Peter Saunders: Work offers best welfare remedy

By PETER SAUNDERS


In 1996, the American Congress set a target for reducing the number of people on welfare by 50 per cent. It also limited eligibility for welfare to no more than two years in any one period, and no more than five years over a lifetime.

Critics were horrified. They said there would not be enough jobs for all the people currently on welfare to do.

One group forecast that child poverty would go up by 12 per cent; another warned that 2.6 million people would be pushed into poverty. Senator Daniel Patrick Moynihan denounced the reform as a "brutal act of social policy," adding those responsible "will take this disgrace to their graves".

But the critics were wrong. Most former welfare claimants found jobs. Although they were often low-paid, they ended up better-off.

Single mothers who moved off welfare improved their incomes by an average of 60 per cent, and surveys found they were happier. Their children, too, seemed to benefit - the poverty rate among black children dropped to its lowest in US history.

As for the states, they saved so much money on welfare payments that they were able to increase spending on things such as child care and job counselling, to support people as they moved from welfare to work.

American critics have had to swallow hard and admit they were wrong. Welfare reform worked, and nobody there is thinking about reinstating the old system.

Outside the US, however, most commentators remain unimpressed by this social revolution.

Most New Zealand pundits think this country would do better learning from continental Europe with its high levels of welfare spending, high taxes, high unemployment and relatively low economic growth. They think that model can deliver social cohesion and the American path would lead to a divided society.

This argument that high taxes and high welfare spending are necessary for social cohesion is often heard, but there are good grounds for doubting if it is true.

Consider the way recipients and donors experience the welfare system. The theory is that we are all bound together in a spirit of collective trust and altruism. The reality is that people who depend on welfare generally find it an alienating, stigmatising and disempowering experience.

Meanwhile, those who pay into the system - who are often people of modest means - experience frustration and anger as their taxes rise and they come to believe that others less diligent than themselves are taking advantage of them.

The argument that the welfare state fosters social cohesion rests on a misunderstanding of where cohesion comes from.

A sense of common identity and mutual empathy will not develop by the state reallocating money from one group of citizens to another. Cohesion develops from the bottom-up. It emerges when families, workmates and neighbours come together to share common interests and to solve common problems.

But people come together only when they have a reason to do so. The more the welfare state takes care of our needs, the less remains for us to do for ourselves. The result is that the bonds between us begin to fray.

Seen in this light, the best advice for any Government seeking to build social cohesion is to stop doing so much and get out of the way so that people can do more for themselves.

What of the corrosive effects of widening inequalities? Even if the welfare state does not build cohesion, surely an American-style system that tolerates wide inequalities will create divisions?

Again, this is an assumption more often repeated than demonstrated. If we look at the key indicators of social fragmentation - crime rates, rates of substance abuse, suicide rates or rates of depression and mental illness - it is clear that trends have been rising alarmingly over the past 30 or 40 years. But there is no evidence that this has been associated with increased inequality of incomes.

In Australia and New Zealand, most of these indicators started worsening in the 1960s and 1970s, when income inequalities were reducing because of higher taxes and a massive expansion in Government welfare spending. Greater equality went hand-in-hand with more conflict and fragmentation, not less.

Moreover, in the US (where crime rates other than homicides are now lower than they are here), crime rates plummeted during the 1990s at precisely the same time as the Government cut back on welfare spending and income inequality increased significantly. Egalitarian sociological orthodoxy would have predicted quite the reverse.

It may be true that social cohesion requires a "fair" society, but this is not the same thing as an equal one. The pre-requisite for social cohesion is not a population of welfare dependents; it is a population of self-reliant, socially responsible individuals.

* Peter Saunders is Director of Social Policy Research Programmes at Australia's Centre for Independent Studies