The sheer size of the new $5.5. billion Families Package has drawn significant attention. But to understand the truly remarkable approach this government is taking to public policy, one must focus on how the Families Package is distributed.
The Families Package is mainly composed of five programs: Paid Parental Leave, Best Start payments, Winter Energy payments, Working for Families and the Accommodation Supplement.
Paid Parental Leave and the Best Start payments are available to every family with a new child. The Winter Energy Payment is available to every pensioner. Programs like Working for Families and the Accommodation Supplement are not new, but even they have had their scope increased, making thousands more families eligible for support – including those who have not traditionally been entitled to government support.
In other words, the Families Package is the perfect demonstration of the coalition’s Government tendency towards universalism. Instead of targeting their programs or support to families which are deeply mired in poverty, Labour, NZ First and the Greens have decided to expand eligibility to people across the income spectrum – from the poorest of the poor to those who top the Rich List.
That preference for universalism can be seen in every area of the government’s agenda. For example, every new tertiary education student is eligible for their first year ‘Fees Free’, and every first-time house buyer will be eligible to purchase a new KiwiBuild home.
This push towards universalism has opened the Government up to criticism. ACT MP David Seymour lamented that “The Government is giving money to rich kids and wasting it” with the First Year Fees Free policy, and commentators like Auckland University’s Susan St John argued that the Winter Energy payment makes it “easier for rich old people to ‘choose’ more money for themselves”.
The Government’s defence of its universalist tendencies has been muddled. When it has explicitly defended itself on this front, that defence has mainly centred on efficiency and ease of access. If there are fewer restrictions on programs, there are fewer administrative costs. Further, people who otherwise might not have been able to take time off to wait in line at a WINZ office — or who didn’t understand or feel comfortable going through the application process — are now more likely to try get support.
The Government’s universalist agenda does not merely cut costs, or remove long and difficult-to-navigate application processes. It is an ambitious attempt to recreate long lasting and generous systems of government support for those in need.
These explanations make sense, but they miss the main point.
Government-funded welfare programs exist to alleviate social ills like poverty, and universalist welfare programs are better at alleviating those ills than means-tested programs. This is reflected by academic research in areas as varied as pension systems in Latin America; welfare programs in Sweden, Germany, the US, the UK and Canada; and child support payments in Russia.
Firstly, means-tested programs only provide support to people deemed eligible for support by our government bureaucracy – and while that bureaucracy often gets it right, it does sometimes get it wrong. Universalist programs prevent people from falling through the cracks.
Secondly, universalist programs are effective because they lack the stigma associated with means-tested programs. When middle and upper class individuals can’t access a program, using that program becomes perceived ‘proof’ of fiscal and social inferiority. People on welfare become ‘dole bludgers’ or ‘welfare queens’, instead of people in need. That stigma impacts the number of people accessing government support – people don’t want others (or often, themselves) to think less of them, and so they refuse to access support for which they are eligible.
Thirdly, universalist programs lack the disincentives to work which are inherent in means-tested programs. In a means-tested program, the more you earn, the less you are entitled to from the government — making work less rationally attractive. By contrast, universal programs will always be available, no matter how much you earn, meaning there is no such disincentive.
Most importantly, universal programs tend to be better at addressing poverty and other financial troubles because of the ‘Middle Class Inclusion’ theory. Universal programs apply to everyone in a particular situation. For example, everyone over the age of 65, or entering tertiary education, or who has a newborn child. By including everyone, universalist programs build a coalition of political support — because if people benefit from a program they are far less likely to view it unfavourably. As a result, it becomes easier politically to make the program more generous in the amount of support it provides and harder politically to remove the program.
The better explanation for Scandinavian generosity is simply that Scandinavian welfare schemes bought the political support of the middle and upper class by including them in the schemes as well.
More simply, universalist programs are generous and long lasting because people like universalist programs more.
By contrast, it is politically easy to decry ‘over-funding’ means-tested programs, meaning that means-tested programs often only provide the bare minimum (or less).
The best example of this is Scandinavia, which has exceptionally generous universalist welfare programs funded by comparatively high tax rates. It is often assumed that there is some peculiar quirk in the Scandinavian psyche which explains the exceptional generosity and perceived self-sacrifice of middle and upper class Scandinavians in funding these programs.
The better (and less fanciful) explanation for Scandinavian generosity is simply that Scandinavian welfare schemes bought the political support of the middle and upper class by including them in the schemes as well. Wealthy Scandinavians benefit from the programs and so they support them.
In a New Zealand context, the Government is betting that it can boost government support for poorer individuals without being punished politically by charges of fiscal irresponsibility, because middle class voters will also feel the benefit of these schemes and view them positively. Labour’s website makes this strategy explicit — its explanation of Labour’s Families Package proposal repeatedly mentions how it benefits “middle income families”.
Admittedly, the benefits of universalism aren’t present in every aspect of the Government’s universalist agenda. For example, it currently seems that there will still be issues of supply with KiwiBuild for the foreseeable future, even when the Government has significantly begun ramping up production. As a result, a purely universalist agenda in KiwiBuild could lead to some poorer house-buyers losing out to wealthier competitors.
Further, there is a clear drawback to universalist programs — they cost more. Expanding access to support programs to the middle and upper class doesn’t come cheap. However, for the reasons explained above, that is a political fight that the Government can win.
Having explained all of this, it must be noted that universalism is not a new concept in public policy in New Zealand. Indeed, our most distinctive government support programs are all universal — from the pension, to no-fault accident compensation, to a publicly-financed health system.
However, universalism has been under pressure for the past few decades. The uptake of neoliberal policies by both National and Labour under Ruth Richardson and Roger Douglas led to cuts in government spending and new limitations on previously universal or widely-accessed forms of government support.
With that recent history as context, the Government’s universalist agenda does not merely cut costs, or remove long and difficult-to-navigate application processes. It is an ambitious attempt to recreate long lasting and generous systems of government support for those in need. The Government shouldn’t be ashamed or afraid of saying so.
