Palmerston North Poverty Action Group

(a post - Hikoi initiative)

 

 

8 September 1999

 

 

 

The Chairperson and Members

Low Income Sub-Committee

Palmerston North City Council

 

 

The Changing Nature of Work, Employment and Income Support

 

Summary

 

Recent publicity about the many problems people have getting adequate and appropriate income support from Work and Income New Zealand, and publicity about the steady lowering of the actual "age of retirement" while the qualifying age for publicly funded superannuation is rising, highlight the inadequacies of the income support system as currently administered and the dramatic changes that have and are taking place in the worlds of work and employment.

 

While the purpose of income support is still " ... to safeguard the people of New Zealand from disabilities arising from age, sickness, widowhood, orphanhood, unemployment, or other exceptional conditions; to provide a system whereby medical and hospital treatment will be available to persons requiring such treatment; and, further, to provide such other benefits as may be necessary to maintain and promote the health and general welfare of the community." the extent and degree to which this happens is now minimal.

 

The current legislation and practice has been framed on the premise that work is full-time and "permanent" and that a claimant for income support and a worker are generally different people.

 

The current and future worlds of work and employment are very different from this. Part-time and temporary work are becoming much more prevalent and the job prospects of both young and old have reduced significantly. The income support transitions associated with part-time and temporary work are cumbersome and financially costly.

 

While anecdotal material on the changes taking place in the worlds of work and employment in Palmerston North abound, there is little hard data. For meaningful planning relating to the economic and social status and needs of those in the community this situation needs to be addressed.

 

It is also becoming obvious that a major overhaul of the income support system is needed to meet the realities of people's lives. While this may well be a nation-wide and global issue, it has immediate relevance to the citizens of Palmerston North and Council could take a leadership role in this area.

 

The issues surrounding paid employment and income support are intimately related and warrant wide ranging public discussion.

 

1.    Reason for this Report

At the meeting of the Poverty Action Group with the Mayor on 19 August, the Mayor asked that the Group report to the Low Income Sub-Committee on their concerns about the changing nature of work, employment, training and the increasing inadequacies of the income support system which had been included in the Group's reports to her.

 

This report follows two related reports to the Low-Income Sub-Committee concerning difficulties people have in dealing with WINZ. These reports were entitled: Poverty in Palmerston North - "The problems people are having with WINZ - getting their entitlements and benefits that are not enough to survive on" by the Poverty Action Group, and "Survey of Concerns about WINZ" by Nigel Fitzpatrick.

 

2.    Introduction - Trends in Employment

·       The following highlights the fact that the normal work pattern is no longer full-time employment to the age of qualification for superannuation. The mismatch between this reality and government social policies (which assume full-time paid employment until retirement) are noted.

 

Massey University History Professor David Thomson, in his Winter Lecture (University of Auckland, 27 July), described a little-appreciated reality; that people over 45 in New Zealand are less likely to be doing paid work than ever before, despite becoming relatively more numerous. Despite the rise in the age of eligibility for a public pension, the average age of retirement continues to fall.

 

Twentieth century policymaking has been predicated on the assumption of "full employment", which was taken to mean that around 95% of men aged 25-60 should be in regular paid employment of 20 hours or more per week. That high employment consensus also came to mean that perhaps 90% of women aged 25-60, excluding those caring for pre-school children, should be likewise employed. Superannuation is based on the assumption that full and unbroken employment will last until age 65.[1]

 

"Retirement" for men in New Zealand and other comparable countries now begins at age 45. From around 1980, there has been a significant increase in the number of men and women over 45 who are not employed. Paid work past about age 45 is diminishing markedly. This change of the past 20 years has been relentless, touches all levels of society, spreads right across the developed world and shows few signs of halting, let alone reversing.[2]

 

If present trends continue, then within a decade a third of all New Zealand men by their later 40s will be "retired" (without significant prospects of getting paid work again) and half of them by their mid-50s. Even fewer women will have substantial paid work - perhaps 40% at their mid-50s

 

The nature and quality of the shrinking paid work available, is also changing. Increasingly, paid work after age 45, is in the form of self-employment, is uncertain, insecure and low paying.

 

A study released in June this year by Ryerson Polytechnic University[3] found that 45% of Canada's workforce is engaged in "flexible" work, with people unable to find full-time or permanent jobs. Flexible work, defined as part-time and non-permanent, earns an average of $5 to $8 less an hour than full time workers. It is suggested that these flexible workers have little chance of improving their wage. All of the indicators show that this is the emerging trend."

 

The Ryerson report also introduced a new employment-vulnerability measure intended to reflect the amount of underemployment in the society, rather than just unemployment. "Looking at traditional unemployment isn't enough, it masks the tremendous underemployment in the economy, people who are working part time who don't want to be. They want more work, but just aren't able to find it." While the official unemployment rate in that country is 8.4%, the Ryerson study estimates that as many as 20.3% of Canadians are underemployed or otherwise lack employment security and an adequate level of wages.

 

"If we look at the employment problem (in Canada) from that perspective, the real unemployment rate is two-and-a half times larger (than the "official" statistic). What's really going on in the labour market is an increase in more-peripheral and more-vulnerable types of employment."

 

Comparing other studies suggests that essentially the same story will be found in New Zealand.

 

According to Anne Else[4] in her Winter Lecture at Auckland University, "Full-time market (paid) work, as the norm which all adults must continually strive to meet, has become the basic premise underpinning all income support policies. There has been a steady growth of emphasis on the value and indeed the duty of paid employment for all adults of "working age", with little or no regard to gender, marital and parental status, disability, ill-health, earning capacity, or unpaid work responsibilities. Levels of unemployment, underemployment and overemployment, and changing labour market conditions, get no significant consideration either. There have even been calls for a return to treating children as not only capable of paid work, but able to benefit from combining it with schooling."

 

"Part time, short-term jobs which do not pay enough for fit young adults to live on, let alone to support children, will not keep someone in their 60s either. It seems quite pointless to focus on the continuing ability of older people to earn a living when the labour market is already patently failing to provide so many of those under 65 with employment which lasts long enough, pays enough, and leaves enough time to carry out unpaid work, let alone enjoy leisure."

 

"We should ask why the value of employment is being emphasised so strongly now in connection with old age. We must conclude that the main reasons are to lower wages and conditions by increasing the competition for jobs ...".

 

Part-time work, job insecurity and breaks in employment are spreading among men too (to resemble more the work patterns of women), and their labour force participation is falling as women's rise.

 

According to Rankin, the "reforms" since 1984 have had some apparently contradictory effects. They have hastened the growth of the female labour force (esp. in the 1980s) and for a time have led to a resurgence in labour force participation of older persons (esp. in the 1990s), and have raised the (part-time) participation rates of secondary and tertiary students. The latter now work part-time through the year as a matter of course, whereas those of us born before (say) 1965 worked for wages full-time in the summer vacation and not at all during the rest of the year.

 

Other trends in the 1980'2 and 1990's include:

·       an unusually high proportion of the population has been of working age. (This contrasts with, say, the 1950s, in which those of working age supported one baby boom generation in retirement and another as children.)

·       a tendency for the average individual work-week for those in full-time jobs to increase, with more people working very long hours (often unpaid overtime). The mean length of the working week hasn't changed much though, because of the growth of the part-time workforce.

·       employment has expanded.

·       Unemployment - official and unofficial - has also expanded. We now have the difficult situation of simultaneous unemployment, underemployment and overemployment.[5]

·       Many families now commit twice as much parental time to the labour market compared to the 1970s.

 

As for wages, since 1982 real average wages have declined for all but the top two income deciles, while job insecurity has dramatically increased.

 

"It is now normal for families to derive their incomes from a variety of sources; some income coming from wages/salaries, some from profits, some from rents/interest/benefits (and some from crime):[6]

1.     with the multiple-income household becoming the norm. Many people receiving entrepreneurial income have partners who receive wage income.

2.     with individuals increasingly working through varieties of contracts, many of which are much closer to customer-supplier than employer-employee relationships. An individual with two or more jobs is not unusual. At least one of those "jobs" might involve some creative activity that might yield a substantial profit but more likely will not.

3.     with the creation of the welfare state, and its evolution into a welfare society. Beneficiaries are analogous to the landlords of the ancien regime, ie pre the industrial revolution. Benefits are paid out of a social wage fund that represents a return on all our forms of collective capital: our bequest from nature (read "environment" in place of the classical "land"), our past social investments, and our present social and intellectual capital. We are all beneficiaries. We all depend in full or in part on the public purse. Indeed, those in Treasury who worry about "middle class capture", acknowledge that our well paid salarymen and women receive considerable support from our social wage fund."

 

3.    Discussion

This section reviews the relevant statistics for the city and the implications for the residents of:

1.     Falling employment and incomes

2.     The new jobs

3.     Training issues

4.     Problems with the current system of income support

5.     The need for this system to be reassessed and revised to address current realities.

 

3.1 Palmerston North Demographics

 

3.2 Levels of Income

In Palmerston North, 48% of those over 15 have an income of less than $15,000. (Statistics New Zealand, PNCC Community Development Plan)

 

In the new Palmerston North Electorate, 45% of the households have incomes below $30,000 before tax with the areas of greatest deprivation being the suburbs of Highbury and Roslyn. (Judith Reinkin 1998)

 

The $15,000 before tax income level includes beneficiaries and those earning low wages (eg the adult minimum). Households with incomes below $30,000 a year qualify for the Community Service Card which entitles them to lower doctors' fees and prescription charges. These income levels constitute an unofficial poverty line.

 

3.3 Numbers receiving income support

At the end of August last year there were approximately 18,800 people receiving a benefit from NZISS. The number receiving income support through Inland Revenue are not to hand. The total probably equates to between one third and one half of the population of the city.

 

3.4 Falling employment and Incomes

In 1993, Keith Rankin[7] wrote that the latest census income data (to 1991) were grim, especially for the young, for males, and for the self-employed.

 

The data for 20-24 year olds was the easiest to interpret, because young adults in full-time employment have little investment income to supplement their wages, and because their experiences generally reflect those of people recently hired. Young adults are at the cutting edge of the labour market and trends show in this group earlier than in others. The incomes of young full-time workers are the best indication we have of wage trends. In terms of median real incomes, those for males declined from a peak at the 1980/81 census to pre 1965/66 levels by 1990/91, those for females declined from a peak at the 1980/81 census to pre 1975/76 levels. Those for entrepreneurs: males declined from a peak at the 1975/76 census to pre 1955/56 levels by 1990/91 while for females they declined from a peak at the 1980/81 census to pre 1955/56 levels.

 

Overseas, this phenomenon has been described as the first generation in which the children have been worse off than their parents.

 

There has also been a very marked decline in full‑time employment that only dates from after 1986. This is mirrored by a big decline in young entrepreneurs, despite the greater numbers of young people available for self‑employment.

 

3.5 The "invisible"[8]

Most men over 45 who are not in full-time employment are not "job seekers". Some have dropped out of the labour market and do not figure in any statistics. Others work mainly outside the market economy while supported by partners and perhaps some benefit income. Others, while often underemployed, are self-employed. They are not "job seekers" in the sense that "Employment Minister" Peter McCardle uses the term; "job seekers" as a synonym for "unemployed".

 

When policymakers divide our working-age population into these three categories - "employed", "job-seekers" and "caregivers" - increasing numbers of us become invisible. Previously, it was mainly women who appeared not to exist. Now it is mostly older men.

 

The categories "employed", "job-seekers" and "caregivers" do not only exclude increasing numbers of us. Our policymakers tend to see these categories as mutually exclusive. Yet increasing numbers of our employed are also job-seekers and caregivers.

 

3.6 The new jobs

The majority of jobs are now on a short term contract basis. The concept of a career in the narrow sense, or a "job for life" applies no longer. On average, the turnover of those in full-time jobs is about 3.5 years.

 

There is ongoing debate about whether the new jobs are high skilled or low skilled. While it appears that there are some high skilled new jobs, there is a surplus of highly skilled people in many fields including in management. With downsizing and contracting out and locating overseas, there are many redundant managers. These, and other skilled people compete with others for the lesser skilled jobs and often have to take jobs requiring a much reduced level of skills eg corporate manager becomes service station forecourt manager.

 

Many of the new jobs are low skilled, McJobs, part-time, insecure, low pay and no holidays etc. These jobs tend to be the first entry point for school leavers and those rejoining the workforce rather than apprenticeships or other entry points into trade or professional occupations which are their preferred and eventual option.

 

Research by Statistics Canada in a report released in March last year[9] found that the three most frequent occupations for men in Canada today are truck drivers, sales clerks, and janitors. For Canadian women, the three most common jobs are sales clerks, secretaries, and cashiers. It is likely that a similar picture will apply in this country.

 

3.7 Changes in the hours of work

In recent years a number of changes have been taking place in work places in Palmerston North: 40 hour a week jobs have been reduced to 30 hours a week; full-time jobs have been reduced to half time; half time jobs have been put onto a rotating shift basis (making it very difficult to obtain additional compensatory work); some part-time workers are restricted by their employer from seeking additional hours; some contracts have the workers permanently on call for no guaranteed hours of work.

 

3.8 Training issues

Major changes have taken place in the field of trade training with the re-organisation of the agencies responsible for this, the funding available and the framework within which it is done. The level of uncertainty felt by many employers means that fewer are able or prepared to take on apprentices. This uncertainty arises both from the changes in the training infrastructure and the economic climate and the lack of confidence about the ability of their business contracts to provide ongoing employment.

 

One response to this has been the development of group apprenticeship schemes, but these are few in number and small scale in relation to the need. One is currently being developed for this region.

 

One other area of training is for those at the bottom end of the labour market. WINZ has taken over some of the funding for these and there are concerns about the underlying philosophy of their recent tender. It purports to involve the wider community but in fact very few agencies will be able to participate, as they do not have NZQA registration, unless they offer short courses which are of limited value.

 

The assumption also appears to be that training gets people jobs. While this is true in some respects, it begs the question of where the jobs are to come from for those in these programmes. It is absurd to suggest that limited literacy coaching over a few weeks will guarantee that 1 in 5 will get a job as a result.

 

There appears to be a lack of appreciation of the reality of long term unemployment and the effects of this on the person. WINZ's approach to 'meeting their needs' is simplistic and superficial and in some respects is more to do with meeting the objectives of WINZ.

 

While the proposals are targeted to specific groups, probably the most important group because of its size and it growing nature in terms of the long-term unemployed, the mature, are less ell catered for.

 

There is growing resistance and scepticism in the community to the "training treadmill" particularly with respect to WINZ type programmes. This also applies to the costs involved. While WINZ may support the initial steps, the individual must carry the substantial burden of continuing the training to the effective stage, with no guarantee of any increase in the ability to pay back the loans necessary to finance the training. Many people are very fearful of increasing their financial vulnerability to undertake serious training.

 

The age of eligibility for income support has been raised so that young people are forced to stay at "school" longer and stay dependent on their parents for longer.

 

Similarly the rules have changed dramatically with respect to tertiary education. Until the advent of user pays, reduced allowances and student loans, allowances were sufficient to meet most costs associated with tertiary education for most, often including living expenses. Work over the summer vacation provided the necessary additional finance.

 

With the advent of reduced allowances and user pays and student loans, students are forced to work during the year, increasing competition for the casual and part-time jobs, and recently the Government removed the eligibility for students to have income support over the long vacation at a time when the level of available work is low and uncertain. As a result, mortgage sized debts are incurred which for most will take decades to be paid off with no certainty of a good job to enable this to happen.

 

On 23 August this year the Vice Chancellors' Committee was reported as expressing its concerns about the unsustainability of this state of affairs.

 

3.9 Surviving on irregular work

There are a number of issues that relate to the transition between being a beneficiary and a non-beneficiary for people whose hours and incomes fluctuate every week or so.

 

For people on the Accommodation Supplement (AS), they are meant to declare their incomes each week or fortnight if their incomes vary. That includes people who work shifts, get performance bonuses, or work for commission. If the weekly income fluctuates to the point where you are eligible for the AS some weeks but not other weeks, then it means a new 7-page application each fortnight!

 

This is always a problem for people on the Family Support (tax credits)(FS) and AS when they move in and out of work. WINZ treat Family Support and Accommodation Supplement as completely different benefits if you are a beneficiary. So a person in work on the FS and AS, when becoming eligible for a benefit must go off the FS and the AS, apply for a benefit, and also reapply for WINZ's version of the FS and AS. When, a few weeks later, it is time to come off the benefit, you are also taken off WINZ's version of the AS and FS. You then have to apply (with delays) to WINZ for the workers' version of the AS and to the IRD for their version of FS.

 

Typically, when you go to full-time work from being on a benefit, your first full pay takes about 3 weeks to arrive. The last thing you want during those three weeks of no wages or benefit is to lose your AS and FS supplements. It's no good if they are backdated, because you need them straight away. This is pertinent with respect to the baby bonus. By the time you have got your baby's birth certificate, and made an appointment with WINZ, the new baby will be several weeks old. The financial crunch time comes when the pregnant woman leaves work, and the second crunch comes immediately as the baby is brought home.

 

We suspect that many people coming off the benefit are not told that they are still eligible for the AS that they were getting while on the benefit.

 

In the case of a low-waged household moving on a semi-regular basis to and fro between full-time and part-time employment eg where hours of work vary from week to week, if they were to get everything they were entitled to, and not to commit benefit fraud (ie non-disclosure of changes in their income), they would be virtually resident in the WINZ office, filling out forms, in particular the AS forms, given that they would be forever swapping between the two forms of AS (2 forms that appear to be almost identical,

 

The legislation was constructed on the assumption that beneficiaries are one class or category of person and workers are another class/category of person who are meant to have a regular work-week. In the "flexible labour market" which now dominates, this is no longer the case.

 

3.10 Stand-downs

 

There is a one week stand-down when people go from one benefit to another and from a work scheme such as Task Force Green, back to the benefit. This imposes major financial stress and acts as a major disincentive to taking up a work scheme.

 

The same applies when a person changes from one form of a benefit to another such as the transition from a children's to an adult benefit.

An issue of real concern to workers who get dismissed is that they automatically go on "stand down" before the benefit is paid unless they take a personal grievance case against their employer to prove wrongful dismissal. This has become beyond the abilities of most people, mainly because of the costs involved. This is of considerable concern because as one Union Organiser reports, only 1 in 10 dismissals can be reasonably considered to be justifiable.

 

3.11 Benefit abatement rates

While some income can be earned before the basic benefit is abated, many beneficiaries and many of those in low paid work rely on the Accommodation Supplement and often special benefits to survive. These are abated with every dollar earned which is taxed at secondary income tax rates. Many people experience marginal tax rates around 70% with some 100% and more.

 

Because of this, the only viable option is for most beneficiaries to go from full unemployment to full employment. This type of transition is not common both because of the lesser availability of full-time and because of employers' perceptions and predjudices about people who are unemployed. Thus, it is most unlikely that a person on income support can move from this situation to a permanent, full-time job. Anything less than this has a low or negative return for effort and leads to endless difficulties associated with the adjustments to benefits..

 

3.12 The Purpose of Income Support

What is the purpose of "income support" or social welfare? The clearest guide comes from the Court of Appeal in 1996. [10]

 

"The Social Security Act 1964[11] does not have a statement of purpose as is often found in more modern legislation. Its long title says only that it is an Act to consolidate and amend the Social Security Act 1938 and its amendments. But the 1938 Act's long title does provide some guidance:

An Act to provide for the payment of superannuation benefits and other benefits designed to safeguard the people of New Zealand from disabilities arising from age, sickness, widowhood, orphanhood, unemployment, or other exceptional conditions; to provide a system whereby medical and hospital treatment will be available to persons requiring such treatment; and, further, to provide such other benefits as may be necessary to maintain and promote the health and general welfare of the community.

 

The concern of the legislation was with the provision of financial help for people who for one reason or another could not adequately support themselves."

 

3.13 The level of the basic benefit

In 1991, the basic benefit was reduced to a level that many people found they were unable to survive on[12], particularly with State houses charging "market" rents which means that the average tenant now pays over 40% of their income on rent with many paying over 50%. This change caused the mushrooming of foodbanks. For many beneficiaries, this meant that they had to rely on supplementary benefits to survive, a situation these benefits were not designed for.

 

On Morning Report, (Radio NZ) on 2 June, the WINZ spokesperson said that WINZ staff were giving out too many supplementary benefits and that these would be limited and that budgeting is the issue. This suggestion (budgeting) is strongly refuted by Budget Advice Services generally and the foodbank and related agencies locally.

 

3.14 Targeting

Over the last 10-15 years, the approach has been increasingly to reduce and restrict income support through narrower and narrower targeting. While some targeted assistance will always be required, this can only be effective if it in addition to a reasonable base level of support or well-being.

 

Thus targeted, supplementary and special circumstance assistance works well when the basic benefit is adequate, it ceases to operate in this way when the basic benefit level is inadequate as it has been since the 1991 benefit cuts coupled with the introduction of market rentals for state houses.

 

The consequences and deficiencies of excessive targeting and an inadequate base line are becoming increasingly obvious. Boston and Dalziel deal with these issues at length.[13] Boston and St John bring the discussion up to date.[14]

 

The need for a rethink of the place of income support in a changed work of work is one of the main drivers of the movement to provide a basic income to all citizens. The push for a universal basic income is expanding in New Zealand and world-wide and has even got into recommendations at OECD and similar high level meetings overseas.[15]

 

3.15 How the Legislation is applied

 

The Income Support Service had a history of ignoring Appeal Authority[16] and Court rulings and WINZ appears to have maintained this attitude. The practice of requiring[17] or organising claimants into pay-as-you-go electricity is a good example. Firstly, this is contrary to Section 11 of the Act. Secondly, there is a considerable amount of social security case law to show that a person cannot be put into a position of further hardship or be required to choose a more expensive option than other available options that are adequate.

 

The Ministerial Advisory Committee on a Maori perspective for the Department of Social Welfare in 1986 charged the Department with institutional racism following a "tidal wave of criticism that the department was unresponsive and insensitive to the needs of Maori"[18]. Rongo Wetere, Maori Employment Commissioner, reiterated this view at the Employment Summit in Palmerston North in March this year.

 

The Social Services Select Committee in their 1996/97 Financial Review of DSW states "We are concerned that customers are possibly not being made aware of their full benefit entitlements ... that Income Support staff in some areas are managing an average of 300[19] customers in their caseloads, and in one area a staff member was managing a caseload of 410 customers."

 

Apart from the overloading issue, it is concerning to read (Petrie, 1998) that "The CSO[20] typically[21] gives an undertaking to ensure the client is receiving their full entitlements ...." Surely, if claimants are to know their entitlements, this must surely be an essential standard practice rather than an optional one.

 

Various official papers note the problems associated with the administration of supplementary assistance[22], however, the approaches to dealing with the problems are obviously ineffectual and ineffective, and the prime reason would appear to be the over-riding emphasis on speed. The position documented in the Social Policy Agency Review report is still the same today.

 

3.16 Advocacy

The importance and value of advocates in such an environment cannot be rated too highly.

 

However, few people have access to effective advocacy services and such services should only need to cope with exceptional difficulties rather than issues of a systemic nature.

 

It is obvious that the system of income support needs to be reassessed so that a basic level of adequacy is provided, so that particular and exceptional needs can be effectively considered and so that the need for an advocate to assist claimants to get their entitlements becomes more the exception than the rule.

 

4.    Conclusions

A major section of the population of Palmerston North receive publicly funded income support. The basis and the application of income support is becoming increasingly out of step with the needs of people and the realities of the labour market. This applies across all age groups and levels of training and expertise.

 

A number of major changes are taking place in the areas of work and employment in the city. They have implications across all areas of Council activities. While there is good anecdotal evidence of the changes taking place there is a need for sound, detailed information which would form the basis for sound policy making.

 

As these changes are fundamental and will have long term implications for the nature of Palmerston North and its residents, it is important that they be widely and publicly discussed.

 

5. Recommendations

1.     That the City Manager be requested to produce a detailed report on the impacts of the status and the changing nature of work and incomes on Palmerston North and its residents.

 

2.     That the Council's economic policies be reviewed to ensure they reflect the changes outlined in this report.

 

3.     That a conference on the Future of Work and Incomes be held in Palmerston North in September 2000 as a joint venture between the City Council and the Local Employment Committee.

 

 

 

Ian Ritchie

Researcher