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University of Otago Law Theses and Dissertations |
Last Updated: 25 September 2023
THE BLUDGERS AND THE BEAUTIFUL:
Work Incentives in New Zealand’s Welfare System
MICHAEL EVANS
A dissertation submitted in partial fulfilment of the degree of Bachelor of Laws (Honours) at the University of Otago —Te Whare Wānanga o Otākou
October 2022
TABLE OF CONTENTS
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ACKNOWLEDGEMENTS
Dr Dawn Duncan, for being my supervisor. Marianne Hyslop, for acknowledging me in her acknowledgements.
1. Introduction
Many New Zealanders, both employed and unemployed, draw upon welfare to ensure that they have a sufficient standard of living. The state addresses insufficiency of income for different groups in different ways, and through different systems. Some groups’ financial support attracts conditionality aimed at inducing certain behaviours, while others benefit from universal, unconditional payments. This dissertation will apply a Marxist analysis in exploring the ways in which the welfare system in Aotearoa distinguishes between these two groups at the levels of law and policy, with a focus on the use of conditionality to incentivise employment. In today’s welfare system, this is exhibited in a complex system of incentives, sanctions and compulsory programmes aimed at discouraging “welfare dependency” and encourage movement into paid work. It will be argued that this conditionality is representative of a system which as a whole works primarily in the interest of employers and in the maintenance of capitalist production in New Zealand. For individuals within the welfare system, the outcome of employment is erroneously prioritised above other key outcomes in a manner that engenders social and individual harm.
This dissertation aims to provide a critique of New Zealand’s welfare law and policy. It will analyse the parallel historical development of the economy and the legal superstructure that serves it in three key chapters. In “Employment, Unemployment, and Work Incentives in Aotearoa”, an overview will be provided of the effects of unemployment, New Zealand’s welfare system, and the role work incentives play within it. In “Workers, Capitalism, and the State”, the development of the welfare system will be explored in relation to the changing form of capitalism in New Zealand. Finally, “Manufacturing the Dole Bludger” will relate the present state of the welfare system to its historic development and argue that the contemporary form of the welfare system is contingent on the state’s role in upholding New Zealand’s particular capitalist mode of production.
2. Employment, Unemployment, and Work Incentives in Aotearoa
This Chapter will illustrate the importance of income sufficiency for individual’s wellbeing, both for those who are in employment and out of employment. This establishes the basic metric upon which the welfare system will be judged in this dissertation—whether it provides sufficient material support to guarantee individuals’ wellbeing, and whether it supports good outcomes for individuals both in the short- and long-term. The second Part of this Chapter willthen outline the basic structure of the welfare system as it is understood in this dissertation, inclusive not only of mainline benefits administered by Work and Income but encompassing other forms of state support for individuals aimed at ensuring income sufficiency. This Part will then explore work incentives, where they exist within their welfare system, and why. Overall, this Chapter provides background on the welfare system and its importance.
a. The effects of unemployment, poverty, and beneficiary status
Sufficiency of income is essential, whether for those in work or in receipt of welfare. In 1998, the National Health Committee on Health and Disability found that “income is the single most important determinant of health”.1 Income is an essential prerequisite for many other determinants including housing, diet, and education, with the report concluding that the “surest” way to alleviate the health effects of poverty is to “alleviate poverty itself”.2 Studies of the health gap between rich and poor found that it could not be accounted for just in behavioural difference, such as the prevalence of smoking or drinking.3 A 1999 study on the effects of food poverty in New Zealand found that poor diet and inadequate food could not be explained by factors such as an inability to budget or cook, fast food spending, or lack of knowledge about a healthy diet; rather, income insufficiency was the problem.4 Income insufficiency also engenders a number of personal impacts, including relationship stress and declining emotional and personal wellbeing.5 It causes social isolation, as individuals are unable to reciprocate hospitality or travel.6 Unemployment is a risk factor for poverty, but it is not the only risk factor for poverty, which can also occur when an individual is in full-time employment.
1 National Advisory Committee on Health and Disability The Social, Cultural and Economic Determinants of Health in New Zealand: Action to Improve Health (June 1998) at 23.
3 Sally Jackman Child poverty in Aotearoa/New Zealand : a report from the New Zealand Council of Christian Social Services (New Zealand Council of Christian Social Services, Report, June 1993) at 21.
4 New Zealand Network Against Food Poverty Hidden Hunger: Food and Low Income in New Zealand (1999) at 2, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 87.
5 Methodist Social Services Centre Budgeting for Cuts: A Study of Poverty in Palmerston North after the April 1st Benefit Cuts (1992) at 28, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 104.
6 Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 106.
Where individuals do not have sufficient income from work or other sources, the welfare system provides support through monetary payments. Over time, these payments have varied in generosity and the nature of benefit recipience has shifted in response to policy. These changes have historically had a strong impact on the conditions that beneficaries face and their wellbeing while within the welfare system— for example, the 1990s saw benefit levels cut dramatically while eligibility requirements were significantly tightened. Families were recorded as feeling “so helpless that they could see no end to their struggle and hence were not looking after themselves, leading to mental, physical, and emotional neglect”.7 One single parent described the effect of the cuts in the following terms: “For myself it is like the light has been turned off at the end of the tunnel”.8 A school receptionist described “increased hardship; desperation; low self esteem; humiliation and hungry children”, and described interacting with a pre-school child who “had not eaten since the night before”, saying to the receptionist that their family had “got to get some money”.9 Today, New Zealand’s welfare system remains imperfect. The Welfare Expert Advisory Group (WEAG) report declared the system “no longer fit for purpose”, requiring “fundamental change”.10 The Working Group reported that eligibility rules failed to reflect the nature of contemporary life in New Zealand.11 For those who met eligibility rules, the income support provided is inadequate, failing to support the fulfilment of basic need, let alone alone “meaningful participat[ion]” in society.12 Studies of experiences in engaging with the welfare system highlight the “desperateness, sense of failure, stigmatising, hopelessness and frustration” of beneficaries.13
Engagement with the welfare system therefore does not in and of itself prevent the harms of income insufficiency. Unemployment itself also has significant negative impacts on individual wellbeing. A 2017 United Nations-commissioned report studied happiness at work, finding
7 Sally Jackman, above n 3, at 22.
8 Sally Jackman, above n 3, at 33.
10 Welfare Expert Advisory Group “Whakamana Tāngata: Restoring Dignity to Social Security in New Zealand” (February 2019) Welfare Expert Advisory Group <http://www.weag.govt.nz/assets/documents/WEAG- report/aed960c3ce/WEAG-Report.pdf> at 5.
13 Michael O’Brien, above n 6, at 106.
that being in employment had significant positive impact for self-reported wellbeing.14 Contrastingly, the significant unhappiness that corresponds with periods of unemployment has effects that endure beyond entering the workforce. Self-reported wellbeing also differs depending on the quality of that work, as those with higher job security and higher self-reported work-life balance were happier at work than those who had neither. There is evidence, for example, that job insecurity and precariarity has significant negative wellbeing impacts just as unemployment does.15
Income sufficiency is therefore essential for wellbeing—in material terms, with regard to health, and in terms of abstract aspects of individual wellbeing such as social belonging. Where an individual needs to draw upon welfare, the level of support it offers is important. It is also necessary to consider the conditions that individuals face while interacting with the welfare system, as well as the quality of the employment individuals gain upon leaving the welfare system. While it will not be considered in detail in this dissertation, labour rights are also important in informing factors that lead individuals to draw upon welfare—for example, a worker in one economy may be laid off in a recession where in another system of labour law their employment, and income, may have been protected. Overall, it is important to consider not only the material conditions and requirements of engaging with the welfare system, but also terms of entry and exit into the system.
b. The contemporary welfare system & work incentives
For the purposes of this dissertation, the “welfare system” is considered broadly and inclusive of a range of programmes which exist to address income insufficiency. As such, the contemporary welfare system spans several key pieces of legislation. The Social Security Act 2018 establishes the social security system as administered by the Ministry of Social Development—systems of benefits such as Jobseeker for the unemployed,16 sole parent
14 Jan-Emmanuel de Neve and George Ward “Happiness at Work” (April 2017) Sustainable Development Solutions Network < https://s3.amazonaws.com/happiness-report/2017/HR17-Ch6_wAppendix.pdf> at 145.
15 Tae Jun Kim and Olaf von dem Knesebeck “Is an insecure job better for health than having no job at all? A systematic review of studies investigating the health-related risks of both job insecurity and unemployment” (2015) 15 BMC Public Health at 8.
16 Social Security Act 2018, ss 20 to 28.
support,17 the supported living payment,18 or winter energy payment,19 in addition to corresponding administrative requirements and sanctions. The Income Tax Act 2007 establishes and sets administrative requirements for the Working for Families package such as the family,20 in-work,21 and parental tax-credits,22 as administered by the Inland Revenue Department. Although it will not be explored in detail, the New Zealand Superannuation and Retirement Income Act 2001 is another important element of the New Zealand welfare system,23 being the current administering document for New Zealand’s universal system of retirement income.
Work incentives encompass diverse forms of conditionality applied to welfare recipience, which can be broadly characterised as strict, repeated eligibility test and activity requirements.24 They seek to reduce long-term benefit recipience and encourage transition into or back into paid employment. They respond to the concern that the welfare state suppresses individuals’ incentive to shift into paid employment and reinforces issues of long-term employment.25 By increasing pressure on both the workers and the unemployed, they aim to increase workforce discipline,26 increase the number of those available for work, the flexibility of the labour market, and induce downward pressure on wages.27 They have been a persistent feature of our welfare system, and are not politically controversial—for example, the Fifth Labour Government’s flagship Working for Families programme’s in-work tax credit exists at the policy’s core, while the Fifth National Government’s 2010 Welfare Working Group
17 Social Security Act, ss 29 to 33.
18 Social Security Act, ss 34 to 42.
19 Social Security Act, ss 70 to 75.
20 Income Tax Act 2007 s MD 3.
21 Income Tax Act, s MD 4 to 10.
22 Income Tax Act, s MD 11 to 12B.
23 New Zealand Superannuation and Retirement Income Act 2001.
24 Gaby Ramia “Governing the Work-Welfare Relationship” in Governing Social Protection in the Long Term: Social Policy and Employment Relations in Australia and New Zealand (Palgave Macmillan, Cham, 2020) at 2. 25 Ian Greer “Welfare reform, precarity and the re-commodification of labour” (2016) 30 Work, Employment & Society 162 at 163.
focussed shifting individuals from the welfare system into employment.28 The WEAG report found that while work incentives have always existed, their emphasis has increased over time with work incentive-related obligations applying to larger categories of beneficiaries than before. The report found that the majority of obligations within the New Zealand welfare system are not work-related. Rather, they are “designed to elicit certain social behaviours or to transfer some administrative burden to the recipient”.29
Work incentives are deeply embedded within the Social Security Act 2018 and its predecessors. The contemporary Act’s purposes including helping those not in paid employment to support themselves and to help people “find or retain” paid employment;30 to impose on beneficiaries work-related requirements “where appropriate”.31 The Act’s principles similarly include view that paid work offers “best opportunity for people to achieve social and economic wellbeing”;32 that working age peoples’ “priority should be to find and retain work”;33 and for those for whom work may not “currently” be appropriate it is essential to assist them in “preparing” for work.34 The purposes and principles do not suggest that the system it establishes plays a role in securing “social and economic wellbeing” in and of itself, but nevertheless emphasise that employment is the means to achieve it. In New Zealand, this is complemented by the absence of the incorporation of social security rights into legislation such as the New Zealand Human Rights Act35 or New Zealand Bill of Rights Act.36 This may be contrasted with nations such as Finland, which declares a constitutional right to social security and “indispensable subsistence and care”,37 or China, which declares a constitutional right to “material assistance” as well as the state’s duty to develop “social insurance” and “social relief” to support it.38 New
28 Bryce Wilkinson “Welfare, Work and Wellbeing: From Benefits to Better Lives” (November 2017) The New Zealand Initiative <https://www.nzinitiative.org.nz/reports-and-media/reports/welfare-work-and-wellbeing- from-benefits-to-better-lives/document/508> at 9.
29 Welfare Expert Advisory Group, above n 10, at 41.
30 Social Security Act, s 3(a).
31 Social Security Act, s 3(e)(i).
32 Social Security Act, s 4(a). 33 Social Security Act, s 4(b). 34 Social Security Act, s 4(c).
35 New Zealand Human Rights Act 1993. 36 New Zealand Bill of Rights Act 1990. 37 Constitution of Finland (Finland), s 19.
38 Constitution of the Peoples’ Republic of China (Peoples’ Republic of China), art 45.
Zealand, has, however, ratified the Universal Declaration of Human Rights, which contains a right to socal security,39 as well as the International Covenant on Economic, Social and Cultural Rights, which also includes such a right.40
In the contemporary Social Security Act, specific obligations relating to work applying to some beneficiaries include the obligation to undergo work ability assessments,41 work-preparation obligations,42 work-test obligations,43 and obligations to work with contracted service providers.44 Failures to comply with obligations result in liability to sanction under Part 5.45 Sanctions arise from failure to comply with one or more obligation “without good and sufficient reason”,46 applying to obligations to undertake work ability assessments, work- preparation, work-tests, interviews, and working with contracted service providers.47 Sanctions span from a reduction in a main benefit for the beneficiaries’ first failure, to suspension for the beneficiaries’ second failure, and cancellation of the main benefit for their third failure.48 Additional sanction-related legislative requirements include the overriding requirement that MSD cancels a main benefit for any failure to comply with the work-test obligation to accept any offer of suitable employment.49 MSD holds responsibility to make the individual aware of their obligations, aware of consequences arising from failure to comply, and aware of rights to review and appeal related decisions.50
Even where these provisions apply predominately to those on the Jobseeker benefit (i.e., those deemed temporarily out of work and fit for later transition into work), structural changes mean that this category is inclusive of more people than before. Since 2013 for example, the Jobseeker benefit is inclusive of those with sickness or disability which precludes them from
39 Universal Declaration of Human Rights GA Res 217A (1948), art 22.
40 International Covenant on Economic, Social and Cultural Rights GA Res 2200A (1966), art 9.
41 Social Security Act, s 109(2)(b). 42 Social Security Act, s 109(2)(c). 43 Social Security Act, s 109(2)(e). 44 Social Security Act, s 109(2)(k). 45 Social Security Act, s 105(1).
46 Social Security Act, s 232(1).
47 Social Security Act, ss 233(a), (b), (d), (e), and (f).
48 Social Security Act, ss 234(a), (b), and (c).
49 Social Security Act, s 244(1).
50 Social Security Act, s 106(a) to (c).
employment but are nonetheless considered under Ministry of Social Development criteria as fit for later transition into work as well as single parents with children aged over 14.51 With a three-track system embedded below Jobseeker Support carrying temporary work exemptions, part-time, or full-time work expectations, extending work incentives to a broader number of beneficiaries than in the past. In the future, this may be expanded further, with the Leader of the Opposition promosing to sanction young beneficaries with health conditions or disabilities who fail to take up employment.52 Work incentives also exist within welfare that sits outside of the Social Security Act. Working for Families also embeds work incentives into its structure, although in a different character to that of mainline benefits. The in-work tax credit, administered under the Income Tax Act, exists as a measure to “make work pay”, seeking to ensure an income gap between those in paid employment and those not in paid employment, and so incentivise paid employment.53
3. Workers, Capitalism, and the State
The previous chapter outlined the contemporary welfare system, its importance, and the role of work incentives within it. In this chapter, the Marxist theory of the state is introduced. A Marxist approach to legal analysis assumes that the role of the state and law should not be seen as organic, but rather resultant from the ways in which they “correspond to and bolster the prevailing mode of production”.54 This enables the querying of the “false necessity” of existing relations”.55 Consistent with this approach, this chapter then explores the development of the welfare system in relation to the changing nature of capitalism in New Zealand, placing the contemporary welfare system into its historic context. Overall, it will argue that the welfare system has developed in response to the conditions of capitalist production in New Zealand.
a. Marx’s theory of the state
51 Beehive.govt.nz “Second stage of welfare reforms introduced” (press release, 18 September 2012).
52 Interview with Christopher Luxon, Leader of the Opposition (Simon Shepherd, Newshub Nation, Three, 13
August 2022).
53 Cabinet Paper “Future Directions: Working for Families” (31 March 2004) as cited in Child Poverty Action Group Incorporated (CPAG) v Attorney-General [2013] NZCA 402 at 20.
54 Paul O’Connell “Law, Marxism and Method” (2018) 16 Communication, Capitalism and Critique 647 at 649.
Marx defines capitalism primarily in terms of the relationship between the capitalist, who owns the means of production, and the worker who sells to that capitalist his labour for a wage. The relationship between worker and capitalist is considered inherently exploitative, a condition arising from the fact that the capitalist owns the means of production, rather than the worker, and the fact the worker’s wage is at a fraction of the value that their labour adds to the process of production.56 Instead, the wage is reflective of the cost of “maintaining and reproducing the worker and his family at a socially acceptable standard of living”.57 Where the costs of maintaining the worker exceed the value expropriated by the capitalist, the capitalist is unable to realise this surplus value as profit.58 Crisis occurs in the capitalist system where capitalists are unable to exploit labour at a rate sufficient to maintain continued production.59 Those who are not in work function as capitalism’s “reserve army”—the population who are “available for exploitation in expanding areas of the economy”, including those who are temporarily redundant or “stagnant”.60 The replenishment of the reserve army is essential in times of crisis, as it serves to reduce labour costs for the capitalist class and restore the profitability of production.61
The essential role of the state in this system is to aid in the maintenance of the working class and reproduce class exploitation.62 An analysis of the state and the law turns on assessing the “concrete material relationships that produce and sustain given legal or state forms”.63 To this end, a state utilises repression (in the guarantee of private property as the foundation of the capitalist system), ideology (appearing representative and class-neutral, legitimising the system), and economically (to moderate capitalism’s tendency to crisis).64 Together, these functions act in “response to the changing requirements of accumulation as capitalism develops
56 David Beggood “The Welfare State” in Paul Spoonley, David Pearson and Ian Shirley “New Zealand: Sociological Perspectives” (The Dunmore Press, New Plymouth, 1982) at 198.
60 Ian Greer “Welfare reform, precarity and the re-commodification of labour” (2016) 30 Work, Employment & Society 162 at 165.
62 David Beggood, above n 55, at 202.
63 Paul O’Connell, above n 53, at 650.
64 David Beggood, above n 55, at 202.
historically”, which are specific to each country.65 Lippet, in a non-Marxist analysis of capitalism, describes “supporting social structures of accumulation” as sets of institutions that support intense capital accumulation in a given period,66 which support considerable growth but eventually give way and are replaced as the economy enters a stage of stagnation. As such, capitalism survives through perpetual reinvention.67 This basic framework may be applied to the account of the welfare system’s development in this chapter.
In the following Part, these ideas will be applied to the development of the welfare system in New Zealand from the Liberal era to its contemporary form. It will be demonstrated that the welfare system should be viewed as predominately contingent upon the maintenance of the prevailing mode of production throughout its history, rather than borne from overarching principles that could be seen to supersede the capitalist system. The historical development of the welfare system in New Zealand can be seen as closely connected to the function of “blunting the edge of class antagonisms” in various stages of New Zealand’s capitalist development.
b. The development of welfare
Although the state’s foremost role is in upholding the existing structure of economic relations, that is not to say that the state does not play an essential role in that economy’s functioning within that structure.68 While democratic forms of government might universally enfranchise, empower workers, and restrict the state as a wholly unrestricted tool of capital,69 the basic relationship between the state and the existing mode of production remains unaltered.70 Notwithstanding the fact that the question of when state power is used is defined by problems invoked by the particular mode of production, immediately unprofitable decisions may be made where the “overriding aim of preserving the system intact is promoted”,71 with concessions
65 David Beggood, above n 55, at 203.
66 Victor Lippit “The capitalist system” in Victor Lippit “Capitalism” (Taylor & Francis Group, Abingdon-on- Thames, 2005) at 12.
68 Paul Sweezy “The Theory of Capitalist Development: Principles of Marxian Political Economy” (4th ed, Dennis Dobson Ltd., London, 1942) at 244.
made in the name of “blunting the edge of class antagonisms”.72 In an advanced capitalist economy which operates on the basis of capital-intensive exploitation and increased labour productivity, the state operates to develop a skilled labour supply through social services and welfare.73 In effect, the advent of the welfare state “re-shaped labour markets by interfering in various ways with the reserve army”, and strengthened the bargaining power of the workers while allowing some to abstain completely from the workforce.74 This analysis will be applied to three key periods of the development of New Zealand’s welfare system.
Fifty years after the signing of the Treaty of Waitangi, New Zealand was for the first time predominately urban, born locally, and dominated by the agricultural economy.75 Early forms of social welfare in this environment were provided on an ad hoc basis. Charitable Aid Boards, established by the state in 1885, offered rations and clothing to the poor after subjecting them to “an extensive investigation based on strong judgements about morality and self-help”.76 With help contingent on interrogation to assess moral character, they were largely hated.77 Both Charitable Aid Boards and private providers also ran individual institutions offering food and shelter, housing the elderly, disabled, ill, orphans, and other groups together in generally poor conditions.78 Community networks played an important role, with workers and women both offering informal support within their communities.79 Friendly societies and unions also ran cooperative schemes that provided members with income support.80 As the “duty and privilege” of the rich, private charity also played a role.81
72 Paul Sweezy, above n 68, at 249.
73 David Beggood, above n 55, at 203.
74 Ian Greer, above n 59, at 166.
75 Margaret Werry Performing Leisure, Liberalism, and Race in New Zealand (University of Minnesota Press, Minneapolis, 2011) at xviii.
76 Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 14.
77 Stephen Eldred-Grigg New Zealand Working People 1890-1990 (Dunmore Press, New Plymouth, 1990) at 70.
Working life was difficult and physically precarious. Masses of unemployed men roamed the countryside or dockyards seeking work and reliant on meals given as charity by owners of large, wealthy estates,82 or stand outside manufactories in hope that an industrial accident would necessitate replacement labour power.83 The high incidence of workplace injury left left many vulnerable to unemployment and poverty,84 while the advent of old age was necessarily accompanied by work for as long as the individual’s body could sustain it.85 In 1890 alone, an eight year-old girl was found with her head crushed by a drive shaft; a sixteen year-old boy faced ambutation after having had his arm crushed by a flax stripper; two laundresses drowned in their tubs; and a cannery worker “drowned in a vat of boiling soup”.86 Although economic conditions in New Zealand had improved considerably, the colonial economy remained subject to a dramatic boom-and-bust cycle, meaning stable employment was also rare.
This was a period of widespread economic dissatisfaction and industrial upheaval. Within two years, union membership had grown from around 5,000 workers to at least 40,000, and 1890 saw industrial action at a scale unparalleled in New Zealand’s history thus far.87 As unions were unable to financially support those workers who were on strike in the long-term, and employers simply hired others who were willing or needed to work, this action failed.88 This environment was also the precursor to an election which was, for the first time, inclusive of the suffrage of working class men,89 albeit those who had the privilege of stability—those who had been in the colony for one year, and in their electorate for six months.90 In this election, the Liberal government was elected, and Parliament for the first time included five working class parliamentarians.91
82 Stephen Eldred-Grigg, above n 76, at 9.
90 Qualification of Electors Bill 1879 (23-2), cl 2(2).
91 Stephen Eldred-Grigg, above n 76, at 19.
The Liberal Government oversaw a massive project of nation-building and expansion of the state characterised by a “gregarious spirit of capital expansion and social managerialism” overseen by the state.92 This included the first public pension, extended first to the elderly and widows, later to “dusted” miners, and, later, to “deserving” poor families with three or more children.93 Morality and behaviour were directly linked to eligibility—people without good moral character, who “had not led a sober or reputable life for the previous five years”, had left their wife or children, or been imprisoned for 4 months within the last 12 years were ineligible.94 This was in addition to financial means testing.95 Accompanying this reform were moral concerns—workers who had failed to be thrifty and so lacked the savings to support them in old age, it was argued, should not be rewarded with state support. 96 The welfare system continued to develop slowly in this period. The Widows Benefit was first introduced in 1911, providing money to widows with children.97 In 1926, the first family assistance was introduced, restricted to families with three or more children. The benefit was paid to the mother, but they were ineligible if the husband did not sign the application.98
The New Zealand Herald of 1891 described what it saw as an uneasy “truce” between capital and labour, as labour sought to “make themselves an aristocracy”, urging that there was no need for “violent or revolutionary measures”; rather, the solution to the poverty of urban wage- earners was to disperse them around the virgin countryside as “independent cultivators of the soil”.99 These fears did not eventuate under the early Liberal period. The trade union movement grew significantly after 1894, when the Industrial Conciliation and Arbitration Act rendered the state the “very foster-parent their organisations”.100 In surrendering the right to strike, the new mechanism of the Arbitration Court allowed workers to obtain a binding award regarding
92 Margaret Werry, above n 74, at xviii.
93 Stephen Eldred-Grigg, above n 76, at 71.
94 Michael O’Brien, above n 75, at 14.
96 Stephen Eldred-Grigg, above n 76, at 105.
97 Michael O’Brien, above n 75, at 15.
99 New Zealand Herald (Editorial) The New Zealand Herald and the Daily Southern Cross (New Zealand, 7 January 1891) at 4.
100 Industrial Conciliation and Arbitration Act 1894; D.W. Crowley “An outline history of the New Zealand labour
movement, 1894–1913” (1951) 4 Australian Historical Studies 367 at 367.
their wages and conditions, increasing wages and ensuring industrial stability during an economically prosperous period.101 The Act achieved its goal in preventing disruptive and widespread industrial action,102 at least in the short-term. Declining economic conditions at the turn of the 20th century shifted moods amongst the union movement. The doctrine of “direct action” led to the founding of the Red Federation, a group that abstained from the function of the Arbitration Court but was still legally able to function under the Industrial Conciliation and Arbitration Act.103 Through early success, it attracted greater membership, leading the docile Trades Councils to develop their own federation and a political arm.104 It was only after those unions who did not wish to lose the benefits of the Arbitration Court failed to join 1912’s violently suppressed “General Strike” that philosophical differences between the groups were ironed out.105 Faced with this failure, unions again submitted themselves to the arbitration system, establishing the compromise upon which the New Zealand Labour Party was later formed.106
Analysis
The Liberal era’s “social laboratory” can be seen as arising directly from working class suffrage and in response to unprecedented class tension and industrial action. The social contract that resulted was one that co-opted and “sponsored” contemporaneous working class movements while developing infant forms of social welfare. The progressive policies of the Liberal era should be seen primarily in light of the society that it was attempting to build. Described in one account as a “promotional state”, the Liberal Government fused highly interventionist policies with a constructed narrative of the nation to be told not only domestically, but internationally, prejudicially benefitting Pākēha while co-opting indigeneity as a national brand.107 Faced with unprecedented industrial upheaval, policies benefitting newly enfranchised working classes were representive of state co-option into the Liberal state’s brand New Zealand. Roper notes
101 D.W. Crowley “An outline history of the New Zealand labour movement, 1894–1913” (1951) 4 Australian
Historical Studies 367 at 367.
102 Gordon Anderson and Michael Quinlan “The Changing Role of the State: Regulating Work in Australia and
New Zealand” (2008) 95 Labour History 111 at 120.
103 D.W. Crowley, above n 100, at 368.
107 Margaret Werry, above n 74, at xix.
that expanding suffrage under capitalism has historically occurred only as a possibility where it is compatible with the maintenance of production in each state’s context—for example, German capitalists saw authoritarian movements as a means to curb working-class agitation and restore profitability.108 One clear example is the Liberal state’s dual role as facilitator and neutraliser of labour interests through the Arbitration Court. It is important to note that the Liberal era’s relative period of labour stability broke down as the Arbitration Court’s co-optive mechanism failed to subdue the antagonistic interests of workers and the state, and it was only through state violence against unionism that the conditions were established for a later social contract to be developed. In this manner, welfare served as one mechanism of co-option of working class interests into the Liberal construct of New Zealand’s nascent state, at once providing for these interests while attaching conditionality to instill certain behaviours and responding with violence where the social contract broke down. The extension of welfare in this period is therefore representative of extension of a certain view of social citizenship to the working classes.
The election of the First Labour Government in 1935 saw rapid and widespread change for working people, with the Minister for Labour declaring that he would not be satisfied “until the workers of this country are living up to the standard of an American millionaire”.109 Michael Joseph Savage’s government built up the welfare state considerably, embedded with a “spirit of generosity” which contrasted with early “paternalistic, coldly dissuasive and condescending” state charity—for working people, incomes, housing, health, and schooling improved considerably.110 It also introduced compulsory unionism, significantly increasing union membership in New Zealand. Central to the First Labour Government’s welfare reforms was the Social Security Act 1938.111
The Act introduced the Sickness and Invalids Benefits, as well as formalising unemployment
benefits, which had been introduced in a limited, ad hoc fashion during the Great Depression.112
108 Brian Roper “Capitalist expansion, globalisation and democratisation” in The History of Democracy: a Marxist Interpretation (Pluto Press, London, 2013) at 216.
109 Stephen Eldred-Grigg, above n 76, at 204.
112 Michael O’Brien, above n 75, at 15.
Family assistance was also extended, and the Family Benefit was able to be withheld if the applicant “was not of good moral character and sober habits”.113 The Widows Benefit could also be denied on these grounds or if the benefit was not being used to benefit the widows’ children.114 Under the Act as initially enacted, the Social Security Department was able to reduce the benefit entitlement paid to recipients if it was considered that the full rate was not required. This provision was commonly used to reduce the benefit rate received by Māori, which was common practice until it was prevented by the Māori Social and Economic Advancement Act.115
Social security continued to be largely funded through general taxation under the First Labour Government’s scheme, but the social security tax was introduced to supplement this funding,116 applied at a flat rate of 5%.117 There was no legislative mechanism for the adjustment of benefits in response to the changing cost of living or income levels. As such, during the lengthy period of National Party rule in the 1950s and 1960s, the government instead relied on discretionary “supplementary assistance” as a means to address poverty.118 The result was that benefit levels fell in relative terms, with state spending falling from 44% of the cost of social security in 1947 to 26.5% in 1954 and the social security tax making up the remainder of expenditure.119 The flat rate social security tax was regressive, disproportionately impacting lower income earners, with the result that the poor paid more for the social security system that they required the most.120
In ensuing decades, the welfare system continued to develop. In response to growing poverty among the elderly and single parent families, the 1972 Royal Commission on Social Security was formed.121 The Commission argued that benefits should be paid on the basis of need,
113 Michael O’Brien, above n 75, at 16.
114 Māori Social and Economic Advancement Act 1945; Michael O’Brien, above n 75, at 16.
117 Ministry of Culture and Heritage “Social Security Act passed” (4 September 2020) New Zealand History
https://nzhistory.govt.nz/social-security-act-passed.
118 Michael O’Brien, above n 75, at 17.
“irrespective of the cause of need”. It also argued that benefit levels should be set at a level that allowed “any citizen to meet and mix with other New Zealanders as one of them, as a full member of the community—in brief, to belong”.122 On the Commission’s recommendation, the means-tested Domestic Purposes Benefit was introduced in 1973 for those with dependents who had “seperated from their partner”, “unmarried mothers”, and those who had caring responsibilities.123 While the ultimate policy was gender neutral, the majority of beneficiaries were women, a trend which continued into 2005 (90%).124 ACC, introduced in 1972, diverged significantly from an earlier tradition of flat-rate social security payments.125 By paying injured workers in proportion to what they had already earned, the programme “[freezed] the inequalities of the market economy”,126 thus supporting those in the middle class commensurate to their middle classness and the lower class commensurate to their lower classness.
Analysis
The First Labour Government as driver of the post-war social contract emerged directly from the state’s assertation of its monopoly on violence over the union movement, and it granted vast concessions to workers through a greatly expanded welfare state and compulsory unionism without meaningfully challenging the underlying system. This thread of co-optation continues under the First Labour Government’s largescale welfare expansion. If the Liberal era was “backed by working people not because the Liberals represented the working class, but because the political working class did not yet exist”,127 the First Labour Government certainly veered closer to governing for working class in the broadly generous and universal nature of its welfare programmes. However, the middle class primarily buoyed this government as they gained significant beneft in supervising a rapidly expanding state bureaucracy, as well as from generous and diverse benefits and subsidies given to business.128 The state, in return for support for the middle class, acted to “disciplin[e] workers, offering employers a labour force better
122 Michael O’Brien, above n 75, at 19.
126 Stephen Eldred-Grigg, above n 76, at 207.
and better drilled, taught, punished and bribed, than in previous generations”.129 Working people gained power as a “junior partner” to the middle class, which was able to impose its values on the growing welfare state and thus working people, who remained a “problem to be solved”.130 In the domain of labour policy, compulsory unionism resulted in unions that were less militant, and complacent, and the goal of workplace policy was an “orderly state” and a “disciplined workforce”, with industrial arbitration as a means of economic stability.131 While welfare in this period saw huge material change for individuals, it remained legislation and policy unconnected to substantial embedded, legal rights—for example, as funding was unentrenched, welfare spending quickly declined in real terms. Welfare policies continued to embody paternalistic conditionality attached to normative moral values.
The Neoliberal Fourth Labour Government was elected in 1984. The Labour Party, having officially dropped socialism as its political goal in 1951 and by 1963 having party leadership claiming the end of “real class divisions”, had materially shifted from a party represented by the working class in 1935 to one that was represented by doctors, lawyers, academics, and businessmen.132 As the Fourth Labour Government carried largescale restructuring of New Zealand’s society and economy, those receiving an unemployment-related benefit grew from 50,136 in 1984 to 149,078 in 1990, while the average length of unemployment benefit recipience also increased.133 The growing unemployment of the period was not felt equally— economic restructuring hit industries that employed working people, Māori, and Pacific peoples particularly hard.134 Welfare saw a fundamental shift in the policy focus changing from “increasing labour demand to a emphasis on labour supply and changes to that supply as the response to unemployment”.135 In practice, this meant that policy focussed on training programmes in response to local employment demand, rather than in supplying employment opportunities to individuals.136 With regards to public opinion of the era, the 1988 Royal
129 Stephen Eldred-Grigg, above n 76, at 206.
133 Michael O’Brien, above n 75, at 22.
Commission on Social Policy found that lone parents and the unemployed were the groups thatthe public was most unwilling to increase taxes to support further.137
The election of the Fourth National Government in 1990 saw a continuation of Labour’s programme of reform. Welfare reform both increased stringency of eligibility requirements and dramatically cut welfare entitlements—for example, single parents lost 20% of their income, while those receiving an unemployment benefit lost 15%.138 The immediate rationale was that of the affordability of supporting increased numbers of beneficiaries, and the second was centred on the necessity to increase the gap between those on welfare and those in work and so incentivise employment.139 Alongside this reform, National reformed industrial relations legislation in a manner that severely weakened union membership and saw wages fall.140 It was argued that additional income following the cuts could be provided on an individual, targeted basis—hardship grants were available in an emergency, and the Special Purposes Benefit could be provided were there was an ongoing gap between incomings and outgoings, provided families met part of the gap (i.e., moving to cheaper accommodation).141 Not dissimilarly to during the First National Government, the reform led to greater use of discretionary programmes to meet basic need.142
Analysis
This era of welfare’s development, arising directly from a crisis of capitalism from the 1970s onwards, saw the institution of a novel social contract which sought to restore market power to renew capitalism’s profitability. From 1984, the Fourth Labour and National Governments pursuit of Neoliberal reform saw widespread social and economic change. Although it was the Labour Government that instigated the economic restructuring that disproportionately impacted working class New Zealanders, it was the National Government that took this ideology to its logical conclusion, dramatically undermining the welfare state and decimating unions as an economic force for working people. Neoliberalism’s ideal of welfare, with greater emphasis on individualised service and discretional support, is again representative of an
137 Michael O’Brien, above n 75, at 18.
assertation of value over working people. Policy reflected a view that “poverty, income inadequacy and unsatisfactory living standards were seen to stem from individual failings” and were issues to be dealt with “individually”.143 The welfare system no longer justified its existence on grounds of protecting beneficiaries from poverty, being replaced by the notion that it must justify its existence by protecting beneficiaries from “dependence”.144 In 1993, dependence did not feature as a major issue presented to the incoming minister, but by 1996 the Department of Social Welfare’s Strategic Direction document features the term a total of 43 times.145 As well as reflecting ideas of poverty as a moral failure, developments in welfare also reflect the abstract nature of welfare rights as the “Mother of All Budgets” decimated social security overnight. Accounts in Chapter 2 describe the immense individual cost arising from this policy.
c. Historic appraisal
At all key stages of welfare’s development, the importance of contemporary conditions of capitalism can be seen in informing how the state has responded to working class interests— either through methods of co-optation, as in the Liberal era and that of the First Labour Government, or outright suppression. Historically being tied with a paternal state which enforces normative moral standards as a condition of benefit recipience, changes in the welfare system can be seen to reflect the state’s need to develop a working class that reflects the needs of production. In later periods of welfare’s existence, the system as an enforcer of normative morality may not exist so brazenly as in its early development. This notwithstanding, conceptions of morality were and continue to be spun up in conceptions of responsible saving and spending as well as a responsible life. While cultural ideas of virtue can exist prior to their incorporation into law and vice versa, the following chapter will argue that the state should be seen as both reflecting and perpetuating these ideas in the support of capitalist production. In the context of the state maintenancing a given mode of capitalist production, the law should be examined not only in this light but also to what ends it serves.
4. Manufacturing the Dole Bludger
143 Michael O’Brien, above n 75, at 108.
In the prior Chapter, it was argued that New Zealand’s welfare system developed in a manner that supported the development of capitalist production in New Zealand. In this Chapter, evidence as to work incentives’ material outcomes is assessed. This is then applied to neoliberal ideas of social citizenship, being the dominant governing ideology in New Zealand. Finally, both are analysed in relation to the Marxist theory of the state and in particular the state’s ideological function. It will be argued that work incentives produce a range of adverse outcomes for individuals, and that moving individuals out of the welfare system is not a neutral good. The absence in New Zealand of incorporated law protecting social welfare forms a key normative gap which advantages capitalist interests, while structural choices around welfare recipience and choices as to which groups face conditionality reflect and embed narratives about the deserving and undeserving poor. The state, performing its ideological role in the maintenance of the reserve army of labour and of capitalism, helps to manufacture the “dole bludger”.
a. The operation of work incentives
If work incentives affect those who, predominately poor, exist on the margin of employment and unemployment, then it is necessary to look not only at work incentives and experiences within welfare system, but also work incentives and what occurs upon exiting the welfare system. With both the importance of the welfare system as final safeguard of income sufficiency as well as the current systems’ failures established, this Part will examine the material impacts of work incentives both for those inside the welfare system and transitioning out of it. This will be examined in two respects—first, their efficacy in moving individuals into work and the quality of that work; second, their broader impacts on individuals.
In New Zealand’s case, the WEAG report found inconclusive evidence as to the efficacy of obligations and sanctions encouraging desired behaviours such as employment, while noting evidence that they increase long-term job insecurity and disengagement from the welfare system.146 Research finds that in increasing motivation to “escape” a “demotivating and exhausting” welfare system, workers are incentivised to take lower-paying jobs and employers are incentivised to offer lower-paying jobs.147 Research of American experiences with what are described as welfare “activation” policies found that reform aiming to increase incentives
146 Welfare Expert Advisory Group, above n 10, at 41.
147 Ian Greer, above n 59, at 168.
to move into work met many of its primary goals, being increased self-sufficiency with little indication of harm to children.148 This notwithstanding, there was little evidence of material benefit to individuals in increased incomes or a reduction in poverty—many were, in fact, financially worse off than if they had remained within the welfare system.
Turning to broader impacts, the WEAG report described negative outcomes such as increased poverty and crime, and worsened health outcomes.149 In the United Kingdom, the phased introduction of Universal Credit (reform characterised by the streamlining of various benefit types into a single payment and increased conditionality to induce greater employment), was found to have resulted in a 6.97% increase in the incidence of self-reported psychological stress among the unemployed subject to the policy with little effect on employment status.150 The application of benefit sanctions in the United Kingdom, additionally, has been found to lead to increase poverty, debt, and risk of destitution.151 For those with mental illness, such conditionality was found to risk “triggering and exacerbating mental illness whilst simultaneously pushing many further away from the possibility of paid work”.152
Overseas evidence also finds that such policies increase pressure on case workers.153 In the 1990s, analysis of increased conditionality and reliance on discretionary programmes to address need in New Zealand suggested that they lead to barriers in terms of staff knowledge, difficulties with complex application processes, and variation in the quality of the service provided.154 It was found that the discretionary nature of the Special Needs Grants, for example, saw discretion exercised over clients “perceived ‘genuineness’”, the amount provided, the recoverability or non-recoverability of the grant, and over opportunity to apply,
148 Bryce Wilkinson, above n 27, at 23.
149 Welfare Expert Advisory Group, above n 10, at 41.
150 Sophie Wickham, Lee Bentley, Tanith Rose, Margaret Whitehead, David Taylor-Robinson, and Ben Barr “Effects on mental health of a UK welfare reform, Universal Credit: a longitudinal controlled study” (2020) 5 Lancet Public Health 157 at 162.
151 Peter Dwyer, Lisa Scullion, Katy Jones, Jenny McNeill, and Alasdair Stewart “Work, welfare and wellbeing: The impacts of welfare conditionality on people with mental health impairments in the UK” (2019) 54 Soc Policy Admin 311 at 318.
153 Ian Greer, above n 59, at 168.
154 Department of Social Services An Evaluation of the Special Needs Grants and Special Benefit Programmes
(1993) at 20, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 110.
among others.155 In these cases, it is the beneficiary who bears the material consequences of pressure on case workers. Another example of the impacts of reliance on discretionary support is found in the Downtown Community Ministry’s 2002 study which found that Pākehā were on average 60% more likely to receive the Special Purposes Benefit than Māori applicants, and 83% more likely than Pacific Islander applicants.156 It can therefore be seen that individualised, complex, and discretionary systems of support can degrade outcomes resultant to the system’s growing complexity, while also offering greater opportunity for individual discrimination.
A number of conclusions can be drawn from this evidence. If the goal of work incentives is to move people out of the welfare system, they appear to succeed—if only through dissuading engagement with the a hostile welfare system altogether, given the mixed evidence as to their efficacy in moving individuals into paid work. If work incentives are predicated on the notion that employment in and of itself characterises a higher quality of life, then the evidence suggests this is incorrect, as it is clear that “self-sufficiency” is not a neutrally good outcome. If the quality of that employment in terms of income or security is low, outcomes which work incentives appear to embed, then there is little benefit for the individual. “Self-sufficiency”, rather, does not necessarily reflect any gain for anybody, save the fact that there is one fewer beneficiary that is “dependent”. Finally, the increased individualisation, discretion and administration that conditionality demands increases pressure on case workers, with any adverse consequences necessarily falling to beneficiaries. In monetary terms, the WEAG report also notes the financial costs associated with administering and complying with such obligations and sanctions.157
These are the outcomes of conditionality as imposed on one group of state welfare recipients, but not others. Where it is the poor that are most likely to interact with the welfare system to begin with, and the poor that are therefore most likely to be subject to this conditionality, it is the poor that these impacts predominately effect. In a push for self-reliance, such benefit recipients are inventivised to take lower-paying, insecure jobs in order to exit the welfare
155 Downtown Community Ministry Widening the Gaps: Bias in the Administration of Welfare to Those Most in Hardship (2002) at 2, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008) at 111.
156 Michael O’Brien, above n 75, at 112.
157 Welfare Expert Advisory Group, above n 10, at 41.
system with no guarantee as to material gains in come. In the following Part, neoliberalism will be explored as the ideological justification for such policies in the contemporary era.
b. The Neoliberal citizen
Neoliberalism, the dominant ideology in New Zealand, will be demonstrated to form a rationalisation of harmful welfare outcomes. In its view that redistributive policies exist in opposition to the cardinal value of economic efficiency and that they incentivise further inefficiencies, neoliberalism masks what are effectively normative judgements about which workers deserve to benefit from increased bargaining power in the labour market. Furthermore, it inherently prioritises the interests of employers—the satisfaction of which is seen as contributing to the common good—and correspondingly neglects the interests of individuals, creating a tiered view of social value. Finally, it erroneously presupposes the fact of employment as a neutral good in a manner that justifies incentive policies while ignoring the costs of resultant insecure employment.
The concept of liberal neutrality proposes that the state should remain “neutral on the good”. The branch of “justificatory neutrality” focusses on “legitimate reasons for governmental action”, rooting policies in the basis that they appeal to all, and presupposing a universally acceptable common ground.158 “Consequential neutrality” shifts this focus to the outcome of the policy on the basis that “each kind of life [should be] equally easy to lead”.159 Policy should therefore be focussed on “help[ing] or hinder[ing] different life plans to an equal degree”.160 What is shared is that the liberal state should establish basic fair conditions, favouring no specific view, and that the burden then rests on the individual to set and achieve their respective goals.161 Liberal neutral institutions, then, stress the importance of equal fundamental rights as the basis “to achieve the full and informed exercise of our moral powers”.162 These include
158 Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120
Journal of Business Ethics 473 at 474.
159 Ronald Dworkin “The Place of Liberty” in Sovereign Virtue: The Theory and Practice of Equality (Harvard University Press, 2000) at 154.
161 Sandrine Blanc, above n 157, at 475.
162 Peter de Marneffe “Liberalism, Liberty, and Neutrality” (1990) 19 Philosophy and Public Affairs 3 at 257 as cited in Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120 Journal of Business Ethics 473 at 475.
freedoms of thought, expression, and association, while “primary goods” such as income and wealth are to be fairly distributed to all.163 At work, this is supported by free market institutions such as freedom of contract, free choice of occupation, and the labour market. Individuals are free to opt for the workplace that best suits their “conception of the good”, “given [their] talents and preferences”.164 With relation to welfare, the concept of “moral hazard” holds that redistributive policies insulate individuals from the costs of certain choices, incentivising further decision-making contrary to the social interest.165 In short, alleviating income insufficiency embeds income insufficiency. By decreasing protection from incentives to seek paid work, welfare reform aims to reduce this “moral hazard”.166
Neoliberalism emphasises an ideal of social citizenship defined by individual’s “[maximisation] of private rational self interest” and considers economic redistribution in opposition to the cardinal value of efficiency in a free market that trends by nature towards maximum wellbeing.167 Whereas earlier economic orthodoxy saw redistributive measures as a means through which to achieve efficiency, neoliberalism emphasises that redistribution produces incentives towards inefficiency that curb long-term wealth and wellbeing.168 Neoliberalism is then relatively silent on wellbeing within work, providing that the common baseline of basic fair conditions is fulfilled—this, for example, including the preconditon of freedom of contract, which assumes that contracts “set freely in a just environment” are to be upheld,169 while ignoring the effects of economic and cultural imperatives to seek such employment. Nussbaum argues that liberalism’s focus on workplace egalitarianism and silence on workers’ interests within the workplace contradicts addressing moral failings within work.170 A focus on exclusively increasing primary goods “precludes diving into the complexity and richness of human life”, and fails at addressing “whether [the worker’s] life is
163 Sandrine Blanc, above n 157, at 475.
165 Martha McCluskey “Efficiency and Social Citizenship: Challenging the Neoliberal Attack on the Welfare State” 78 Indiana Law Journal 783 at 807.
167 Martha McCluskey, above n 164, at 786.
169 Sandrine Blanc, above n 157, at 480.
such that he is capable of using the resources he is given in a truly human manner”.171 It is then a fundamental failing that liberalism presupposes work as the moral ideal while failing to address its internal morality.
McCluskey emphases that arguments surrounding disincentives to seek work can be reduced to a discussion of relative bargaining power, as welfare programmes enable individuals to avoid the costs of joblessness.172 Underpinning the idea of “moral hazard” is therefore a normative judgement about moral issues arising from welfare recipients having greater bargaining power relative to their potential employers.173 If welfare increases workers’ bargaining power relative to employers, it also necessarily and correspondingly decreases employers’ bargaining power relative to workers.174 Neoliberalism considers that it is an issue where workers are able to decline a moral imperative to work in low-paying jobs, but it is not an issue that employers are reliant on low-paid labour—and, as such, an inhospitable welfare system offers employers protection from costs such as scarce labour, increasing wages, or offering better conditions for workers.175 Neoliberalism presupposes that employers’ gains are “efficient” on grounds that any arising costs are the workers’ responsibility, represented through a mutually benefitting employment contract; conversely, workers who avoid low-paying jobs are representative of private gain at the public’s expense.176 Implicitly, neoliberalism holds that certain fulfilled private interests benefit society as a whole—and it is not the interests of low-paid workers, tilting market power towards employers.
In the American context, the Civil Rights Movement also had important impacts on welfare rights. Prior to the Civil Rights Act, welfare benefits that systemically targetted white widows were seen as virtuous on grounds that this in fact increased their capacity for choice in the market.177 Contrastingly, discrimination against Black and other groups in the provision of
171 Martha Nussbaum (1990) “Aristotelian Social Democracy” in Liberalism and the Good (Routledge, 1990) at 215 as cited in Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120 Journal of Business Ethics 473 at 475.
172 Martha McCluskey, above n 164, at 809.
benefits was seen as virtuous on grounds that it declined them greater capacity for choice in the labour market.178 The extension of this programme was innatively tied to normative judgements around preserving pre-existing racial caste systems in the labour market, which McCluskey argues demonstrates that the neoliberal “moral hazard” argument relates not to the disincentives themselves, but to which groups these incentives should rightfully be distributed.179
c. The state and ideological mystification
The state acts to legitimise class exploitation by appearing representative and class-neutral, legitimising the capitalist system.180 This Part will argue overall that welfare is primarily constructed in support of capitalist production. This will will be argued in two points. First, it will be argued that welfare is unsupported by substantive legal rights and remains the domain of policy, enabling harsh treatment against beneficiaries in order to maintain the reserve army of labour. Second, it will be argued that structural divisions within welfare provision in New Zealand exist as part of the state’s ideological function in legitimising class exploitation, and that the selective application of conditionality ensures that exploitation can be sustained.
Neoliberalism’s rationale for harsh treatment against the dole bludger holds that redistributive policies are necessarily inefficient, and are carried out with reluctance. Consequently, long- term benefit “dependency” is to be curbed. Evidence around work incentives suggests that achieving the fact of employment does not necessarily benefit the individual concerned in material terms and in fact embeds job precariaty, despite the policies achieving their stated goal in encouraging employment. It is apparent that, in law and policy, addressing income insufficiency or ensuring quality of life is an issue subsidiary to whether employment is achieved—or, in other terms, an issue subsidiary to discouraging benefit reliance. By implicitly favouring the interests of employers above working people, and undervaluing workers’ interest in high quality income and employment, neoliberalism prioritises the replenishment of the reserve army of labour over working people. At the same time, there is no substantive law in New Zealand that directly asserts or protects an individual’s interest in a high quality of life.
178 Martha McCluskey, above n 164, at 810.
180 David Beggood, above n 55, at 203.
The New Zealand Bill of Rights Act (NZBORA) is silent as to economic interests, despite New Zealand being signatory to the International Covenant on Economic, Social and Cultural Rights (CESCR). Where issues directly relevant to welfare have been tested in the courts, such as in CPAG v Attorney-General, it has been on the basis of discrimination.181 In that case, the Working for Families’ IWTC was found to constitute discrimination on the basis of employment status under the Human Rights Act.182 Nevertheless, in applying the Bill of Rights Act’s “demonstrably justified” test, such discrimination was found to be justified on the basis that “in matters involving social security and the allocation of spending, a greater degree of leeway will be afforded to the decision maker’s choice”,183 and that that off-benefit rule was proportionate to the objective of providing an incentive to work.184 Another case where the unincorporated right to adequate housing was tested on grounds that the Government failed to consider their international obligations was Lawson v Housing New Zealand.185 This case came in the context of neoliberal-era state housing reform which saw market rents instituted with the justification that the novel accommodation supplement would be sufficient address income insufficiency with regard to housing costs.186 In the plaintiff’s case, their inability to pay market rent led to their eviction.187 Williams J found that the Court could not examine the material impacts of the policy on the right to adequate housing, and could only consider procedural matters such as whether the right to adequate housing was considered in the policymaking process.188
Such rights were not incorporated into NZBORA on the basis that they are “incapable of judicial resolution”.189 It is contended that such rights require the courts to delve into issues of
181 Child Poverty Action Group Incorporated (CPAG) v Attorney-General [2013] NZCA 402.
185 Lawson v Housing New Zealand [1996] NZHC 1528; [1997] 2 NZLR 474 (HC).
187 Daniel McDougall, above n 182, at 90.
189 Geoffrey Palmer New Zealand’s constitution in crisis: reforming our political system (McIndoe, Dunedin, 1992) at 57.
social policy to which they are ill fit,190 notwithstanding the fact that the judiciary makes independent decisions of immense consequence with regard to individuals each day. McDougall argues that the Bill of Rights Act already imposes costs on the Crown—for example, in providing for the right to legal aid, or the right to fair elections, both of which impose costs on the Crown in order to be vindicated.191 The judiciary also imposes direct ongoing costs on the state in sentencing criminal offenders.192 Furthermore, this view obfuscates the costs of alternatives. Where work incentives may move the costs of maintenancing a workers’ poverty off the Ministry of Social Development’s budget, there are economic, wellbeing, and other social costs associated with that same poverty being maintenanced by an insecure, low quality, and low pay job. The rights that are embedded in New Zealand law are, then, not neutral or without cost, but representative of a certain view as to which rights and interests are acceptably apolitical and neutral, and which are not. Notwithstanding their importance for human dignity, material rights to sustenance are also a necessary prerequisite to the sort of political rights guaranteed by our law. This point has been affirmed in South African law, a jurisdiction where CESCR rights have been incorporated:193
“There can be no doubt that human dignity, freedom and equality [...] are denied to those who have no food, clothing or shelter. Affording socio-economic rights to all people therefore enables them to enjoy [civil and political rights].”
Where the courts defer to decision-makers who are able to dramatically undermine individuals’ rights overnight on the basis that the decision-makers’ ideological crusade sufficiently reflected on those rights’ existence, it is difficult to say that these rights have a material existence at all. Furthermore, just because a decision is deferred in the legal sphere does not mean that the costs of addressing it do not exist elsewhere. The absence of a sound legal framework through which to assert such claims is necessarily a distributional choice, accepting the inequality of the market while asserting that the failures of social security are a cost to be borne individually. This further reflects McCluskey’s argument holding that neoliberalism’s posited neutrality is
190 Daniel McDougall “‘The vibe of the thing’: Implementing economic, social and cultural rights in New
Zealand” [2015] AukULawRw 6; (2015) 21 Auckland University Law Review 86 at 93.
193 Government of the Republic of South Africa v Grootboom [2000] 11 BCLR 1169 (CC) at 23, as cited in
Daniel McDougall, above n 182, at 96.
nevertheless defined by normative ideas about how incentives and benefits are rightfully to be distributed. As detailed in Chapter 2, the non-inclusion of these rights in domestic law is further compounded by the absence of any form of broader value relating to quality of life within legislation such as the Social Security Act. “Social and economic wellbeing” is included only insofar as the Act puts forward that “paid employment” is the best means to achieve it.194 The law’s silence in this area functions as an implicit acceptance of the status quo, favouring those whose interests do not require a comprehensive guarantee social security above those who do not, in the interests of those who benefit from the reserve army of labour.
Chapter 3’s historical analysis confirms that welfare in New Zealand has remained the domain of politics in the long-term. After the First Labour Government’s expansion of welfare, welfare support declined in real terms as the law did not provide for standards of wellbeing that it was to achieve. Upon the crisis of 1970s capitalism, neoliberalism’s dismantlement of welfare in order to restore labour market discipline and profitability came entirely from the Executive with enormous social cost. The result is that welfare more effectively fulfils its function in the maintenance of the capitalist system, being able to respond to the needs of contemporary production with little legal protection for costs that fall to individuals. This point is the basis of the following Part, which argues that welfare’s contingency on the needs of capitalism is supported by structural choices which illustrate the state’s ideological function. If the absence of formal rights regarding welfare favours the interests of the capitalist system, then the following Part argues that selective conditionality insulates some workers from its costs in a manner that embeds an exploitative system.
The basic structure of the welfare system, as explored Chapter 2, shows that we address the issue of income insufficiency through a number of different mechanisms. Programmes such as Working for Families target those in work and explicitly deny benefit to those out of work through the taxation system. “Welfare” operates through the Ministry of Social Development and deny benefit to those who fail to comply. New Zealand Superannuation exists independently, offering universal support to retirees. ACC, responding to the incidence of accidental injury, exists as its own system. All these programmes focus on income insufficiency—whether it is through wages insufficient for the maintenance of an individual’s
194 Social Security Act, s 4(1)(a).
life, the absence of those wages either in the short- or long-term, or, in the exceptional case of retirees, on the basis that universal support should be offered on the basis that the individual’s working life is complete. This Part will argue that this division is wholly artificial, at once responding to and contributing to cultural ideas of worth that obfuscate the issue at hand and the role of the state in alleviating it. It will argue that these structural distinctions enable and embed the archetype of the Dole Bludger and work to legitimise ongoing class exploitation.
Barbehon and Haus highlight the “middle class” as a social construction to which they found three narratives, each bearing relevance to welfare discourse. First, the middle class as “plundered” and “squeezed” in the middle of “passive, envious and dependent” underclass members as well as “greedy capital owners”.195 As the middle class are society’s productive core, policy that counters middle class interests will lead to welfare’s “self-destruction”. Second, the narrative of “precarization” arises from the fragility of the middle class—in this narrative, the welfare state is blamed for failing to protect the middle class.196 Reforms that break the historic consensus between the middle class and welfare state undermine the social contract. The third is characterised by “de-dramatisation” of middle class “crises”—the middle class, rather, is privileged at the expense of other classes. Welfare, then, is judged on grounds of whether has been captured by the interests of the middle class and their electoral power, depriving the needy of necessary support. In this narrative, the “undeserving” poor becomes the undeserving middle.197
This point can be built on with reference to the welfare system’s structure. Working for Families is predominately middle-class welfare. On introduction, its explicit aims were the alleviation of child poverty whilst also “making work pay” through the function of the in-work tax credit (IWTC), which in 2013 cost taxpayers 21% of the programme’s total.198 While the programme as a whole reduced child poverty within working households from 28% to 9% in 2004, those families not within work saw little material benefit.199 In light of this, there were
195 Marlon Barbehön and Michael Haus “Middle class and welfare state – discursive relations” 9 Critical Policy Studies 473 at 478.
198 Susan St John “Preventing, Mitigating or Solving Child Income Poverty? The Expert Advisory Group 2012 Report” (2013) 9 Policy Quarterly 47 at 53.
proposals to expand the programme so as to alleviate child poverty among workless households—these were considered incompatible with the goal of “making work pay”.200 The goal of achieving in widespread reduction in child poverty, then, was so subsidiary to “making work pay” that 170,000 children were resigned to continued poverty,201 at least as far as Working for Families was concerned. So, workless families saw no benefit, while families in work, saw considerable benefit and in doing so never had to interact with the conditional systems that were designed for workless families. Even notwithstanding the fact that child poverty —the policy’s outright focus—is necessarily family poverty, Working for Families designates children in poverty as deserving or undeserving on the basis of their parents’ income source. Working parents are not required to have their work status, prospects, and financial arrangements subject to individualised judgement in the same manner as an unemployed mother without private means of financial security. This was the situation of 191,100 families receiving the IWTC in 2020.202 Furthermore, families in recipience of the IWTC, by nature, are not beneficiaries, drawing upon state welfare through Inland Revenue and the Income Tax Act while having no personal stake in the conditions faced by those who interact with the Social Security Act nor exposure to the stigma attached to beneficiary status.
The structural demarcation of virtuous and non-virtuous obfuscates the fact that, in each of discrete systems of welfare that exist in New Zealand, the state is intervening to address the same issue—the failure of the market to provide for the maintenance of an individual or family. Lower classes are subject to conditionality on grounds that their work ethic is a moral problem to be solved, while the middle class who is considered to bear disproportionate cost and whose existence has moral, rather than immoral, implications receive unconditional support. As much as the “middle class” may be a social construction or narrative, the notion of separation is reinforced by legal structures which gives it real force. The structural dilineation, then, reinforces stigma around state support and narratives of deserving, diligent workers vis-à-vis the undeserving, lazy dole bludger. The state performs its ideological role in “blunting the edge of class antagonisms” while obfuscating its functions along class lines. In this way, the legal structure of the welfare state embeds notions of deserving and undeserving poor and bolsters
200 Susan St John, above n 192, at 54.
202 Inland Revenue Department “Working for Families statistics” (28 April 2022) Inland Revenue <
https://www.ird.govt.nz/about-us/tax-statistics/social-policy/wfftc>.
the construction of the “middle class” as distinguished from capitalism’s reserve army. As a result, even while vast numbers of New Zealanders draw support from the welfare state to alleviate the market’s failure to provide for them, they are relatively insulated from the harsh treatment of other beneficiaries and from the cost of welfare’s contingency on the needs of capitalist production. The exploitation of capitalism’s reserve army is legitimised through the reinforcement of social narratives and insulation of the middle classes from its costs. As explored in the first section of this Part, this also means that the “deserving” poor are insulated from the normative gap that exists in welfare—because they enjoy universal, unconditional and unindividualised state support, they do not feel the effects of this substantial legal gap. Through structural segregation, the exploitation inherent to the system is reinforced.
5. Conclusions
Unemployment is a harmful, demoralising experience. For those without other financial recourse, the welfare system provides a system through which those without other income can gain it. In the contemporary era, there is significantly increased emphasis on the conditionality of welfare recipience with the aim to encourage paid employment. In practice, these work incentives embed precarity of employment for individuals among other negative outcomes, furthering the harm done not just by unemployment, but by an inhospitable welfare system as a whole. Persistently throughout the history of the welfare system, its construction has been such that it seeks to enforce normative value upon welfare recipients and decline support to those who do not comply, with a common thread of paternalism able to be traced from earlier, outrightly morality-based conditionality to today’s employment-focussed conditionality.
This function can be related to the concept of the reserve army of labour. In ensuring that the welfare system is an uncomfortable alternative to paid employment, work incentives seek to ensure that there is a cheap supply of labour on which the capitalist class can rely. They are representative of the state’s ideological function, in which it simultaneously provides for the maintenance for the present capitalist mode of production while acting to co-opt the interests of exploited workers. With a focus on individualised welfare recipience and individual responsibility, the law serves to prejudice the interests and rights of the capitalist class at the expense of lower-class interests while social security rights remain unincorporated into domestic law. In doing so, the welfare system addresses income insufficiency for individuals
and families in a manner which outrightly furthers and reinforces a distinction between the deserving and undeserving poor and embeds an exploitative system.
As such, it cannot be said that the welfare system as it exists today is representative of the values it purports to serve. In elevating the fact of employment as its cardinal value above that of providing for income sufficiency, it not only engenders poor outcomes for working people but fails to meet its potential in supporting long-term wellbeing for individuals and families. While shifting poverty may support economic growth and reduce the costs of welfare in the short-term, this does not mean that social costs do not accrue elsewhere. Where individuals and families face income insufficiency, the state should act to guarantee it in a manner that is materially reflected in enforceable domestic law and truly reflects the importance of the system as a guarantor of material rights. Then, if a capitalist utopia is found and employment still does not provide for the economic incentive to work in and of itself, perhaps it is the nature of work that should change.
6. Bibliography
A Cases
Child Poverty Action Group Incorporated (CPAG) v Attorney-General [2013] NZCA 402.
Lawson v Housing New Zealand [1996] NZHC 1528; [1997] 2 NZLR 474 (HC).
Government of the Republic of South Africa v Grootboom [2000] 11 BCLR 1169
B Legislation
Income Tax Act 2007.Industrial Conciliation and Arbitration Act 1894. New Zealand Bill of Rights Act 1990.
New Zealand Human Rights Act 1993.
New Zealand Superannuation and Retirement Income Act 2001. Māori Social and Economic Advancement Act 1945.
Qualification of Electors Bill 1879 (23-2).
Social Security Act 2018.
Constitution of Finland.
Constitution of the Peoples’ Republic of China.
C Treaties
International Covenant on Economic, Social and Cultural Rights GA Res 2200A (1966).
Universal Declaration of Human Rights GA Res 217A (1948).
D Books and chapters in books
David Beggood “The Welfare State” in Paul Spoonley, David Pearson and Ian Shirley “New Zealand: Sociological Perspectives” (The Dunmore Press, New Plymouth, 1982).
Ronald Dworkin “The Place of Liberty” in Sovereign Virtue: The Theory and Practice of Equality (Harvard University Press, 2000).
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Martha Nussbaum (1990) “Aristotelian Social Democracy” in Liberalism and the Good (Routledge, 1990) as cited in Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120 Journal of Business Ethics 473.
Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008).
Geoffrey Palmer New Zealand’s constitution in crisis: reforming our political system”
(McIndoe, Dunedin, 1992).
Gaby Ramia “Governing the Work-Welfare Relationship” in Governing Social Protection in the Long Term: Social Policy and Employment Relations in Australia and New Zealand (Palgave Macmillan, Cham, 2020).
Brian Roper “Capitalist expansion, globalisation and democratisation” in The History of Democracy: a Marxist Interpretation (Pluto Press, London, 2013).
Paul Sweezy “The Theory of Capitalist Development: Principles of Marxian PoliticalEconomy” (4th ed, Dennis Dobson Ltd., London, 1942).
Margaret Werry Performing Leisure, Liberalism, and Race in New Zealand (University of Minnesota Press, Minneapolis, 2011).
E Journal articles
Gordon Anderson and Michael Quinlan “The Changing Role of the State: Regulating Work inAustralia and New Zealand” (2008) 95 Labour History 111.
Marlon Barbehön and Michael Haus “Middle class and welfare state – discursive relations” 9
Critical Policy Studies 473.
Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120 Journal of Business Ethics 473.
D.W. Crowley “An outline history of the New Zealand labour movement, 1894–1913” (1951)
Peter Dwyer, Lisa Scullion, Katy Jones, Jenny McNeill, and Alasdair Stewart “Work, welfare and wellbeing: The impacts of welfare conditionality on people with mental health impairments in the UK” (2019) 54 Soc Policy Admin 311.Ian Greer “Welfare reform, precarity and the re-commodification of labour” (2016) 30 Work,
Employment & Society 162.
Tae Jun Kim and Olaf von dem Knesebeck “Is an insecure job better for health than having no job at all? A systematic review of studies investigating the health-related risks of both job insecurity and unemployment” (2015) 15 BMC Public Health.
Peter de Marneffe “Liberalism, Liberty, and Neutrality” (1990) 19 Philosophy and Public Affairs 3 as cited in Sandrine Blanc “Expanding Workers' 'Moral Space': A Liberal Critique of Corporate Capitalism” (2014) 120 Journal of Business Ethics 473.
Martha McCluskey “Efficiency and Social Citizenship: Challenging the Neoliberal Attack on the Welfare State” 78 Indiana Law Journal 783.
Daniel McDougall “‘The vibe of the thing’: Implementing economic, social and cultural rights
in New Zealand” [2015] AukULawRw 6; (2015) 21 Auckland University Law Review 86.
Paul O’Connell “Law, Marxism and Method” (2018) 16 Communication, Capitalism and Critique 647.
Susan St John “Preventing, Mitigating or Solving Child Income Poverty? The Expert Advisory Group 2012 Report” (2013) 9 Policy Quarterly 47.
Sophie Wickham, Lee Bentley, Tanith Rose, Margaret Whitehead, David Taylor-Robinson, and Ben Barr “Effects on mental health of a UK welfare reform, Universal Credit: a longitudinal controlled study” (2020) 5 Lancet Public Health 157.
F Parliamentary and government materials
National Advisory Committee on Health and Disability The Social, Cultural and Economic Determinants of Health in New Zealand: Action to Improve Health (June 1998).
Welfare Expert Advisory Group “Whakamana Tāngata: Restoring Dignity to Social Security
in New Zealand” (February 2019) Welfare Expert Advisory Group
<http://www.weag.govt.nz/assets/documents/WEAG-report/aed960c3ce/WEAG-Report.pdf>.
Beehive.govt.nz “Second stage of welfare reforms introduced” (press release, 18 September
2012).
Cabinet Paper “Future Directions: Working for Families” (31 March 2004) as cited in Child Poverty Action Group Incorporated (CPAG) v Attorney-General [2013] NZCA 40.
Department of Social Services An Evaluation of the Special Needs Grants and Special Benefit Programmes (1993) at 20, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008).
G Reports
Downtown Community Ministry Widening the Gaps: Bias in the Administration of Welfare to Those Most in Hardship (2002) at 2, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008).
Inland Revenue Department “Working for Families statistics” (28 April 2022) Inland Revenue< https://www.ird.govt.nz/about-us/tax-statistics/social-policy/wfftc>.
Sally Jackman Child poverty in Aotearoa/New Zealand : a report from the New Zealand Council of Christian Social Services (New Zealand Council of Christian Social Services, Report, June 1993).
Methodist Social Services Centre Budgeting for Cuts: A Study of Poverty in Palmerston North after the April 1st Benefit Cuts (1992) at 28, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008).
Ministry of Social Development “National level data tables – March 2020” MSD<https://www.msd.govt.nz/about-msd-and-our-work/publications- resources/statistics/benefit/archive-2020.html>.
New Zealand Network Against Food Poverty Hidden Hunger: Food and Low Income in New Zealand (1999) at 2, as cited in Michael O’Brien Poverty, policy and the state (The Policy Press, Bristol, 2008).
Jan-Emmanuel de Neve and George Ward “Happiness at Work” (April 2017) Sustainable Development Solutions Network <https://s3.amazonaws.com/happiness- report/2017/HR17-Ch6_wAppendix.pdf>.Bryce Wilkinson “Welfare, Work and Wellbeing: From Benefits to Better Lives” (November 2017) The New Zealand Initiative <https://www.nzinitiative.org.nz/reports-and- media/reports/welfare-work-and-wellbeing-from-benefits-to-better- lives/document/508>.
H Internet resources
Ministry of Culture and Heritage “Social Security Act passed” (4 September 2020) NewZealand History https://nzhistory.govt.nz/social-security-act-passed.
I Other resources
Interview with Christopher Luxon, Leader of the Opposition (Simon Shepherd, NewshubNation, Three, 13 August 2022).
New Zealand Herald (Editorial) The New Zealand Herald and the Daily Southern Cross
(New Zealand, 7 January 1891).
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