Reflections on Orewa II

So now we have the speech, and the media coverage, and it is as it was expected to be - a speech about the welfare system. Rather than buying into Don's framing of this issue, my intention in this post is to go through some of the deeper issues lying behind the speech. These can loosely be described as Labour's record, the impact of social change, National's inconsistencies, the gap between welfare and work, and finally the miasma of despair Brash is trying to cast over the country.

Reading this, bear the following point in mind. It is important to locate debates about a party's perspective on welfare issues in the wider social and economic context, and with reference to the party's wider policy framework; without doing so one risks ending up detached from reality. The picture painted here shows that while elements of Don Brash's analysis make sense when taken in isolation, the sum of them, in context, adds up to a deeply dysfunctional approach to New Zealand's social and economic development.

Labour's Record

Since 1999, the number of people on income tested benefits (e.g. sickness, invalids, unemployment related and DPB) has fallen from 387,542 (32,868; 51,239; 193,435 and 110,000) to 316,092 (45,569; 71,639; 89,884 and 109,000). This is a decline of 71,450 or 18% in a little over five years.

This progress is encouraging, because Labour's mission is to ensure that everyone who is able to work has the chance to do so. Employment is an essential component of people's own self-respect, and the social participation represented by work is a real benefit - to people working as well as to society as a whole. It is significant progress from the 1980s and 1990s, where people were being thrown on the scrapheap and left to rot on benefits - which, to add insult to injury, were then cut from tolerable to near-subsistence levels.

Employment, full and part time, has risen by 230,000 which has been a large part of the driver for the falls in people on welfare. It's worth noting though that the growth in employment has been greater than the fall in people on welfare - the labour force participation rate has increased, and falls in the number of people on the DPB and unemployment benefits have been somewhat counteracted by rising numbers of sickness and invalids beneficiaries. I will come back to those below.

I am not sure that Don Brash's target of getting the rolls down to 200,000 is viable - even if we got to full employment with nobody on the dole (not likely) that still leaves about 225,000 people on health-related benefits or the DPB - but it is not a bad thing to aim to reduce the number of people stuck on welfare. The problem with the Brash prescription is that it won't achieve this, at least in part because New Zealand is not the same country it was in the 1970s (thank goodness), the subject of the next section.

A final remark about the above: it is a record that speaks for itself, and is something for all Labour people to be proud of. National left more people on welfare in 1999 than it found in 1990. The fifth Labour Government will not be repeating that failure.

The impact of social change

One of the interesting points of Brash's speech is that he seems to think that life (or the welfare state, at any rate) began in 1975. Many of the references to figures in the speech compare current numbers with those present in 1975. The interesting points to explore are the numbers on DPB, invalids and sickness benefits. We all know the story of unemployment, which was stoked by Labour in the 1980s, exploded under National in the 1990s, and was still stuck at 7%+ in 1999. We are down to 3.8% and some think this will fall further (to best in the OECD) when the December 04 figures come out. It's easy to agree that unemployment is not the biggest issue here, and Brash agrees with this - he does not focus on it in his remarks.

Our society is a very different place to what it was in 1975. Look at the DPB, a then newly introduced benefit to allow women (and now men, too, who are bringing up children) to get away from violent and abusive relationships, and to bring up their kids with some dignity and comfort. For the first time ever, under Labour, the number of people on the DPB is beginning to fall, thanks to better case management and so on. Brash murmurs the conservative critique - that the DPB creates welfare queens, that it destroys families - but I do not think he really believes it.

It's a simple cultural change. We no longer expect people to stay in abusive relationships. As a society, we decided 30 years ago that it was better for people to be free of such things, and raising their children with the assistance of the community. That thought still holds among the majority of Kiwis. If there is abuse, and I do not doubt that some small number of people probably do see the DPB as a lifestyle choice, the question is how to best deal with a tiny minority of cases. Winding back the clock and trying to re-create a white-picket-fence New Zealand that no longer exists isn't the way forward.

The other aspect of social change is the rise in numbers on sickness and invalids benefits. There are a large number of factors driving this increase. Deinstitutionalisation of mental health patients is a big one. So is the increase in the retirement age to 65. The aging of the population is another one. Greater recognition of health issues in the workplace is another. Once again, there is probably some abuse, but that is being countered by better case management. Brash's specific suggestions should be canvassed (where they have not already been tried and shown to fail), and if they have merit they could be adopted. The substance of what he is proposing would make very little difference to the numbers, which I'll come back to.

Brash's views on these are consistent with a more conservative turn in his mindset. I don't think he has the measure of New Zealand's electorate on this matter, in the same way he was wrong on civil unions. We are a liberal people, like it or not. That is the society we have built in these islands and that is how most of us want things. We could probably dramatically cut the number of people on sickness and invalid benefits, on the DPB - and it might save some money. It would destroy lives, though, and they matter more than money. Yet Brash claims to be on a mission to save lives. How does one reconcile these inconsistencies?

Nationally Inconsistent

Without a doubt, one of the most interesting things in the speech are the inconsistencies between various strands of National thinking that are now beginning to emerge.  Some examples:

Cut/increase spending: National's making lots of noise about tax cuts. This welfare policy is bloody expensive in its implications. You can't spend money twice. Big policy commitments like this alongside others in health and education, combined with the recent flip-flop on the NZ Super Fund, sharply reduce the room for tax cuts - but I see no backing away from these. You can't cut taxes without cutting spending - so what else is going to be cut, if National was elected?

Talk tough/act soft: For all the big rhetoric, the policy proposals Brash mentions are not going to deliver the outcomes he seeks. They just don't add up on the numbers. If you really want to get benefits down to 200k people, there is probably only one way to do it: time limits. National hasn't gone there; it's too hard politically. So is revealed one of the deceits in the policy.

Welfare/wage gap: One of the specific proposals is to allow people into working situations without the protection of employment law. It is evident from NZ experience and from labour market economics that such casualisation that REDUCES AVERAGE WAGES. That is not consistent with his desire to increase wages - his only alternative is tax cuts, which he cannot deliver because he is now getting into double-spending of the surplus.

There are others. Probably one of the most fascinating ones is the way he couches his speech in terms of it being a great moral calling to save people's lives. National's policy, as John Armstrong identifies in this morning's Herald, is tinkering at the edges. If they actually believe what Brash is saying, they'd be proposing much stronger measures. If they don't, then this is just a political game. I suspect the latter is the case. Focus groups indicate this issue might be a goer, and so he is hammering on it with fine words but little substance. In contrast, Labour is delivering in one of the implicit areas that Brash proposes as a remedy, mentioned briefly above - the welfare/wage gap.

The Gap between Welfare and Work

Most people agree that there is a need to have good incentives in the labour market for people to get off benefits and into work. There are two main approaches to delivering this. One is to cut benefits. The other is to increase the benefit you get from getting a job. Labour is strongly in favour of the latter. National, from Brash's speech, is still into the former to an unhealthy degree.

Brash doesn't like Working for Families. Working for Families delivers very big improvements in the incomes of people who move from welfare into work, and makes the transition easier too.

The only way Brash could match this with his focus on tax cuts would be to cut income taxes so much the whole state sector would be starved of funds. You're talking about tens of billions of dollars of tax cuts, to deliver something a more targeted approach delivers for far less. How that is consistent with spending more, I do not know.

It's an underlying philosophical difference that does deserve to be highlighted. Labour believes in getting people into work by making work pay, and by ensuring jobs are high wage, secure, high productivity etc. National believes in getting people into work by cutting their benefits, casualising work place relationships and so on. Their whole workplace law framework is last century, and focuses on cutting costs and casualising labour rather than investing in productivity and encouraging collective involvement in working life.

Of course, you could argue that this is just part of Brash's essential meanness of spirit - which seems an appropriate place to conclude.

A Miasma of Despair

It is the job of Opposition parties to create conditions where they can get elected. One of the only ways they can do this is by generating discontent and a sense of grievance about the current government, and by holding out hopes of a better future should they be elected to power. They need to be careful they don't stoke ambitions too high, for fear of not meeting them, but that is the basic pattern.

You can see this logic at work with the speech Brash gave. With Orewa II, just as with Orewa I, Brash is trying to tap into those areas of our national life where there are some senses of injustice. In retrospect, welfare was his only possible choice this year. He cannot complain credibly about the economy; about foreign affairs; about unemployment; about falling crime rates; about our growing cultural achievements; about improvements in the public services; about better transport and infrastructure provision. All those areas are moving ahead.

In short, life is getting better in New Zealand, and people know it. The UMR survey discussed a few weekends ago in the Sunday Star Times makes great reading for New Zealanders, and bad reading for opposition politicians. This is a great place to be, and it's getting better - people know it and more important, they feel it too. Trying to fight that is like stopping a juggernaut; the effort to turn around those positive feelings about where our country is at is not a simple one.

That is why he has to focus on those areas where there is any sense of grievance. He has done that with race and with welfare. On the first, he definitely scratched an itch. On the second, I suspect he has done less well.

Why?

Mainly because the facts are not on his side. Last year, he articulated a view that the elite consensus had become out of touch with the community. Even the PM admitted that he was right, and he was. There was a big gap between where politics had taken the Treaty, and where the community had followed. The repercussions of that played out in the most significant political event of 2004, the formation of the Maori Party. This event, more than any other from last year, will reverberate for the rest of our history, for better or for worse.

This issue, welfare, is different. Labour's reforms have seen fewer people on benefits. The community at large does not have the same sense of irritation with a situation that is clearly getting better. Times are not tough and people are not begrudging those on benefits, except for the most egregious examples of people flouting the point of the welfare system.

Even more so than last year, Kiwis want a positive vision of the future. After 20 years of heartache, of constant change, of perceived pain without gain, things are finally looking up. The massive increase in Kiwi music and the economic boom have contributed to a sense I have never felt in my 17 years here - of confidence, of daring, of taking risks and of aiming once again to be the best. Concern with community and engagement with some of the symbolic aspects of our national life are growing again.

These are developments driven by values Labour is profoundly in tune with. The modern Labour Party has the broadest and most diverse reach into Kiwi communities of any political movement. We are everywhere and we draw every point of view into government. We are not "mean" but nor are we "soft". We are not stuck in a dead ideology that was tried and failed last century. We're the party of progress, of middle New Zealand values and priorities - and people know it.

We are where New Zealanders are, and in the most simple terms, that is why we'll be elected to a third term in government later this year. National's living in the past, and Orewa II confirms it. Brash has done nothing more - or less - than I expected, but winning formula it is not. And for the sake of the nation, I can say "thank God for that" with every bit of meaning the phrase can contain.

Comments

[Sock Thief]

There is some evidence for aspects of Brash's view on the DPB.

[Chris]

One simple question to a post full of half-truths, vitriol, revisionism, and even the downright denial of reality.

What do you think has enabled the unemployment rate to go down to 3.8%? Why is the economy booming? Why do we have such a huge surplus?

Please answer that.

[Jordan]

Because of the reforms of the 80s, 90s and this century;

Because of the record commodity price reforms;

Because New Zealanders are happier and more productive than they have been for a generation.

You may think it's "half truths, vitriol, revisionism and even the downright denial of reality" but you really should face the fact that it is the reality most people live with. Most people aren't as grumpy as you fringe right wingers.

I'm sorry if that happiness makes you feel bad. :)

[Chris]

I'm interested to know how you know I'm a 'fringe right-winger' - explain please?

New Zealanders' happiness doesn't make me feel bad - it's great. I love that our economy is doing well, and I know what caused it (as you do as well).

Unlike you, I want more of the same, so this country can reach its full potential, that's all.

I guess even if the Nat's don't win Labour will steal most of the policies anyway, as they did post Orewa. They'll continue to denounce Brash as a 'nasty right-winger' and move further towards the right themselves.

Oh sorry, that's right, it's called 'The Third Way'. I forgot. A.K.A the triump of the market economy.

[Gooner]

Jordan - reforms of 80's and 90's were nothing to do with this government. I'm unclear on what reforms this century have contributed to the current economic prosperity, Perhaps you could expand?

Moving people off benefits and into work is largely a result of a good economy - booming businesses need workers. As I have mentioned, the good economy and booming businesses has very little, if nothing, to do with the current government.

High commodity prices has nothing to do with this government.

Happier and productive? Happier, I'd say yes. Why? Economy, house prices, commodities basically. I would argue all three have very little to do with the current government, apart from perhaps house prices which school zoning has contributed to.

More productive? I doubt this is true in an economic sense. Businesses are operating at full capacity. There is no room to move there. Productivity is not improving, and won't until there is decent labour market reform.

I'm a fringe right winger and certainly not grumpy :). Happiness makes me feel happy. Duh.

[Jordan]

Gooner - glad to hear you're not unhappy. I know some people on the right who are decidedly unhappy with things going as well as they are.

[Gooner]

Jordan - not sure I'm totally happy about some of the social reforms, but I'm not like some who worry and lose sleep over it. At the end of the day, we have a chance to do something about it in October (or earlier- I don't discount that yet). I'm a bit like John Banks when he lost the mayorlty, I don't whinge or moan, too much to get on with for that!

[David Farrar]

Jordan - you forgot to mention that Jim Anderton's job machine is surely responisble for the low unemployment!

All those grants to Dick Hubbard have to have created at least a few thosand jobs. :-)

[Anna]

Gosh post that went on. "Yawn".

[Jordan]

Anna - quality analysis there ;)

David - 220,000 jobs? I don't think that Jim can take the credit for that...

[Gooner]

The state sector has increased threefold under this government. I think about 20,000 new jobs. Easy way to reduce unemployment aye!

[geniusNZ]

>Labour's Record

yes it is fairly stellar at least on the face of it.

> everyone who is able to work has the chance to do so.

the problem is that almost no one wants to work if there is no incentive and almost everyone will work if that incentive is high enough. It is jsut a matter of balancing how much pressure you wnat to put on people.

> Employment is an essential component of people's own self-respect

Only if you make it so. there is nothing intrinsic in a human that makes work required. Our society however creates incentives. these incentives are all interconnected if you make "not working" a plausible career path then employment will be less of a component of self respect because it is (almost entirely) learnt behaviour not genetic behaviour.

> even if we got to full employment with nobody on the dole (not likely) that still leaves about 225,000 people on health-related benefits or the DPB

are you really saying we have 225,000 people that sick that they cannot work at all?
for example
a number of people are defrauding the system one could reduce that number
a number of people are injured so they cannot do their profession but could do somthing else
a number of people are treatable but not being treated
etc..
lots of ways you could approach it

> We could probably dramatically cut the number of people on sickness and invalid benefits, on the DPB - and it might save some money. It would destroy lives, though.

it seems you still need a "brash" to think up these solutions even if labour adopts them because it is very hard for labour off its own bat to go into welfare reform. Personally I like greyshades UBI.

>You can't spend money twice.

I am indeed concerned national will "pull a bush" with spending plus tax cuts that they cannot back out of when the economy takes a down turn and the surplus that they plan to spend evaporates.

>If you really want to get benefits down to 200k people, there is probably only one way to do it: time limits.

I dont think arbitrary time limits would work.. they would be both unfair and inefficient.

>working situations without the protection of employment law.

why not a two part system - you negotiate a trial period and then negotiate a full contract after 1-3 months? where the salary is expected to be different/renegotiated between those two periods. (up or down)

> You're talking about tens of billions of dollars of tax cuts, to deliver something a more targeted approach delivers for far less.

there is nothign wrong with having a very low bottom tax rate. I suggest it is a very good idea. of course then you have to make up the difference in other tax brackets...... I dont see brash doing that.

[Mellie]

A nice post, Jordan. I think the 2 minutes that Don Brash spent on TV3 answering John Campbell's questions revealed the substance of his speech: a) he's inconsistent b)the welfare bill isn't going to sink the country.

I'm particularly worried about what he said about the 90-day period - all I can see there is an unconscious snubbing of working New Zealanders. Never mind that we need and want security of employment, never mind that three months into the job is a bloody long time to wait before you know if you'll be staying.

It indicates the lack of concern that the National Party really hold for workers. And if not the National Party, then Don Brash himself. Campbell wanted to talk about people, all Brash could do was reply with numbers. As an economist, it's quite clear that for him, workers rate right down there next to teenage mums on the DPB.

[Max Soy]

I believe that cutting benefits or making them harder to obtain and introducing work for the dole scheme (mostly schemes with no real employment-prospect raising potential, like in Oz) is counterproductive, because it does not help the people on benefits find jobs but simply punishes them further and makes it even more difficult for them to find work and come off welfare.

The majority of jobs that unemployed people eventually obtain are also not high-income ones and cutting welfare and reducing taxes would benefit mostly those who are on higher incomes, thus regressively redistributing money from the poor the rich. This runs counter to my personal social-democrat values.

I also think Brash is advocating a return to social-conservative values. Remember many of National's caucus favoured means-testing welfare benefits for same-sex couples based on partner income but did not wish to grant them other legal benefits - this is definitely what the Wizard of Oz wants here in Munchkinland. Double standards, perhaps.....

As for unemployment and the economy, sorry, but Labour managed to catch the high point of the economic cycle. It just happens to be in power at the right time - unemployment ebbs and flows and while governments do have some impact the overall global trends are as immutable as the tides of the ocean. In that regard your post sounds almost like a Howard-type propagandist - sorry. But I'm sure if I were in your position I'd play the scare tactics card too.

I look forward, finances permitting, to contributing to the Clark re-election in Aotearoa Polis later in the year.

[Matt]

Really good analysis. Pity so many of the people posting comments are stuck in bizarre right-wing tribal views of reality that really only still retain any support in 3rd world countries like the US and China. I think some of those national party blog-hacks need to go out and get a job and contribute to the more tolerant, happy and productive NZ that's developed under the 5th Labour Govt.

[Steve]

Nice post Jordan :) Glad to see you still hard at work. Things going to plan I should be back from Japan in time to campaign this year.

[James]

Well written piece Jordan, and you make a lot of very good points, but really I think you are being very charitable to old Mr Brash.

Mr Brash, head of the Reserve Bank at a time when the Reserve Bank policy was to hold unemployment at a certain minimum level to keep a downward pressure on wages, and therefore on inflation.

Mr Brash, who with every sentence of his first Orewa speech revealed bias against the Maori and seeked - successfully - to divide the country in the very way he was warning against.

Mr Brash, who uses politically correct rhetoric in which to couch pessimistic, elitist, bigoted ideas that appeal to the lowest, lynch mob type drives that we all have (some in smaller doses than others), to create grievances where there are none, to bring out the worst of racism and classism that has been dormant and ebbing away for years.

Yes, his speeches are comparable to Bush's because in them he tries to bring out the very worst in all of us: fear. Fear of some impending disaster if he is not at the helm.

He may be a very nice man in person, but in political and business life I find his actions and speeches absolutely deplorable. He can just bugger right off.