000 people is a lot to hide in dodgy courses though...

Posted by che tibby : 7/25/2005 03:56:00 PM

"As a society, we have chosen to have a certain level of unemployment in exchange for low inflation. Therefore, as a society, we have an obligation to care for those whose lives and prospects we are sacrificing."

- So when did we agree on this utter and objectionable nonsense as a society? I don't remember, because no one talks about it in the mainstream media. People have spent years trying to educate people on the damage done by the Reserve Bank Act, Don Brash, and his ideological cronies in both the Labour and National.

Then a supposed 'left-wing' commentator says that we've been prepared and agreed to sacrifice people up to this nonsense all along. What a load of patronising drivel!

- John Anderson

Posted by Anonymous : 7/25/2005 04:19:00 PM

Che: and in any case it wouldn't matter, because any unemployment "hidden" in this way would simply show up in higher demographics, once people have graduated. And given the shortness of Te Wananga's courses (which everybody on the right seems to be complaining about, and which simply shows how little they know about the tertiary sector), its effect is around about nil.

You can complain about Te Wananga for all sorts of reasons, but being a dastardly plot to hide the real level of unemployment isn't one of them.

Posted by Idiot/Savant : 7/25/2005 04:38:00 PM

John: well, where "agreement" means "passed by an elected government and not yet repealed". But the fact is that it exists, and it's bloody stupid to have welfare and employment policy working at cross-purposes with it. Either those policies have to change to accomodate the reality of legislated joblessness, or we need to ditch the RBA and start running a monetary policy which doesn't condemn people to legislated joblessness.

I give the latter about a snowball's chance in hell of happening, so I'm focusing on the former.

Posted by Idiot/Savant : 7/25/2005 04:47:00 PM

Sector 7G: these would be the policies which have seen a dramatic reduction in unemployment, as well as in overall beneficiary numbers?

Labour seems to have figured out a welfare policy compatible with its monetary policy. national hasn't, and the result will be to punish people for something which in an important sense isn't their fault, and in a way that won't do squat to solve the problem. it will however make people so desperate to get off benefits that they'll accept anything offered, which is really the point: National's welfare policy is really an employment policy geared at keeping wages low.

Posted by Idiot/Savant : 7/25/2005 04:51:00 PM

Most New Zealanders have no idea of the relationship between the reserve bank and unemployment. The role of the left should be to reveal the fundamental bankruptcy of these policies regardless of the preferred alternatives - not to shrug and accept structural unemployment.

That's not even left, liberal, or even decent! - John Anderson

Posted by Anonymous : 7/25/2005 05:50:00 PM

" Most New Zealanders have no idea of the relationship between the reserve bank and unemployment."

So tell them then.

The idea's been around since some time in the late `eighties. Back then it was called something like the "non-accelerating inflationary rate of unemployment" - NAIRU for short. Some people may recall that Don Brash made an (in)famous pronouncement during the mid `nineties that unemployment was falling too quickly and if it didn't level off he'd have to tighten the screws on the economy. Interestingly enough, unemployment has fallen dramatically during the term of the current Administration and the sky hasn't fallen.

Posted by Anonymous : 7/25/2005 06:17:00 PM

The only failed policy is you. you and your views on politics. God justified going into Iraq, if you dont believe it than you need to repent and realize the truth of our church.
The Church of Jesus Christ of Even More Latter Day Saints

Posted by Elohimus Maximus : 7/25/2005 06:55:00 PM

With the exception of the last post on this thread, this has been a good debate. IMHO, the Right is quite deliberately practicing class war and criminalising the poor. The current benefit administration actually does hassle unemployed beneficiaries into work but also does something to address the real barriers many people have towards sustaining employment. There is a real danger that the sick and disabled will also be hassled to the detriment of their health - under Labour. Under the Nats, I think they'll probably be exterminated or something. The problem is that the middle classes couldn't care less about people less fortunate than themselves and the Nats play to their callousness brilliantly.

Posted by Anonymous : 7/25/2005 08:03:00 PM

Actually I and other people have tried. Alister Barry even created a film about it and the other forms of class warfare undertaken by Labour and then National. The movie still hasn't had a decent screening on TV despite it's content's obvious importance to political debate.

It's a long hard slog to explain these issues and like most serious economic issues in this country it is either ignored by political parties, or in the case of the Greens paid lip-service to. That's why it's a surprise it's given a mention here, even if it's a completely defeatist and bankrupt position.

More about 'In a Land of Plenty' here:
http://www.jobsletter.org.nz/jbl16910.htm

- John Anderson

Posted by Anonymous : 7/25/2005 09:17:00 PM

John, I'm sure that was shown on NZ TV last year? If I recall correctly I watched it... Or am I getting confused with something else?

Posted by Oliver : 7/25/2005 10:04:00 PM

It was on TV last year, about midday in the weekend though (or something equally stupid).
Most people don't see the connection between unemployment and inflation.
The previous Reserve Bank Act required that the RB mediate between six different goals in figuring its policy, unemployment was one of them. It would be really good for that to be put back in, but it doesn't look likely for quite a while. Such a policy could be: The RBNZ must keep inflation between 0 and 4% while attempting to minimise unemployment. It would be able to control inflation while keeping itself socially responsible.

Posted by Phantasmagoric Political Junkie : 7/25/2005 10:22:00 PM

John: if you have an alternative, and a credible way of getting there from here, I'm listening - but I don't see one myself. Labour is too chickenshit to risk upsetting the investors, and the Alliance will never be elected into government (or even elected at all, the way things are going). Which means we can either bang our heads against a brick wall, or work for positive change, even if its less than perfect. Again, I would rather do the latter.

Anon: wrt sickness beneficiaries, the government at least has started seeing illness as a barrier to employment (not to mention a decent life), and is prepared to fund operations to do somethign about it. Arguably this should be the job of the public health system, but if it solves people's problems and allows them to enjoy life again, then I'm all for it.

PPJ: The Reserve Bank's Policy Targets Agreement already requires it to avoid "unnecessary instability in output, interest rates and the exchange rate"; employment could always be added to the list (though I'm sure it would make some economists scream).

Posted by Idiot/Savant : 7/26/2005 01:19:00 AM

That's what I meant by a decent screening time. We're not getting much further here. I realised that social democrats worked in cages, but I didn't realise how small they were getting these days.

The solution I work toward is getting rid of the whole bloody mess of capitalism along with thousands of others, but I do realise the importance of small victories and steps - but I find this incomprehensible.

The Alliance Policy on this issue seemed to be a good start if you want small change, the Greens are going to get in, and so one place to start is to lobby for change within that party. In addition, the Labour Party seem to have encouraged the governor of the Reserve Bank to loosen up a little, coaxing unemployment down further - there might be some within that party who might be interested in further change?

So there's a proposal of what could be possible, if you wanted to take the parliamentary road to change. It's never been tried to before, and I'm sure it will work this time. :P

- John Anderson

Posted by Anonymous : 7/26/2005 09:08:00 AM

Or we accept that with our improved individual productivity means it takes less labour to get things done and once more reduce the average working week.
Spread the work out more.
Currently a small percentage of the population are forced to take far more leisure time than they want, while others have to work harder to pay taxes to allow for this redistribution of wealth and time. Nobody wins.

Also this might allow more parents to work hours similar to their childs schooling, saving in after school care among other things.

Daniel

Posted by Anonymous : 7/26/2005 09:35:00 AM