How the welfare system can be made to benefit the economy

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OPINION: It is hard to engage with the recently released Welfare Working Group's report because it doesn't really seek engagement.

Not only is the time allowed for a response ridiculously short, it seems that minds are already made up. Welfare costs too much because too many people are "dependent" on the system so "something" has to be done.

We have heard all of this before, along with the willingness to distort everything we know about the welfare system to win the argument.

The report has already run into heavy weather from defenders of the welfare state who deride it as beneficiary bashing dressed up as - well, not dressed up at all. Leave well enough alone is the message.

But the Welfare Working Group is right about one thing - the system cannot be left alone. It needs to continue to change because, in recent decades, we have reached an impasse that has to be resolved. The impasse is caused by the widespread view that economic development and social welfare are antithetical concepts.

Economic development creates wealth while social welfare redistributes that wealth. Redistribution was accepted as a good idea when the welfare state was at its height in the middle of the last century - but not now.

These days it is viewed by many as a brake on prosperity. Cut welfare, the argument goes, and the shackles will fall from the economy to the benefit of all. In this context, talk of altruism, need and the rights of citizens can lose its force.

Is there a way forward from this impasse without one side having to prevail over the other? Yes there is. What we need is an approach that will harmonise social policy with economic development and identify social programmes that make a contribution to economic growth.

If this can be done, the case for social welfare holding back growth is weakened and arguments in favour of social welfare become compelling.

I call this alternative social development because it provides a justification for redistribution by advocating resources be put into social investments that will impact positively on the economy.

Were this approach to be accepted, it would bring to an end the unproductive argument which sets social welfare against economic growth.

Social policy would be seen as investment that makes a contribution to individual and collective prosperity.

There is also a link in the other direction because economic growth is able to be harnessed to social ends. As we know, left to itself economic growth can lead to very unsatisfactory outcomes like poverty, social division, crime and conflict. A social development approach advocates strategies that increase employment, lift incomes and make a positive contribution to the life of the community. Once a social development approach is adopted, a policy programme readily takes shape.

Instead of focusing on income transfers and maintenance programmes, the focus becomes one of investing so people can participate in the productive economy.

IT HAS to be recognised that some recipients of support will never be economically active and these people deserve and should receive ongoing community support. But the majority can be active, given the right opportunities. And these people want to be productively engaged rather than put up with the kind of stigmatisation, vilification and hostility that prevailed in the 1990s and seems to be on its way back.

Instead of being portrayed as "dependent" and being harassed into a job, these people need practical assistance to gain skills and find employment that pays a living wage. (Don't you get tired of well-paid people saying work is the way out of poverty? Work that pays a living wage is the way out of poverty). And where children are involved quality childcare and early childhood education are essential.

Social development wants more than people in jobs. It wants higher levels of education, individuals and communities building assets, communities working together to improve their lot, and support to start small businesses. It wants to see social programmes that do not make a difference closed and existing programmes carefully monitored for effectiveness.

It wants a social support system that is about opportunity instead of maintaining people on a benefit. More broadly, social development is about making sure that no matter what a person's background or circumstances are, they get a chance to get on with life.

A social development approach sparks a whole new way of thinking which can lead to some very radical policies.

For example, no young person should leave school to go on a benefit. Better they are occupied for up to two years in national service of some kind (armed forces through to environment projects). All children should have a KiwiSaver- style account established for them at birth, to be called on only when they take on tertiary level study.

Superannuation should be compulsory and part of the savings made available for small business start-ups.

The benefit system should be simplified so that there are only two categories, those on the way to work (however far away that might be) and those who will never work. A social insurance approach to welfare benefits would give the right incentive to frontline case managers.

There are ideas in the working group's report that could make a positive difference. But the way it is framed is likely to lead to selection of policies which assume a "bit of stick" is needed to get beneficiaries into work.

This nonsense has been tried and failed before. It is time to adopt an approach suited to the 21st century, not the 19th.

Steve Maharey is a sociologist and former social development and employment minister. He is vice-chancellor of Massey University.

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