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The Purpose of Social Policy

Ian Shirley

Social policy in New Zealand from European settlement to the present day has fluctuated between two dominant traditions. The first can be traced back to 1547 when the city of London imposed a compulsory tax on the rich in order to alleviate poverty. It was an imported model based on the British Poor Law and the maintenance of low wages as a deterrent to idleness and as an incentive to industry. Moral distinctions were commonly drawn between the ‘deserving’ and ‘undeserving’ poor with the undeserving being both feared and despised. The Government provision of residual services for the destitute was treated in the same way as the provision of sewers and drains – as one commentator suggests it probably explains ‘why the architect of the New Poor Law of 1834 was also an expert on sewerage and an advocate of drains’.

Although some of the harsh institutional features of the British Poor Law were abandoned in New Zealand the notions of benevolence, discipline and the ‘deserving poor’ were deeply embedded in welfare provisions and legislation. The Old Age Pensions Act of 1898 for example contained various moral clauses aimed at ensuring recipients had led a sober and reputable life. Individual responsibility, no relief without work and the domestication of women were principles transmitted by tradition, by the harsh realities of life in a colonial society and by the attitudes of an articulate elite who framed and administered legislation. These conservative principles and the moral judgements on which they were based have been a constant strand within social policy practices in this country over the past 120 years. We should not be surprised therefore in election year when social policy initiatives concentrate on privatizing state houses or removing ‘nits’ from low decile schools rather than addressing the aspirations of first home buyers or the scourge of child poverty in 21st century New Zealand.

A second tradition that emanates out of the settlement period can be attributed to those migrants who sought to build their lives in a new country beyond the class divisions, bitterness and discontent of nineteenth century Britain. Theirs was an indigenous model shaped by a ‘quest for security’ and an alternative to industrialisation, unemployment and poverty. The reforming tradition of these settlers can be credited in part with New Zealand’s distinctive approach to social policy during the Liberal period when the country first gained the reputation of being one of the most socially innovative countries in the world. The first New Zealand Constitution Act was passed in 1852 and in 1893 it was the first country in the world to grant universal suffrage to women.

At the core of this country’s innovative approach to social policy lay the Industrial Conciliation and Arbitration Act of 1894 that enshrined a basic minimum wage in legislation and sought to provide families with a decent living according to the colonial standard. Since the average ‘wage earner’ of the time was male and since ‘normal needs’ encompassed domestic responsibilities the fair wage was soon defined as being a ‘family wage’ sufficient to support a wife and two children in a reasonable standard of comfort. The family wage not only established a basic minimum income for the majority of households but it protected wage rates and conditions and it included provisions for sickness leave and overtime.

This distinctive approach to social policy was particularly significant in the wake of the Great Depression. The family wage not only underpinned the provisions of the 1938 Social Security Act but the wage itself was extended to encompass free primary and secondary education, a community-based preventative health scheme, a salaried medical service, a free public hospital system and a state housing programme for those who could not afford a home of their own. The combination of a family wage and full employment dominated the development of social policy in this country for over fifty years. Home ownership was particularly significant both as a stabilising influence and as a central element in a family’s economic and social security. It led to high levels of private home ownership with mortgage repayments serving in effect as a major form of retirement security.

It was the vulnerability of New Zealand’s pastoral economy that led to changes in the country’s economic and social security during the 1960s and 70s and whilst policy changes associated with the freeze on prices and wages and the capital development programme (‘Think Big’) were subsequently criticised for increasing New Zealand’s indebtedness, these criticisms pale into insignificance when compared with the reform programme that followed.

In 1984 an imported model inspired by the Chicago School of Economics was imposed on the public by a group of public servants within the New Zealand Treasury along with a small cabal of business and political leaders. This right wing cabal became converts to the theories of Hayek and Friedman and in turn they became vehicles for intellectual colonialism. Jobs were cut – incomes were reduced – state services were withdrawn – and the increasing costs of health, education and community care were transferred to families in general and to women in particular. The cumulative impact of these policies resulted in severe damage to the tradeable sector. Profits, employment and investment were all affected and export growth sharply diminished.

Investment in New Zealand manufacturing declined by almost 50% between 1985 and 1989 and by 1991 registered unemployment represented 11% of the total workforce. Long-term unemployment became a serious social problem with the unemployment rate for Maori aged 15 to 24 years approaching 40%. In 1991 these socially bankrupt policies were taken to their illogical conclusion. Substantial cuts were made in benefit levels and other forms of income support effectively redefining poverty in absolute terms. As a consequence government became exposed to relatively high levels of welfare expenditure. In 1981 almost 115,000 people were in receipt of a welfare benefit – by 1985 that figure more than doubled and by 1992 it had trebled. The very policies that were designed to cut welfare expenditure created the largest pool of beneficiaries since the Great Depression.

New Zealand’s economy was once controlled by producers – today it is dominated by moneylenders and dealers. Buying and selling companies has become more important than selling products. New Zealand once led the world because of its distinctive social policy arrangements only to lose its way since the mid-1980s with policy initiatives that have undermined individual and social security. The family wage has been replaced by an incoherent set of policies that favour those in full-time employment over those on benefits, the healthy over the sick, childless households over households with children and those who own multiple properties over those seeking to buy or rent a home.

The great strength of New Zealand’s indigenous approach to social policy was the way in which social and economic policies were combined to advance the public interest and the common good. That is no longer the case! Social policy today has been replaced by an antiquated form of social plumbing designed to fix the leaks created by an economic experiment that has failed and in the process we have inherited a substantial social deficit that will need to be dealt with by future generations.

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Ian Shirley
About the author

Ian Shirley

Emeritus Professor – Auckland University of Technology

Ian Shirley is a former Professor of Public Policy at AUT, and founder of The Policy Observatory. He has led major research programmes both in New Zealand and overseas the most recent being an international study of economic and social development engaging 15 research teams in the major metropolitan cities of Asia, the Pacific and Latin America. Professor Shirley has led ministerial councils for both Labour and National administrations in New Zealand. He has acted as a consultant to the Minister of Finance and a Budget taskforce on Income tax and Social Security. He continues research on New Zealand as a social laboratory and Auckland city governance.