Prepared by David Knutson, August 1998
with funding from the sponsors of the Ian Axford (New Zealand) Fellowships in Public Policy
Dave Knutson is a Senior Research Analyst for the Washington State House of Representatives in Olympia. He began working for the House of Representatives in 1977 and has staffed the Health Care & Wellness Committee since 1999. His previous staff assignments include the State Government, Social & Health Services, Institutions, Human Services, Children & Family Services, Appropriations, and Ways & Means Committees, as well as several select committees and task forces. From 1984-86, Dave served as an Assistant Division Director in the Department of Social and Health Services. He graduated from the University of Washington with a master’s degree in Social Welfare Administration in 1977.
During Dave’s Ian Axford Fellowship exchange to New Zealand he was based at the Department of Social Welfare in Wellington, where he researched recent changes in the welfare system in New Zealand.
Beginning with the passage of the Old Age Pension in 1898, New Zealand has developed an international reputation for progressive social policy. The Social Security Act of 1938 was the policy framework for a comprehensive, modern welfare state that provided social security and protection for generations of New Zealanders. The ability to afford a comprehensive set of social and health services was assured by the Government’s active role in the nations economy. An extensive set of tariffs, import licenses, and subsidies for domestic industries and producers provided full employment for generations of New Zealanders and ensured that New Zealanders who were unable to work because of infirmity or circumstance were provided for through the welfare state.
Prior to the passage of the Domestic Purposes Benefit in 1973, widows and sole mothers who worked were provided financial assistance by the Government to supplement their wages and support their families. With the passage of the DPB, the Government set the benefit level sufficiently high that sole mothers were able to stay home to care for their children without engaging in paid employment. This was consistent with the recommendations of the 1972 Royal Commission on Social Security, that DPB beneficiaries should have a benefit sufficient to enable them to “belong and participate” as full members of society.
The economic formula of full employment and a comprehensive welfare state began to unravel in the 1970s as New Zealand lost its economic market for exports to the United Kingdom when Britain joined the European Economic Union. The actions of the Organization of Petroleum Exporting Countries to reduce oil production and increase the cost of petroleum also caused a significant impact on New Zealand’s economy. Massive overseas borrowing to finance new energy projects and maintain domestic spending on a comprehensive welfare state compounded the financial difficulties facing New Zealand.
In the economic reforms undertaken by the Government beginning in 1984, New Zealand has seen a virtual transformation of its economy. To address the changing international economic situation, New Zealand went from a protected, state-directed economy to a transparent, free-market approach with an extremely limited role for the Government.
Slow economic and job growth and demographic changes, including a significant increase in sole parents and teenage parents, caused caseloads for unemployment and the DPB to grow steadily through the 1980s and into the early 1990s. With the economy experiencing little or no growth for much of this period, the extensive services and benefits available through the welfare state became more and more difficult to maintain.
To reverse the trend toward higher DPB caseloads, the Government’s 1998 welfare reforms require beneficiaries with children over age fourteen to look for full time work. Beneficiaries with children between seven and fourteen are required to look for part-time work, and those with children younger than seven will be required to attend an annual planning meeting to discuss their prospects for future employment.
The Government also will require certain DPB beneficiaries to take part in the Community Wage, a workfare program that requires beneficiaries to engage in unpaid community activities in exchange for their income assistance check.
The Government’s 1998 welfare reform proposals have been considered by Parliament during a period of serious economic uncertainty and political instability. The substance of the reforms, particularly the Community Wage, and the process used to implement them has generated questions about the ability of the Government’s welfare reform scheme to move beneficiaries currently receiving assistance through the Domestic Purposes Benefit from welfare to work.
Figures and tables
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