Sunday, February 20, 2011

Karl du Fresne: Curmudgeon Column

PETER FREEDOM, who boasted last week of travelling the world on his unemployment benefit, isn’t the only person to make a mockery of the benefits system.Buried in a recent newspaper report about Ronald Terrence Brown, a career criminal jailed for drug offences, was the revelation that he had been on unemployment and sickness benefits for about 20 years.

Brown, 65, was part-owner of a bar in Auckland’s Karangahape Rd and owned six vehicles, including BMWs and a Porsche. He was involved in a ring that dealt in drugs worth millions, and all the while he was bludging off the taxpayer – just like former Christchurch gang leader Darryl Harris, who infamously claimed the sickness benefit for 26 years and even got a special-needs grant to buy tyres for his 2007 Chrysler 300C (a classic “gangsta” car – I bet it was painted black).

Small wonder that honest people get cynical about welfare when they see criminals and other freeloaders abusing the system. The effect on public morale and social cohesion – on confidence in the fairness of the system – is corrosive.

Despite what welfare lobbyists say, New Zealand has an unsustainable welfare problem. More than 350,000 people are on some form of welfare benefit, and if you add those receiving Working for Families and superannuation, the number jumps to 1.3 million. As Sir Roger Douglas has pointed out, “That’s 1.3 million New Zealanders receiving support from the 2.2 million New Zealanders working to pay for it.”

The fact that it’s Sir Roger Douglas saying it gives people an excuse to tune out. There goes the old right-wing dinosaur again, they’ll say. But the unpalatable fact is that he’s right.

Defenders of the welfare system will cry “unfair” at the mention of abusers like Freedom (former name Petrus Van Druten), Brown and Harris. Not typical, they will say; no one condones such brazen ripping-off of the system. And up to a point, they are right. But only up to a point.

The culture of entitlement – the notion that it’s okay to rip off your fellow citizens if you can get away with it – is endemic. Freedom, Brown and Harris simply represent it at its most audacious extreme. Decades of welfarism (exacerbated by accident compensation, the abuses of which are legion) have implanted the belief that living off the taxpayer is a legitimate lifestyle choice.

And the most worrying aspect is that the culture of entitlement appears to be tacitly condoned by the bureaucracy that administers the welfare apparatus. How else can anyone explain the fact that Brown and Harris, whose criminal careers were a matter of public knowledge, could get away with abusing the system for so long?

Clearly, no one noticed the 2007 Chrysler Harris was driving when he arrived at the welfare office pleading poverty. Or if they saw it, no one bothered to ask why someone who could afford to buy and run such a car needed the taxpayer’s help to put food on the table.

We are left to conclude that the public servants who dispense benefits look the other way because they are as dependent on the system as the beneficiaries themselves. After all, their jobs depend on it continuing.

When the media publicised the taxpayer’s generosity to Darryl Harris, provoking public outrage, the reaction from the Ministry of Social Development was quick and fearless. Chief executive Peter Hughes said Harris had been told his sickness benefit would stop from January 10 because “he no longer meets standard eligibility requirements”.

Two questions. Would Harris’s benefit have been curtailed if the media hadn’t created a furore? And does anyone really believe his benefit was curtailed because Harris suddenly ceased to be eligible? Far more likely that the department was embarrassed at being caught out and had to act.

And here’s a third question that doesn’t bear thinking about: how many other Freedoms, Browns and Harrises are out there?

LAST WEEK’S announcement that the minimum wage was to rise by 25 cents to $13 an hour was greeted with scorn and derision in union circles. “Pathetic” and “laughable” were a couple of the epithets I heard on Radio New Zealand’s Morning Report.

The rise amounts to $10 for a 40-hour week, which I would have thought was better than useless, but the unions want the minimum hourly rate raised to $15.

There’s some seriously muddled thinking going on here. Only a week before the increase in the minimum wage was announced, we learned that unemployment was up from 6.4 to 6.8 percent.

Everyone else knows the economy is struggling for traction, but this fact seems to have escaped the unions. They think industry can afford to pay the same minimum wage as economically buoyant Australia.

In the distant, make-believe galaxy the unions inhabit, employers are presumably sitting on vast reserves of cash – but it’s a different story in the real world. You don’t have to be a Nobel Prize-winning economist to figure out that if employers are forced to pay higher wages, they will simply hire fewer people and the unemployment rate will go up again.

The unions’ stance tends to support the cynical theory that unions don’t really care about the unemployed, since people with no jobs don’t pay union fees. Personally, I don’t buy this. I think the union attitude toward the unemployed isn’t one of indifference but of ideological blindness. They can’t, or won’t, see that paying more to people who are in work, particularly when the economy is teetering on the brink of recession, reduces the prospect of jobs for those who are unemployed.

The same muddled thinking applies to youth pay. The Left thought it was a triumph in 2008 when Parliament passed Green MP Sue Bradford’s Bill abolishing youth pay rates, thus requiring employers to pay workers aged 16 and 17 the full adult rate. But as a result, youth unemployment has skyrocketed.

Economist Eric Crampton from the University of Canterbury calculates that 12,000 more young New Zealanders would be in work today had the Bradford Bill not been passed.

This wasn’t even a case of unforeseen consequences, because the consequences were entirely predictable. Simple logic dictates that an employer is less likely to take a punt on an unskilled school leaver if that person has to be paid the same wage as an adult with a solid work record.

I could go on. In 2003, Labour introduced extra entitlements for people working on public holidays. The impact on operating costs was such that many cafes, bars and restaurants no longer open on statutory holidays, meaning their employees earn nothing – a pyrrhic victory, surely, for the workers.

Cause and effect. It’s not hard to join the dots, unless you’re ideologically blinkered.

THOUGHT for the day: If New Zealanders applied a fraction of the energy and ingenuity to their work that they devote to dressing up for the IRB Sevens, would New Zealand soon be back in the top half of the OECD prosperity rankings?


Ken said...

Excellent as usual Karl

Steve Duncan said...

Generally agree Karl, but number of Superannitants over 65 years may double to > 1.3m cf. < 0.6m NOW.

Numbers of all types of Beneficiaries are 'stable' at about 0.350m at present, but cannot be 'forecast' with similar certainty as those who will be aged over 65 years.

As J M (Lord) Keynes famously and wryly stated: "In the Long-Run we are all dead", implying today's issues are best dealt with first, as they are known with a high degree of certainty.

I think you/Sir Roger might agree any other approach implies a much higher degree of 'planning'.

Steve D (Masterton)