Welfare to Work Policy
Helping people move from welfare into paid work can have multiple benefits. From the individual’s point of view, it can help them achieve goals and increase their family’s living standards. From society’s point of view, it can free up state spending for other uses, boost the available workforce, and increase tax revenue.
While many people will get (back) into paid work without assistance, others need greater aid. And the collective benefits of this justify government spending. For this reason, all developed countries spend a certain amount on welfare-to-work policies, also sometimes known as active labour market programmes (ALMPs).
New Zealand does not, however, invest significant amounts of money in this area: on some measures, we spend far less than the developed-country average, and one-tenth of the amount spent by the leading nations. While New Zealand does have an array of policies – including work-focussed case managers at Work and Income, and the Mana in Mahi scheme aimed at young people – these initiatives are often poorly co-ordinated, have significant gaps, and are not always rigorously evaluated.
IDEA’s research will dive deeply into the international evidence about what works best in this field, and examine how New Zealand’s provision stacks up. We will work closely with current beneficiaries to understand how they experience the current system, what aspirations they have for paid work, and what it would take for those aspirations to be realised. And we will bring all the above together in a comprehensive set of recommendations that could underpin a step-change in how New Zealand supports people into paid work.
Creating Competition
Competition is the lifeblood of markets – the force that drives companies to offer better products at lower prices, raising living standards and quality of life. Without it, firms face weak or no incentives to improve what they offer us as consumers.
While many markets in New Zealand have plentiful competition, some unfortunately do not. There are near-monopolies, for instance, in the importing of certain building products. Public concern is also growing about the supermarket duopoly – that is, the dominance of the two large supermarket chains, which the Commerce Commission has estimated generate $1m a day in excess profits above what they would earn in a competitive market. Countries of similar size, like Denmark, have multiple supermarket chains.
There are also concerns about markets dominated by a small number of firms, a situation known as an oligopoly: this includes power generation and banking. In all the above cases, there is a strong likelihood that the absence of effective competition means prices are far higher (and quality standards far lower) than they should be, and that this affects poorer consumers the most. Suppliers to these uncompetitive industries may also be suffering.
IDEA’s research will look at what can be done to drive more competition in these sectors – and what, more generally, needs to change in our competition laws and the intellectual framework that underpins them.
Protecting Small Businesses
The vast majority of New Zealand firms – roughly two-thirds – are small or medium-sized enterprises. These firms are the backbone of the Kiwi economy. Yet although they are often invoked rhetorically by politicians of all stripes, they do not always receive the protections they need.
A wide range of damaging business practices can cause real problems for small enterprises. This includes the practice known as ‘Phoenixing’, where a company is wound up to avoid paying its creditors but then restarts under a different name. It also includes situations where firms declare bankruptcy, again freeing themselves of obligations to their creditors, but have shifted money to other entities – trusts, for instance – in order to disguise their true financial position. And sometimes larger firms go under while owing large amounts to their subcontractors.
In all these scenarios, companies of different sizes can be harmed – but invariably it is the smallest ones, the subcontractors and other medium-sized firms, that are worst affected. These companies also suffer when supplying to, or buying from, uncompetitive markets dominated by monopolies and duopolies (see our Creating Competition project for more details). They may also be unable to ensure basic norms of treatment, such as payment on time from larger firms.
IDEA’s work will examine how New Zealand’s regulatory settings can be strengthened in ways that provide greater protections to small and medium-sized firms operating in the local economy. This promises benefits for all consumers but especially for Kiwis in the lower and middle parts of the income distribution.
Community-led Budgeting
Local councils increasingly face constrained budgets, low levels of public trust, and difficulty ascertaining exactly how their residents would like them to spend and invest funds. Across the world, councils are increasingly turning to something called participatory or community-led budgeting as a way to resolve these issues.
The way this works is that a local council puts up a proportion of its infrastructure budget – its spending on new capital works, in other words – for the community to allocate. Discussions about how to spend this money start at the neighbourhood level, with people arguing for and against different initiatives and ultimately voting them up or down. These discussions are then repeated at the ward level, where the sifting process happens again, before a final region-wide or city-wide meeting, essentially run by residents, selects the successful projects.
These processes, which can happen online or in-person, have been operating successfully for decades now in countries as varied as France and Brazil. It leads to better-informed decisions, because locals know best what their community needs, and because the calls are made only after deep discussion amongst residents. Research has also shown that it leads to infrastructure that better serves those most in need, and that it increases transparency and scrutiny of spending.
IDEA will work with local councils, some of which have already expressed interest in this innovation, to pilot and ultimately adopt it as part of their core business. This will help restore trust, get diverse communities engaged in decision-making, and improve quality of spending.
Barriers to Participation
Public bodies are increasingly acknowledging the need to get ordinary citizens more deeply involved in democratic processes – in the formation of policies and laws. A recent Public Service Commission long-term insights briefing stressed the need for more participatory democracy, while similar arguments were made in the Future of Local Government Review.
In practice, however, this often does not occur. Policy processes are frequently marked by limited consultation with the public, or consultation that is not especially meaningful. Many processes also fail to go beyond ‘consultation’ to methods that might involve citizens more deeply, such as the ‘co-creation’ of policy by public servants and ordinary citizens. More generally, there is often a sense that certain groups have had significantly more influence on decision-making than others.
The reasons for these shortcomings are varied, and not always well understood. Politicians may be constrained by partisan commitments that do not allow them to take a wide range of views into account. Politics can also be reactive and over-hasty, rushing into solutions without properly engaging the public. Public bodies may be inclined to engage only with selected ‘stakeholders’, partly through inertia or lack of time.
While all these issues, and more, have been cited in a general sense, there has been little systematic research on why and how they occur – and how they could be solved. IDEA’s research will dig deeply into the barriers to wider citizen participation in decision-making, and look at potential ways to bring those barriers down.
Modern Social Housing
While markets provide housing well for many people, it has long been acknowledged in developed countries that there is a role for government in ensuring that certain sectors of the population are well housed. In New Zealand, the state has provided housing since at least the 1930s, assisting people whose poverty or other issues would otherwise leave them homeless in a purely market-based system.
However, New Zealand currently has significantly less state or social housing – a term that includes NGO housing that attracts state subsidies – than the developed-country average. This country also provides less social housing than it did thirty years ago, relative to population.
On both sides of politics, there is an acknowledgement that more social housing is needed. It is not clear, however, how best to deliver it. There are concerns that New Zealand social housing is delivered more expensively, and to a lower quality, than it should be, and compares poorly to examples overseas.
IDEA’s research will take a comprehensive look at the system for providing housing to those most in-need. It will examine existing delivery processes, the balance between state and NGO provision, and current costs and quality levels. From this research will emerge a powerful and wide-ranging set of recommendations that will look to transform the way that housing is provided to the most vulnerable Kiwis.
