Nerd Sunday: a New Zealand Income Insurance Scheme?

Welcome to my new series, where I take one for the team – making something quite boring a bit less boring. You can thank me later. Or now. Now is good too.

I just read a 178 page document so you don’t have to

So, what would happen if you couldn't go to work?

A result from your mammogram you thought would be OK, only it’s not OK, and suddenly you’re numb because you can’t believe what you’re hearing. A meeting on the shop floor, where the boss clears her throat and warns there’s change coming – it's been a tough two years – and there isn’t a job for everyone anymore. The depression you can normally manage, only jeez, these aren’t easy times; and as if COVID wasn’t enough, your marriage just went down the tubes. 

Calamity comes in so many desperate forms. Lose your job through an accidental injury, it’ll be hard, but you’ll probably get paid 80% of your income by ACC. But if you’re sick, have a disability that’s not from an accident, or you just get laid off? That’s different. To use a technical term, you’re shit out of luck. 

What happens next depends on your situation. If you’ve got a partner earning above a certain level, they’re responsible for supporting you financially through your loss of income. Doesn’t matter if they want to, or even if they can. If they refuse, you’ve got a painful choice: no relationship or no income.  

And whether you’re partnered or single, if you’ve got assets above a certain value, the government won’t help you. Probably, you’ll take any old job in a panic, even if your skills don’t quite fit, it pays way less, or you’re still sick. But maybe you can’t work. You run down your savings, maybe lose your car, lose your house – until you fall low enough to get a benefit. You need to be on the breadline before you get the crumbs.     

Of course, your misfortune won’t just affect you and your whānau. You’ll tighten your belt. The local café will miss out, your mechanic, the art class you used to send your kids to. At the same time, that local employer who needs your skills will miss out - because they’re hiring in two months, and you simply can’t wait that long. If the reason you lost your job is some kind of wider crisis – pandemic, earthquake, economic shock – your whole community might be in the same boat. The effects of the belt-tightening will be amplified. 

If this sounds bad, that’s because it is. The first hit is the loss of income while you’re out of work. The second lasts ways longer. You’re likely to return to work with lower pay - and even years later, you still won’t have closed the gap. Your losses could run to the tens of thousands.

To help fix this, the Government proposes to borrow a common idea from overseas, creating a New Zealand Income Insurance Scheme (the Scheme). The proposed Scheme would be a bit like ACC, paying you 80% of your prior income for up to seven months, only you’d qualify if you got sick, developed a disability without being injured, or got laid off. It’d treat you as a person in your own right, not make you dependent on your partner, and it wouldn’t push you to the breadline before you qualified for help. Like ACC, workers and employers would chip in to pay for it.

This could be an historical landmark for Aotearoa’s welfare state. I think it’s really important. So, what’s the dealio, nerdz?  To help answer that question, let’s take a short tour back in time.  

Things turn to crap, part one

In the 1930s, the poo hit the fan good and proper. It started with the New York stock exchange crash in 1929, but the ripples spread throughout the world. It wasn’t long before the Great Depression came to Aotearoa. We’d been selling our stuff to Britain, but all of a sudden, Britain didn’t want to buy. We were in trouble.

Workers lost their jobs, farmers lost their farms, families lost their homes. People made do with whatever they could, hunted or fished to keep kai on the table. Reported unemployment hit 15% - but this figure didn’t include women or Māori, telling us an important something about who counted and who didn’t. Actual unemployment was probably more like 30%.¹

The government did squat. Its main response was to set up relief schemes: things that weren’t much better than labour camps, where workers toiled for a pittance. People were so desperate, not everyone who wanted a place in a relief scheme could get one - and women weren’t even eligible. They had to rely on blokes.

Outside of relief schemes, the other main option for survival was the charity of wealthy people. But charity is unequal. It can favour the ‘deserving’ poor, people who meet the expectations of donors, and bypass the ‘underserving poor’ - anyone from unmarried mothers to people with addictions to people on the wrong end of racism or homophobia.

Economic distress has an ugly sibling, civil unrest. By 1932, people had had a gutsful, and unrest swept across Aotearoa. On Queen Street, 15,000 angry people amassed, protesting unemployment. When the police struck down a protest speaker, the crowd snapped. By the time the riot was over, the street was smashed to bits, windows broken, shops looted, hundreds injured. Some guy made off with a grandfather clock on his back - a gesture I don’t really understand, but I have to respect people who commit.²

Aotearoa had just had a wake up call. In the face of unimaginable hardship, we had had failed to take care of our own. It was no way to run a society.

From the cradle to the grave – but also a wee bit racist, sexist, ableist and homophobic 

A little boy was born in 1872, in Victoria, Australia, to poor Irish immigrants - the youngest of eight kids. His mother lived not long into his childhood, so his sister mostly raised him. He was smart; as a teenager, studied at night around the jobs he worked in the day. As a young man he was kindly, and you could not tell from his gentle face that he was strong, too: a weightlifter and a boxer. When he lost his job in the Long Depression of the late 1800s, he walked to a town in New South Wales and found work as a ditch digger.

In 1907, the man emigrated to Aotearoa, found arduous work cutting flax in swamps. By this time, he was fluent in radical new ideas, spreading across the world, about how to create a new kind of society. He was already an experienced unionist, and soon rose up Auckland’s labour movement ranks. The man was Michael Joseph Savage. He became our first Labour Prime Minister in 1935. You will still find his photo, hung with affection, in homes around the motu.

From its establishment by the first Labour government in the 1930s, to sometime in the 1980s, Aotearoa had what we called a ‘welfare state’. There are different ways of describing it, but here’s mine. The Great Depression had left people to fend for themselves, in the face of terrible misfortunes they could not control. The welfare state took collective responsibility, with the aim of protecting people from misfortune, from the cradle to the grave. Economic policies were geared towards making sure everyone who could work had employment. Social policies created (almost) universal health and education systems, and paid benefits to people who couldn’t work. People and businesses paid tax to fund these new, protective institutions.

You’ll sometimes hear people talk about the welfare state times as ‘the good old days’. And, yes: in the post-war period, Aotearoa had by international standards a very high quality of life. The welfare state contributed, forging incredible achievements without a doubt - but it also had grave flaws.

Like, well, the racism. Welfare state policies gave a new form to colonial domination, to dispossession, of tangata whenua.³ And even before we had a fully fledged welfare state, policy already discriminated against Chinese kiwis - they were barred from receiving the pension.⁴ There was the ableism too. Disabled folks were banished, with a quiet and unrelenting cruelty, to our society’s margins - onto benefits, into sheltered workshops, behind the locked doors of institutions.

There were other problems too. Bear with me as I get theoretical on yo ass.

We think about our old-time welfare state as generous: almost everyone got the money and the services they needed to live a decent and dignified life. Well, kinda. Because unemployment was low, no one really needed the unemployment benefit. Home ownership was high, which is good for people’s financial wellbeing, helping them keep off benefits. WHO KNEW?

And there was something called the ‘breadwinner model’. Basically, this meant policies that gave men preference for jobs and benefits, and ensured them higher wages than women. The reasoning was that men look after women through marriage, so women don’t need financial independence in their own right. Of course, women whose husbands deserted them, abused them, or drank or gambled their wages away were - to again use a technical term - shit out of luck. And people excluded from marriage, like unwed mothers and gay people, missed out on even the breadwinner model’s limited ‘protections’. The breadwinner model is important, and we’ll come back to it soon.⁵

Later on in the 1970s, when things started turning to crap again, these other institutions that had propped up the welfare state began to creak. We kicked the tyres on the welfare state - and it started to look more Hillman Hunter than Rolls Royce.

Things turn to crap, part two

In the 1970s, a bunch of things happened, including me. That was a highlight, but only because this decade set the bar so low. Oil shocks created economic turmoil. Inflation crept up after decades of stability; so too did unemployment. People started getting pissy with the welfare state.

On one hand were the economic criticisms. After all, a welfare state that gives lots of things to lots of people is expensive - and taxpayers were footing the bill. The more benefits and government services created, and the more generous their levels, the more it all cost. Aotearoa had a mounting national debt: the welfare state wasn’t helping. And to keep people (or men, at least) in jobs, Aotearoa had been using protectionist policies, to push people into buying kiwi-made. These policies deliberately made it hard to buy stuff from overseas, and people got frustrated at being stuck with a limited range of goods. It meant almost everyone wore corduroy - a national crisis in its own right.

On the other hand were the social criticisms. Some felt the welfare state wasn’t generous enough. New social movements protested the way welfare state policies had repressed some people, including tangata whenua, disabled people, gay people. And the feminists - you know how we love to go on and on - brought up the breadwinner model.

The 1970s had seen a big expansion of the welfare state. With the introduction of the Domestic Purposes Benefit (DPB), all sole mothers could finally get a benefit as of right.⁶ They no longer had to be ‘deserving poor’ - virtuous women who were single because they’d been widowed or abandoned. Women parenting alone for any reason could claim this new benefit, including the ‘promiscuous’ never-married ones. But the DPB was designed to make sure women stayed at home, raising their kids, because working mothers were frowned on. Feminists were divided on this: some thought being paid to stay home recognised women’s important unpaid work, and others thought it fell short of the financial independence men got. But all agreed that a benefit was better than nothing at all.

The breadwinner model was going out of fashion. Unfortunately, the breadline model was about to replace it.

Neoliberalism: pulling yourself up by your jandal straps

I don’t especially want to talk about the 1980s in Aotearoa. Long story short, the fourth Labour government got elected. They inherited genuine economic problems, which they vigorously went about making worse. Everyone was sad, except for Roger Douglas, who notwithstanding managed to scowl even when he was happy.

Labour wanted to make the economy perform better, and reduce our national debt. They got rid of New Zealand’s protectionist policies that had helped keep people (well, men) in work, and earning good wages. These policies had kept us a little apart from the rest of the world, and meant we weren’t great at producing a wide range of cheap stuff.⁷ The idea was if we could buy cheaper stuff, we could be more prosperous. Labour also gave tax cuts, again to boost prosperity. But less tax meant less money to spend on government services, which were cut or restructured.

Not all of Labour’s aims were bad. But the way they carried out their reforms meant a lot of industries got abruptly turned upside down, with a lot of people laid off. Men and Māori were amongst the worst hit. At the same time, inflation was a shitshow. And there was no chance the (expensive) welfare state would get more generous and give folks some extra help. There was a lot of pain, but the promised prosperity wasn’t happening. In short, Labour had said we had to eat our vegetables to get pudding - but then there was NO PUDDING.

Voters responded by chucking Labour out in 1990 - in favour of National, who would turn out to be the most pudding-less government in New Zealand history.

Labour had reformed the economy, but they didn’t go to town on the welfare state. After all, they were meant to be a working class party - and the welfare state was designed to protect everyone, including workers, against misfortune, at a time there was plenty of misfortune going round. From the cradle to the grave, remember? But National came into power with a whole new philosophy.

Cradle to the grave? Yeah, nah. Stop expecting handouts from the taxpayer. Raise your own kids, pre-purchase your own funeral.

Labour had already made extensive economic and state sector reforms that National fancied - so National turned its sights on the welfare state. One of its key acts was the benefit cuts of 1991: eligibility slashed, and benefit levels themselves. This move was partly about the affordability of the welfare state, but mostly about the idea underlying it. It wasn’t just a statement that people should stop expecting the government to help them through misfortune. Misfortune itself - loss of a job, getting pregnant without a husband, failing to care for your health and needing a doctor - was a mark of personal failure.

I could talk about the nuts and bolts of policy stuff from this time. But to really make the point about the change of philosophy, I offer you the works of Muriel Newman. Newman was an MP for the newly formed ACT party, and when it came to the welfare state, nobody had a greater zeal for slashing and burning. Newman wrote a series of books, Living off the smell of an oily rag. The books gave poor people Depression-era inspired budgeting tips, so they could be less dependent on welfare, and by extension, less personally shit. Newman’s tips included - I only wish I was joking - making your own herbal dog shampoo, crafting a poncho out of an old shower curtain, fashioning jandals out of used car tyres, and sewing sexy undies to sell at a nearby pub.

There’s a lot I could point out here. There’s the nonsensical economics; the even sillier belief they could balance a household budget. There’s the patronising of poor people: the assumption folks need budgeting explained to them, that they’re not already trying. There’s the gendered element - because when we imagine people with endless time for unpaid household tasks, we’re really imagining women.

And there’s the idea that anyone can sew competently. It gives me flashbacks to form two manual training, hunched over the Bernina with a furrowed brow, Mrs Sylvester overseeing my amateurish zigzag stitching on my sports bag.

Sexy undies? Mrs Sylvester would be rolling in her grave. She did not train me for a life of smut.

I’m getting to the New Zealand Income Insurance Scheme, I promise

Righto. We’ve seen how the welfare state, and its underlying purpose, have changed since its inception. It used to be about protecting people from misfortune - and it accepted that misfortune can happen to anyone. At the same time, the welfare state was far kinder to some than others. And, to be fair, it was expensive.

Since neoliberal times, the welfare state has been pared back - and some would argue it no longer deserves the name. It’s not about protection anymore, or from the cradle to the grave. Nowadays, people are expected to rely much more on themselves. Benefits are low, deliberately. They’re meant to keep people at little more than the breadline, to hurry them back into paid work. There is no ‘excuse’ for time out of work that requires a benefit: even solo parents are pushed back into employment. (At the same time, it’s worth noting, mums these days are more likely to want paid work.)

Here are some of the things I like about the Scheme. It goes some way to restoring the old school welfare state idea that we should look out for one another, taking a collective response to misfortune. It kicks the breadwinner model to the curb, supporting people in their own right, not making them financially dependent on their partners. And, right or wrong, it recognises that it’s bloody hard for many families to survive on one income, even for a bit.

There’s another selling point I think is critical. A key argument for the Scheme is that technological and economic change is so rapid these days - jobs are lost, but also created, quicker than ever before. Redundancy is the new black: our welfare state needs to adapt. And the ability to reconfigure whole industries is critical to our climate change response.

Climate change behaviour is hard to shift. The vegan burger looks good, but the beef burger looks better. Mmmm. The bus stop’s just around the corner, but the car’s so convenient. If it’s hard to change our small behaviours, how much harder will it be to change big stuff that affects our livelihoods? We can’t expect laid off workers to privately bear the costs when industries adapt to climate change. It’s unfair, and it’ll tie us to a status quo that’s killing the planet.

It’ll end in tiers

As you can tell, I’m broadly in favour of the Scheme. But it has its critics - and they make fair points. One of their concerns is the creation of a two-tier system. People who lose their jobs will get a more generous helping hand. People who never had jobs will stay stuck in the benefit system, comparatively worse off.

Of course, we’ve got two tiers now: people who are injured and get ACC, versus people who are sick or disabled for other reasons and miss out. The Scheme will treat these two groups similarly. But it will not help people who can’t work for other reasons, maybe because they’re caring for kids or sick relatives. And people who get long term sick - or maybe terminally ill - will never go back to work, so will eventually get turfed onto the benefit. This is because the Scheme is primarily a form of insurance - people buying protection against a specific future risk - rather than a way to create across-the-board equity. The critics are right.

To my mind, we need a liveable benefit system as well as a Scheme. That may or may not happen. In the meantime, we’ve got the choice of helping some people, or none at all.

Who’ll foot the bill? It’s the $3.54 billion question

Yeah, that’s the estimated per annum cost. It’s big. To fund it, both you and your employer will pay 1.39% of your wages into the pot. That’s a wee bit more than you currently pay for ACC coverage as an earner.

Of course, the worker contribution will hit low paid workers harder. On one hand, they’re more likely to lose their jobs - so more likely to receive future support from the Scheme. On the other hand, if a person’s wages are so low they’re practically at benefit level, they’ll be paying into a pot that gives them little more than the dole they’d qualify for anyway.

And while some businesses have made it through COVID unscathed, others are hurting like hell. Some, without a doubt, will struggle with this new expense.

These costs aren’t trivial. We need to weigh them carefully. The philosophical underpinnings of our welfare state are important, but you can’t pay the bills with them. Trust me, I’ve tried.

We should care about this stuff

I lost my job once.

I’d always been terrified of being laid off. The fear came from the 1980s, when I was a kid. My father, the breadwinner of our family, was one of those caught up in widescale redundancies. His story was the story of thousands of men. The economy was changing. No one wanted manual skills anymore. Neutral-sounding words like ‘efficiency’ and ‘competitiveness’ were bandied around, but as the men packed up their tools for the last time, the thing they felt was worthless.

Throughout my own working life, I’d told myself, that time of hardship was gone. The 1980s were behind us, not withstanding a couple of shit perms I’d had in the years that followed. I could relax. Redundancy wouldn’t happen to me.

And then I lost my job.

It was fine, really. I found a new and better job straight away. I kept paying the mortgage, buying groceries and school uniforms. But in that moment - in a room full of people, some of whom were close to tears, seated in front of a PowerPoint presentation about the shiny new organisational structure, and a box full of envelopes printed with the names of the unfortunate - it wasn’t just my income that was taken away. It was my self-worth.

You can read the 178 discussion document, or this summary, and you might like to make a submission. But to be fair, you might have better things to do. So let’s make this easy on ourselves. If you’ve got any questions about the Scheme, just post them below - and since I’ve now finished the document, I’ll do my best to answer.

Thanks for reading. If you’ve made it to the end of this post, there’s probably no misfortune you can’t endure.

1. Great Depression - Museum of New Zealand Te Papa Tongarewa

2. Unemployed riot rocks Queen Street | NZHistory, New Zealand history online

3. I’ve written about this prior - but more importantly, so have lots of Māori and indigenous scholars who are well worth your time.

4. NZ's long history of anti-Asian racism (newsroom.co.nz)

5. These ideas about the underpinnings of the welfare state come from (amongst others) a dude called Frances Castles. Of course, lots of feminist scholars have written about the breadwinner model.

6. The establishment of ACC was another massive landmark of the 1970s welfare state.

7. To be fair, lots of countries were doing protectionism. We didn’t just make it up.