Family Responsibility: to Save or to Spend

Keith Rankin, 22 March 1998


The "Code of Social and Family Responsibility" proposed in February by Prime Minister Jenny Shipley and Treasurer Winston Peters is really a set of rules for "beneficiaries", meaning people receiving benefits other than tax concessions, pensions, or aid-in-wages. As such it serves the purpose of creating non-pecuniary incentives for beneficiaries to enter the labour force; ie to "actively seek paid work" and become "immediately available for paid work".

The code is seen as necessary, because, when beneficiaries enter the labour force then the market clearing wage falls, making the gap between wage incomes and benefit incomes even smaller than it is now. The code is all about creating a cheap and "flexible" "reserve army of labour" without having to eliminate the welfare state entirely. In many respects it represents a rerun of the 1834 "New Poor Law", when "outdoor relief" was replaced by the discipline and disgrace of the workhouse as the only public means of support for those without employment or property.

The Code is cloaked as a set of rules for parents rather than specifically for beneficiaries; it's just that the code can only be enforced on beneficiary parents.

One thing that makes the exercise particularly bizarre is the concurrent public campaign on behalf of the Retirement Commissioner. This campaign seeks to persuade all working age persons to save more; ie to spend less. Thus parents are getting the dual message that they should both spend more on their children and spend less on their children. Clearly, the commonsense response is for financially pressed parents (collectively) to save less and to spend more on their children so that their children will in turn be willing and able (collectively) to support their parents in retirement.

It's bad enough marginalising beneficiaries through this code of self-reliance that masquerades as a code of social responsibility. Indeed, the campaign to get the New Zealand workforce to save more is also part of that code of self-reliance. Advising parents to look after their children better, to become "financially independent", and to save for their retirement is pretty confusing, nevertheless, in a society such as ours where the minimum after-tax wage for a 40 hour week is just NZ$227 ($US125) and in which all food is subject to a 121/2 percent goods and services tax (GST).

Indeed, the Government this week reneged on a promise to raise the adult minimum wage by seven percent. It seems that, since the 1991 Employment Contracts Act, many more workers are paid at the minimum wage, and that the Government sees it as necessary for New Zealand's international competitiveness that wages stay very low.

If the government wants to play the role of the stern preacher, it would be wise for it to stick to preaching what it is possible. We, Shipley's flock, cannot easily comply with moral prescriptions that require us to simultaneously save more and spend more. Rather, given the downwards pressure on basic wages, many of us are obliged to both spend less and save less. Or, in order to pay our bills and to continue to care responsibly for our families while social services erode, we spend more and we borrow more. So much for retirement savings. Get real. After all, the 1997 compulsory savings referendum was defeated by a ratio of 92 to 8.


© 1998

Rankin File | 1998 titles