Welfare reform as the politics of redistribution - Part One

The first of a three part series by Donna Wynd on welfare reform as the politics of redistribution.

Changes in welfare policy are not created in a vacuum: rather, they are part of a very deliberate strategy to reduce costs and change behaviour.  Almost invariably, welfare reform goes hand in hand with increased child poverty. As such welfare reform is both political and vulnerable to public opinion. New Zealand’s own history shows us that child poverty is not inevitable. It is the result of government policy: policies that can be changed, and changed for the better.

Changes to New Zealand’s social assistance and child poverty

Politics should never be left to the politicians. Sadly, after 30 years of politics ignoring the welfare of ordinary people, ordinary people have largely left the politicans to themselves. However, the idea that citizens are voiceless and powerless is exactly what suits politicians attending to the interests of the powerful. But it’s not true. People can change things, whether it is at a national or local level. In addition, people working together for change are always greater than the sum of their parts.

My argument is that welfare is politics, and specifically the politics of income distribution. What does that mean?

Income redistribution just means that chunks of money are moved from one group in the community to another. For example benefit cuts reduce the income of one group of households while tax cuts give cash to a different group of households. These changes have nothing to do with who is more deserving: they are about politics and payback.  

The graph below is an illustration of this. It shows changes to real income for various groups for two time periods – from 1983 to 2014, and from 2007 to 2014. If you were on the average wage, your real income increased about 11% between 2007 and 2014. On the other hand the income of a sole parent with one child has fallen by about 30% since 1983, and since 2007 alone it has fallen by about 2%. So when people on benefits say they are finding it harder to make ends meet, it is because their real income has fallen.

(Ministry of Social Development (2014) Household incomes report 1982-2013, p.83)

One of the key lessons of the last 10 years is that it’s not only absolute income that matters to people but the gap between the well-off and the less well-off. In the New Zealand context this gap is particularly critical in places such as Auckland and Christchurch where accommodation costs are outstripping the incomes of most families. The graph above clearly shows that the gap between sole parent beneficiaries and others has gotten wider. We now have a large body of research showing this widening gap is a contributor to uneven health and other social outcomes.

Below we can see what has happened to New Zealand’s child poverty rates over time. The notable thing about this graph – and it is on every graph of child poverty rates in New Zealand that gets drawn, no matter what measure is used – is that we see child poverty rates shoot up in the early 1990s, drift down a bit in the 2000s, and remain steady over the last few years. Crucially, despite the caring rhetoric of successive governments, New Zealand has never returned to the child poverty rates in enjoyed in the 1980s. Child poverty rates are significantly higher for children living in sole parent households and households where there is no adult in work.

(Ministry of Social Development (2014) Household incomes report 1982-2013, p.157)

Recent welfare reforms have focused on sole parenthood but the above graph suggests the issue is low benefit incomes. Successive governments have been unwilling to increase benefits, and this current administration is no different. However, the Ministry of Social Development has signalled that given persistently high child poverty rates, “options could be explored to review the adequacy of the existing transfer payments, notably in the case of families with children."[1]