Welfare reform: $20 bills on the footpath

02/11/2011 § 2 Comments

I could spend all day discussing welfare reform. Unemployment, poverty, and illness are very complicated. I spent a year working in a welfare-to-work programme in California. Each person had a mess of issues that seemed to overdetermine their poverty and unemployment. It was never as simple as just finding a job.

What makes the discussion even more difficult is that people’s responses come from their core values. That’s the whole debate over the ‘deserving poor’ — what should people do for themselves, and what should the consequences be? The debate over how to support children is similar. How much are children the responsibility of their parents, and how much does society have a separate stake in their development?

As I said, I could be here all day. So, I just want to make three simple observations.

First, Paula Bennett’s press release from yesterday had this quote as paragraph two:

“It’s not socially or financially sustainable to continue to spend eight billion dollars a year to pay benefits to 12 per cent of working age New Zealanders.”

Why not? It’s an interesting assertion, but I’m sure I could develop a macro model that sustainably allocates 4% of GDP to supporting unemployed and sick people. The assertion is not a solid basis for policy.

Secondly, we should think about welfare systemically. For example, we could spend more on child health and education if we wanted to, but we have decided that it isn’t worth the investment. As a result, some children are not as healthy and educated as they might be. They become adults who aren’t as employable as they might be. Unemployment benefits are, in part, the price we pay for spending less on health and education. This may be an efficient outcome: it may be cheaper to pay unemployment benefits for x% of the working-age population than to increase other spending by y%. But we have made choices and we need to live with the consequences. And yes, I am aware of the irony of saying that in the context of welfare reform.

Thirdly, the policy screams $20 bills lying on the footpath. They plan to spend $520 million ($130 p.a. times four years) to reap $1,000 million over four years. They expect to double their money from this initative. So…why hasn’t someone already picked up all this free money lying around?

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