Stuff: Let’s face it, New Zealand — we’re terrible environmentalists

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The recent fuss over James Shaw’s flight to the Glasgow climate change talks would be funny if it weren’t so hypocritical.

The climate change minister needs to be at the summit: although many things can be done over Zoom, a high-level climate negotiation is not one of them. If you’re not in the room – and in all the corridor meetings and hastily convened side huddles – you don’t really know what’s going on. You can’t properly represent your country.

Yet we badly need to put our best foot forward at COP26 because, contrary to all our national myths, we have an abysmal environmental record. We are, overall, some of the least green people in the developed world.

Among industrialised nations, we have the sixth highest greenhouse gas emissions per person, each of us racking up an appalling 16.9 tons of carbon dioxide (or equivalents) every year. We generate 781kg of municipal waste per person, more than all but two other developed countries.

As if that weren’t enough, we have some of the OECD’s most polluted rivers and the highest proportion of threatened animal species anywhere on the planet. We’re No 1, but not in the way we’d hoped.

None of the defences of this frankly awful record seem convincing. Sure, we have an exceptionally large number of endemic species. But that just means we should have taken even greater care of them.

Sure, our climate emissions – and river pollutants – come disproportionately from farming, a dominant export industry that’s hard to address without widespread economic disruption. But that just means we should have recognised the problem sooner and diversified more quickly.

Not all of this can be sheeted home to the average citizen. It’s not their fault, for instance, that the farming lobby is so powerful: even under a Labour-led government, the organisation with the greatest access to ministers was Federated Farmers.

But we ordinary New Zealanders haven’t even done very much about the environmental damage happening closer to home. Although the polluted rivers problem is largely a rural one, many urban waterways are also in a parlous state. New Zealanders, the vast majority of whom live in cities, have sat back and – in most cases – done precisely nothing.

Poorer families, understandably, are often too busy keeping ahead of their bills to worry about their carbon footprint. But middle-class households have no excuse.

We can’t even recycle properly: we send to landfill thousands of tonnes of goods that most Europeans would recycle. Yes, they have better recycling systems: but what does it say about us that we have never systematically voted for the politicians who would get ours up to scratch?

The bright spots in our environmental record, such as they are, often stem from the fact that there are so few of us: just 5 million people in a landmass larger than the UK, which houses 13 times as many. I shudder to think how polluted this country would be if it were more densely populated.

The sad truth is that many New Zealanders don’t care that much about the environment – at least not in any meaningful sense. Oh sure, they say they do. They tell pollsters how important it is. They talk lovingly about light and landscape.

But, as the Christians say, faith without works is dead. So if people don’t back their words with deeds, if they’re not willing to inconvenience themselves or give their time to help the environment, and they don’t have a valid excuse for inaction, do they really, in fact, care?

Of course there are individuals and communities out there doing wonderful, environmentally restorative work: planting trees, protesting against climate change, calling for cleaner rivers and less waste. Iwi such as Ngāti Ruanui and Nga Rauru Kītahi are leading the fight against potentially damaging mining plans in Taranaki and elsewhere. Generation Zero provided the impetus for the Zero Carbon Act. These people know the planet is something to be treasured.

But too many New Zealanders, Pākehā in particular, remain stuck in an extractive mindset that I suspect has been passed down from history, and has much to do with the male settler’s desire to head off into the bush and be left alone to do what he will, no matter how environmentally hurtful.

One of our first major colonial economic activities was a sealing industry that almost eliminated the animals on which it was based. That was two centuries ago, but old habits die hard.

None of this is intended as a counsel of despair. People are always capable of change – and the first step is to confess one’s own failures. James Shaw can’t solve all our problems, obviously. But at least he’s trying to turn things round. We should be throwing fewer insults at him, and looking more closely at ourselves.

Stuff: How social insurance could provide a safety net for NZ’s most vulnerable workers

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For Craig Renney, chief economist of the Council of Trade Unions (CTU), it’s personal. Growing up in northeast England as the son of a coal miner, he saw his community “devastated” by the closure of Ellington Colliery​ in 1994​, with the loss of 1100 jobs​. Making no attempt to soften the blow, the government of the day simply “shut the door and threw the key into the North Sea”.

This experience partly explains his support for social insurance, which could be one of this Government’s biggest – and most controversial – legacies. Operating in every major developed society bar ours and Australia’s, social insurance schemes require workers and employers to pay a levy – typically 1-2 per cent of salary – into a fund. When people are made redundant, the fund pays them a time-limited benefit that’s usually a set proportion of their previous salary, capped at a certain amount.

The Government is expected to shortly launch consultation on its proposed scheme. Unusually, it has the support of both Renney’s unionists and Business New Zealand’s corporations. It’s unpopular, though, on the left, where it’s often seen as ushering in a “two-tier welfare system”. And that critique has some merit.

But social insurance is trying to do something different from standard welfare. It’s about preparing for rapid economic shifts, managing risk, and avoiding the phenomenon known as wage-scarring, or long-term income loss. Every year, roughly 1-2 per cent of workers lose their jobs involuntarily, and although the predictions of robots pinching your job are overplayed, still that pace of change may pick up.

New Zealanders, who receive neither social insurance nor compulsory redundancy payments, have one of the least protected workforces in the developed world. Accordingly, we suffer severe wage-scarring. Motu research shows that five years after redundancy, the typical worker is earning up to one-fifth less than they did in their old job.

Receiving, at best, the standard $315-a-week unemployment benefit, the newly redundant have little time to assess their options or retrain. Instead, in desperation, they often grab the first job going; hence the former Air New Zealand pilots stacking supermarket shelves.

A social insurance payment, in contrast, can give them time to find the right job or upskill, and helps avoid forced house sales and other desperate measures. International comparisons suggest the result is less wage-scarring.

It’s not clear yet what New Zealand’s scheme might look like, but the overseas versions often pay people 60-80 per cent of their previous salary for 6-12 months. Ministry of Business, Innovation and Employment (MBIE) documents released last year modelled various options, many of which cost about $1 billion. Those documents also suggest wage-scarring costs us nearly $10b a year, so if social insurance reduced that by just one-tenth, it might pay for itself.

Who would be the winners and losers? High earners would contribute the most (in dollar terms), while low-paid workers would benefit most because, evidence suggests, they get made redundant more often. Within the paid workforce, social insurance might be progressive – and would get employers to bear some of the cost of laying people off. This would rightly help reverse a long-term shift of risk from firms to individuals.

One common criticism is that casual and gig-economy workers, who are disproportionately young, female, Māori and Pasifika, wouldn’t benefit, nor would those with interrupted work histories. But the eligibility criteria in overseas schemes vary, and we could design ours so the payouts are based not just on past salary but also on expected income. Social insurance would then increase support for some of the most vulnerable workers, and do so better than compulsory redundancy payments, which generally favour older, longer-established staff.

Overseas, social insurance can also cover people whose illness forces them to stop work, or at least take a break. Following that path would take us a step towards the much-needed extension of ACC cover from long-term injury to long-term illness.

Of course, the critics’ point remains. Labour may have boosted benefits by $90 a week, but a further $1b spent there would do more than social insurance to help the most vulnerable, and should be top priority. Good luck, though, getting employers and employees to stump up for that, in the Government’s view.

So prioritising social insurance is a political choice. But it’s also, in itself, a good idea. The British coalfields where Renney’s father worked have, over time, brought forth new industries, new jobs, new livelihoods. But a 2014 report found the consequences of the closures “still all too visible in statistics on jobs, unemployment, benefits and health”.

Here, economic change has visited similar damage on towns like Tokoroa, and could do so again. Social insurance alone won’t stop that. It could, though, be one way to ensure that we don’t leave such communities to their fate, but instead help them forge a better future.

Stuff: Why the leniency for Covid wage subsidy fraud, but not for welfare fraud

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“Just get your application in, and worry about the details later.” This, in the words of RNZ journalist Nona Pelletier, is how business groups are advising their members to apply for the latest round of the wage subsidy.

It is, I think it’s fair to say, a piece of advice that has never been given to anyone planning to apply for the unemployment benefit, ever. These people face a maze of tests, requirements, and intrusive personal questions, and have to produce piles of documentation that Work and Income not infrequently loses.

Now, I don’t mind that the original, hastily drafted wage subsidy operated on a high-trust model, requiring few details from applicants. The main thing was to get the money out the door – and in that task it succeeded wildly.

The Ministry for Social Development (MSD) also, to its credit, declined 130,000 invalid applications. Even so, as the Auditor-General has argued, the greater the leeway a scheme gives to applicants initially, the more intense must be the post-payment scrutiny.

For the most part, though, MSD simply rang employers and asked for “verbal confirmation” of their details – then had the nerve to call these enquiries “audits”, something the Auditor-General rightly labelled misleading.

Anger over large firms taking the wage subsidy, then posting handsome profits and shareholder dividends, has also been muted. Some were shamed into repayment, but many others – the likes of Hallenstein Bros, Harvey Norman and Fulton Hogan – were not.

The latter may be acting legally: a company can experience a 30 per cent revenue loss during lockdown – the subsidy criterion – then recover to post a full-year profit. But it’s morally dubious. These firms should have come under far more public pressure to return payments clearly intended to help stave off disaster, not fatten ultimately healthy bank accounts.

In total, of the roughly $13 billion paid out, just $744 million has been repaid – and only $23m of that followed a request from MSD. Given how strongly the economy rebounded, that hardly seems sufficient.

Scrutiny is, belatedly, arriving. After the Auditor-General’s rebuke, MSD is going back and checking “a representative sample” of 339 subsidy recipients to see if they have the documentation to corroborate what they told officials over the phone. This will take several months, apparently. One thousand of the biggest recipients, representing one-tenth of the total bill, have also been asked for written proof they were entitled to the subsidy.

So far, though, the ministry has investigated just 1058 cases of suspected fraud, of which 517 are still under review. And so far only eight applicants face civil recovery action. More may follow, but even so: do we really think just eight firms – out of the hundreds of thousands of applicants – ripped off the scheme?

In the current round, MSD says it has already knocked back 42,000 invalid applications. Some firms are being asked to demonstrate revenue losses before receiving payment. That’s excellent.

But given the miniscule number of past prosecutions, how much of the $1.2b-plus bill this time round will be properly investigated? And why don’t the rules specify that, for instance, firms have to repay the subsidy before distributing dividends to shareholders? We’re still not getting tough enough, quickly enough.

This relatively easy ride for businesspeople reflects inbuilt attitudes. A few years back, the Victoria University academic Lisa Marriott exposed the sharp tilt in the supposedly level scales of justice.

Although the average welfare fraudster stole just $70,000, a fraction of the average tax fraudster’s $270,000 take, the former was three times more likely to be jailed than the latter, her research showed. Judges made glowing comments about white-collar criminals – “references to things like their good character and community standing”, Marriott says – while condemning beneficiaries “in very negative, highly judgemntal ways”.

No doubt this reflected judges’ social background: tax fraudsters, after all, are often people from their own circles.

It also reflected a longstanding government policy of pursuing suspected benefit fraud relentlessly, ruthlessly. In one notorious case, MSD spent 15 years, from 2001 onwards – and well over $100,000 – dragging a deeply impoverished Auckland woman, ‘Kathryn’, through the courts because they thought she had been in a relationship while receiving a benefit.

This Government, thankfully, has softened that approach. MSD figures show the number of beneficiaries prosecuted has fallen from 453 in 2016-17 to just 44 in the year to March 2021. More cases are dealt with through discussion, early intervention and adjusting payments quickly.

That’s only a first step, though. The maze-like complexity of the benefit system still torments recipients. And the reluctance to really crack down on wage subsidy fraud parallels the Government’s general timidity when it comes to the elites.

The idea that businesspeople are all battling entrepreneurs, and welfare recipients all scroungers, may be an old, tired stereotype. But it still exerts its power over public debate.

Stuff: We put too much faith in big events to usher in real change

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Call it an illusion-less lockdown: many people, especially the relatively well-off, have greeted our latest confinement wearily, prosaically, without the odd, feverish mix of fear and anticipation that last year’s big one occasioned.

Without the sense of hope, too. Last year almost everyone – in my circles at least – was proclaiming that coronavirus would “change everything”, that we couldn’t revert to the “old normal” of environmental pollution and egregious poverty, that we would “build back better”. No-one believes that now.

It gives me no pleasure to say I never really thought a revolution was close at hand – though even I have been surprised by just how little has changed. Carbon emissions are still rising, as are state house waiting lists. We basically got our old world back, plus some homeworking.

I was mulling this over recently on one of my late-evening lockdown walks through Wellington’s Kelburn, the cold and clear night so quiet I could hear every drop of water gurgling in the drains and the “skrark, skrark” of kākā echoing across the valley. This was the peacefulness, the space for birds to flourish, that so many of my friends mourned when the last lockdown finished. It went quickly, and will go quickly again this time.

What have we learned, 18 months on, as to why so little changes? Pandemics are poor catalysts, for one thing. Change is motivated by an enemy, a thing to counter – but you can’t mobilise politically against a virus.

The most that one could have said, when trying to foment change, was that the coronavirus stemmed from our relentless incursions into nature, signalling a relationship that needed to be rebalanced. But even that’s unclear: Covid-19 could have escaped from a Wuhan lab. (Just because Trump pushed that argument in bad faith doesn’t mean it’s false.)

When it comes to sparking change, the global financial crisis, with its clear villain – the multinational banking industry – should have been a better bet, but back then too many people were still dreaming the dreams of the 1980s, too few people ready for real change.

It’s true that, when Covid-19 hit, governments suddenly looked good (well, some of them). If, in some libertarian dystopia, businesses had had to cope with the pandemic by themselves – forced to shut down as infections spread like wildfire, but with no support from the state – they would have been toast. Even the National Party’s pollster, David Farrar, thinks New Zealanders will be much more tolerant of the big state in future.

But many Kiwis, unsurprisingly, also associated the big state with a big constriction of their lives. The vibes weren’t all good. Hence the lack of any substantial redrawing of the boundaries between government and business.

And, also unsurprisingly, people wanted normality back. Behavioural science doesn’t tell us exactly how long it takes to form new habits, but it’s generally more than six weeks.

Ironically, if the first lockdown had lasted longer (and thank goodness it didn’t), we might have seen bigger shifts in our basic social and economic structures. One of the reasons Anglosphere politics became more egalitarian in the 1950s was the shared misery of World War II. But that lasted six years, not six weeks.

In any case, some countries have now had extended – though also chaotic – lockdowns, and their politics are becoming more inegalitarian, more atomised, more vindictive. Change needs solidarity, not just suffering.

Here, it might have been different if the Government had really tried to transfer the “team of five million” and “Unite against Covid-19” messages from pandemic to everyday politics. Instead it stuck to its cautious course, intent on hoovering up every last available centrist voter. As a result, there was no springboard towards structural change. “The public has just banked that [Covid] success,” as one minister told me late last year.

But perhaps we put too much faith in big events anyway. Last year I couldn’t understand the mourning for the post-lockdown drop-off in birdlife: there’s so many birds about anyway. I live on the edge of Wellington’s CBD and often there are kākā flying past my window, some of them heading for the centre of town.

This truly amazing fact results from no calamity. Rather, it reflects decades of slow, patient, far-sighted conservation work, by the founders of Zealandia but also by the unsung heroes of the regional council, whose trapping of rats and possums is partly responsible for the extraordinary flourishing of native birdlife we now see around town.

If, then, you genuinely want a country with lower carbon emissions and fewer children in poverty, as I’m sure most people do, the best course of action is to find a cause you believe in and start chipping away. Don’t wait for a catastrophe to create the change you want to see in the world.

Guardian: Why we’re happy hobbits in Jacinda’s ‘mysterious socialist hermit kingdom’

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Physician, heal thyself. This phrase has been in my thoughts ever since global media outlets, most of them British, started mocking New Zealand’s Covid elimination strategy last week.

I’m a proud British passport holder, and spent some of my best years in London, but not once during this pandemic have I ever wished to be anywhere except New Zealand. That holds true even though we’re now back in lockdown while the British freely enjoy what passes for a summer there.

As Twitter users were quick to point out, it was indeed crazy of New Zealand to go into lockdown with just one case – no wait, 22 – hang on, 107 … You get the point. The fact that coronavirus case numbers can mount rapidly should be obvious by now, but apparently not.

Also apparently, some British columnists believe New Zealand has become “a mysterious socialist hermit kingdom”. But we’ve led infinitely freer lives over the past 18 months. On the Oxford Covid-19 Stringency Index, they’ve had – crudely speaking – 60% restricted lives for most of that time, while we have seldom been over 20%. We have lockdowns, but they’re generally short and sharp.

The lockdowns are also effective: we’ve had just 26 people die of Covid, a number which – and I cannot stress this enough – is very different from more than 130,000, the current UK death tally. Our per-person death rate is 400 times less than the British one. And if any British people think that’s down to New Zealand’s being an island, they might want to take a look at the shape of their own country on a map. Luck, and living on the bottom of the world, have also helped us, but not that much.

It’s hard to think of any downsides to our approach. Lockdowns are not great for one’s mental health, admittedly, but also probably not as bad as having to watch “the bodies pile high”.

Our compassionate response has also been an efficient one: New Zealand’s economy recovered more quickly than Britain’s did, while our unemployment rate, at 4%, is so low that firms trying to recruit staff are contemplating desperate measures like actually raising wages.

Yes, we can be sleepy little hobbits, less protective of our civil liberties than the British. But when infringements are proportionate to the harm they seek to prevent, and governments act competently, citizens are right to be trusting. And it’s not as if no one dares criticise Jacinda Ardern.

In short, our coronavirus response has been that rarest of things, a win-win-win situation. In the “slightly magical animal” stakes, we can boast not just hobbits but also unicorns.

As to the “hermit” line: it’s not like we want to be isolated. We organised a trans-Tasman travel bubble with Australia as soon as it looked safe, only for the Aussies to mess everything up. If we don’t have one any more it’s not for lack of effort on our part.

Of course our government has made mistakes. Managed isolation bookings are chaotic, intensive care beds inadequate, testing systems far from perfect. Most notoriously, our vaccine rollout is the developed world’s slowest.

But we could afford some slowness because of our previous victories. What’s more, the continuing deaths and resurgent infections in vaccine “success stories” such as Israel, the US and the UK suggest there are few role models out there, unless one is willing to tolerate a body count of hundreds of people a day, tens of thousands a year. New Zealanders would be more excited about “learning to live” with Covid if it didn’t look so much like learning to die with it. We would also probably prefer not to open up to Covid with a very partially vaccinated population, a delightfully British approach that appears perfectly designed to create the next Delta variant.

Given Delta’s exceptional infection rates, of course, our latest lockdown may not work. We have no monopoly on perfection, no crystal ball. But for the moment it looks like the right strategy.

And of course we need an exit plan, just like everyone else, and we may eventually have to accept a few coronavirus deaths a year. But that exit plan, and the opening of our borders, will seem feasible only once global vaccination rates are sky-high and the rest of the world is a safe place for travel.

That, in turn, does not look likely to occur before the end of this year, by which point New Zealand will be in the same situation as everyone else – that is, having got the vaccine to anyone who wants it before commencing a desperate battle with the anti-vaxxers.

I’m genuinely delighted that the UK has nailed its vaccine rollout, helping protect my many British friends and family members. But rather than mock others, Britons would do well to contemplate their own past – and continuing – problems with a pandemic that is sorely testing us all.

Stuff: Sorry, homeowners — prices must fall

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Would you be willing to see your house value fall by 40 per cent if it helped restore affordability within a generation? That’s the question now facing homeowners. I hope their answer is yes.

As a congenital optimist, I react to something like a housing crisis by asking: how quickly could we solve it? So I ran the numbers, and discovered – surprise, surprise – that there is no easy solution.

Currently, the typical (median) house costs $820,000 (although I typed that sentence yesterday, so it may be higher now). The typical household income – if you assume one and a half earners in their 30s, as is standard – is $97,000.

That gives a typical house price-to-income ratio of 8.5. (Other calculations put it even higher.) It’s generally accepted that in an “affordable” housing market, one where prices are within reach of ordinary people, that ratio is 3:1.

If house prices plateau, and incomes grow at 2.5 per cent a year after inflation, as they have done in the last decade, want to guess how long it takes to get back to affordability? 42 years. We have to wait until 2063, a whole two generations away. (My calculations can be found at here.)

If you’re an aspirant homeowner, that seems … suboptimal. Income growth alone won’t do the job.

What would? We could assume incomes will grow more quickly than 2.5 per cent a year, but that seems risky, given the turbulent times ahead.

We could hope that house prices rise more slowly than inflation, as they have in 19 of the past 50 years, according to Selena and Shamubeel Eaqub’s Generation Rent. But we still wouldn’t return to affordability until 2051, an unacceptably long way off.

What if prices fell – say, 1 per cent a year? If inflation was 2 per cent a year, that would work out to a 3 per cent annual fall after inflation (relative to the increase in the price of everything else, in other words). And on that basis, we could restore the 3:1 ratio by 2040, one generation away.

Morally, I think that’s still too far off; but, pragmatically, it might be the best we can do. Bear in mind that the last time we had a 3:1 ratio was the 1990s: this is a crisis decades in the making. Bear in mind, too, that New Zealand house prices “have never really fallen sharply or for a sustained period”, the Eaqubs write.

Even getting homeowners to accept a 3 per cent a year decline, adding up to a 40 per cent real-terms fall over two decades, could be extraordinarily difficult.

In theory, of course, such a fall needn’t be catastrophic. People’s ability to repay their mortgage depends on their income, not the notional value of their house. Prices have risen 40 per cent in the last couple of years, so only the most recent buyers would lose out anyway.

A slow decline might give people time to adjust to the fact that their retirement-fund property would reap less than expected; ideally, they would make other savings plans. Those having to sell might be at least partially compensated by buying their next house more cheaply.

All that makes sense, in theory. In practice, people hate the idea of their house losing value. Even a gradual decline could provoke panic. It could also damage the economy: much consumer spending depends on sentiment, and owners feel more buoyant when their house value is too. (Hence politicians’ desire to keep prices up.)

That said, if the trade-off is that the next generation can actually afford a house, enough people might accept the idea to make it politically viable. And though it might take 20 years to reach 3:1, every year of gradual price decline would bring affordability closer. What’s more, a ratio higher than 3:1 might be manageable – for those with a deposit – if interest rates remain low.

More radical change, though, seems off the table. I understand why some commentators want the market to crash. But if prices suddenly fell 30 per cent, say, I think there’d be an outcry, and the government that allowed it would be rapidly replaced by one committed to reversing it.

Even a slow decline is hard to conceive. Most politicians have so far shown no interest whatsoever in reducing house prices. The prime minister’s position is that people expect single-digit annual increases, which would presumably mean homes remain unaffordable forever.

Politicians’ control over the housing market is partial, in any case, and engineering a perfectly gradual decline is probably beyond them. Still, we have to hope for something of this nature.

House-price growth is already slowing. And last year, for the first time in ages, more houses were consented than was needed to meet demand. If we keep that going, alongside other measures, a gradual decline might be achievable. It’s the least we owe to those looking to own the roof over their heads.

House price to income calculations

Today's Stuff column looks at different scenarios for returning New Zealand house prices to an affordable ratio of three times median incomes. The calculations underpinning these scenarios are here. The spreadsheet has five tabs representing five different scenarios for house prices: plateauing, rising more slowly than inflation, falling slowly, undergoing a sharp correction, and crashing. Each scenario makes assumptions about increases to median incomes, a possible one-year decrease in prices, and a possible gradual long-term decrease in prices. Users can enter their own assumptions to generate their own scenarios.

Guardian: ‘Can we opt out?’ — New Zealand benefit increases leave some worse off

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It feels like a broken promise,” says Bella*, a thirtysomething Auckland mother of one for whom this month’s ostensible benefit increases have turned into something quite different – a $75 a week loss of income.

On 1 July, New Zealand’s Labour government lifted weekly benefits by $20 per adult, the first instalment in a $32-55 increase in May’s budget that was the largest since the foundation of the modern welfare state in the 1930s.

But for some, the headline numbers don’t match the reality. The chief culprit is something known as clawback. In addition to their main benefit, many of the country’s 351,000 welfare recipients get supplementary payments that can be reduced (“clawed back”) if that benefit increases.

Most common are the accommodation supplement (AS), which defrays housing costs, and temporary additional support (TAS), originally intended to help beneficiaries with one-off exceptional costs. Both are now embedded as top-ups to what welfare experts describe as “inadequate” main benefits. In June this year, there were 354,000 people receiving AS and 82,000 TAS.

For some beneficiaries, the clawbacks have simply meant they get less than a $20 increase. A survey by Auckland’s St Vincent de Paul budgeting service showed just 12 of 91 beneficiary clients would get the full amount. Most would get $14-$15. (Some, confusingly, would get more.) Similar stories were collated on Twitter, under the tag #clawbacks, by the beneficiary and worker advocate Chloe Ann-King.

These situations can be disappointing enough. But others say they have found themselves in the bizarre scenario of actually being worse off.

‘Can we opt out?’

Bella lives with her partner, who is on Jobseeker Support but with a health certificate owing to a long-term condition. Bella is on the supported living payment as she is caring for a teenage daughter recovering from a serious car accident. Bella had to quit her studies to provide that care, and because she hadn’t completed enough of her course, the Ministry of Social Development (MSD) is requiring her to repay a large amount of her student allowance.

Once those repayments, other MSD debts, rent, and her partner’s child support payments were deducted from their benefits, Bella and her partner were receiving a combined $207 a week before 1 July. (Their daughter also received $99 a fortnight in disability allowance.) They were then horrified to discover that, as a result of the benefit “increase”, their payments had somehow fallen to a combined $132 a week – $75 less than they had been receiving. When she found out their incomes had fallen, Bella says, “I couldn’t believe it … It’s mind-boggling.”

A frontline MSD officer told Bella that, thanks to the benefit increase, they were deemed able to meet their basic living needs and would have their TAS payments reduced accordingly.

Although Bella has been promised a letter explaining the situation, nothing has arrived. She is now in the farcical situation of asking, “Can we opt out of having the ‘extra’ $20 a week? I feel like, thanks but no thanks.”

Fiona Carter-Giddings, MSD’s general manager for welfare systems and income support, says the ministry is “really concerned” to hear Bella’s situation, and has (via the Guardian) offered the family further assistance. But the ministry believes it “likely to be an isolated situation of some kind, or maybe due to an error”. She says that the ministry’s modelling shows that on average those on the main benefit will receive $19 a week more in assistance from the July 1 changes. “We’re not aware of any evidence that there are clients whose incomes have declined as a result of an increase to their benefit on 1 July.”

If there had been widespread reductions in income, the ministry would have expected “an immediate spike in calls and enquiries”, but that has not happened. “From what we’re seeing at our end, the benefit increases have gone smoothly.”

‘Weird dark arts calculations’

Bella is not the only person to report problems, however. In May, a supported living payment recipient, “Alex”, said their income had fallen $37 a week after changes in April designed to increase beneficiary incomes.

The same occurred to Annie Ross. A former Auckland council worker who is medically retired owing to a chronic illness, she has had no formal explanation for the decline, and has had to rely on food grants to make up the $37 shortfall.

The ministry acknowledges such situations can occur – but insists they are rare, and being addressed.

It estimates 125 people were initially worse off. These people normally receive “disability exception”, a special top-up payment to meet above-average disability costs, but an “unintentional anomaly” means the benefit increases pushed them over the income limit to be eligible for that top-up.

The ministry says it has advised those people that they will receive yet another top-up, a transitional assistance payment, to ensure they are at least no worse off.

Ross says the government has partially simplified the system but its “weird dark arts calculations” still make it “a nightmare” to deal with.

‘Something isn’t right’

Even if individual issues can be addressed, welfare experts say the clawbacks demonstrate the need for major reform. Michael Fletcher, a senior associate at Victoria University’s Institute for Governance and Policy Studies, says all targeted welfare systems suffer these problems. But New Zealand has “made ours rather a lot worse” through a long-term decline in the value of main benefits and a reliance on payments like AS and TAS to fill the gap.

This reliance generates enormous complexity for benefit recipients. The official documentation on who is eligible for TAS, for instance, runs to multiple pages and several layers of income and expense calculations.

This complexity also creates ample room for situations like the “unintentional anomalies” in disability payments. “Even if it’s only a small number of people, it says something isn’t right with the system,” Fletcher argues.

“The only solution to that problem is to raise benefit levels themselves so they are adequate for the vast majority of people, and the temporary payments go back to what they are supposed to be for, which is temporary, additional support – as the name suggests!”

Clawbacks also pose a problem for the government’s ambitious child poverty reduction targets, the most recent of which, announced last month, commit ministers to cutting the number of families in poverty by one-third by 2024 and two-thirds by 2028. Pre-Covid, the government was making progress on the existing targets, boosting the incomes of 100,000 families by an average of $175 each. But further benefit increases, widely seen as essential to meeting the new targets, may be blunted if substantial amounts are clawed back.

The government says it will review the way supplementary payments work as part of its ongoing “welfare overhaul”. Ross, meanwhile, just wants a more humane system. “If they [the government] truly cared about wellbeing for families,” she says, “they would move heaven and earth to get rid of whatever system they have in the background that’s doing these really unjust calculations.”

*Pseudonyms have been used to protect individuals’ privacy

Stuff: Supermarket prices — Politicians have dropped the ball

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The forensic evisceration on Thursday of our uncompetitive supermarket duopoly is a landmark moment, a sign of shifting attitudes towards capitalism – and a massive test for Commerce Minister David Clark.

The Commerce Commission’s draft report into competition – or rather, the lack thereof – in the supermarket sector is damning. New Zealanders face the sixth highest grocery prices in the developed world. Innovation is limited, and suppliers are beholden to retailers.

Why? In large part it’s because just two firms, Foodstuffs and the Countdown empire, utterly dominate the $22 billion grocery market.

Speaking on Thursday, the commission’s chair, Anna Rawlings, was suitably blunt. “Our preliminary view is that the core problem is the structure of the market,” she said. It’s uncompetitive, in short.

The minor players “are unable to compete with the major grocery retailers on price and product range”. Large firms find it hard to enter, because the wholesale market (where the big two supply groceries to other firms) is not competitively priced and sites for large stores are lacking.

Unsurprisingly, the duopoly make profits “consistently and materially” above what they should. Their profit margins are a staggering 50 per cent above the global norm.

These conclusions mount an assault on a form of entrenched market power that should have concerned politicians across the spectrum – but which has been tolerated for far too long.

One of the casualties of recent decades has been our vigilance against monopolies (the dominance of a market by one firm), duopolies (two firms) and oligopolies (a very small number of firms).

Influenced by laissez-faire thinking, politicians have told themselves comforting untruths. Even if there were no new entrants to a market, they said, the mere potential for someone to enter would keep big players honest.

The efficiency of larger firms would compensate for competitive shortfalls. And as a small country, New Zealand couldn’t expect that many competitors.

None of this was substantially true. Other countries don’t tolerate such uncompetitive markets. Similar-sized Denmark, for instance, has six major supermarket chains, four of them holding over 10 per cent of the market each.

Competition is essential because it is the only thing that makes capitalism work. Without the threat of going out of business, firms lack incentives to improve. Indeed, Countdown and Foodstuffs cosily divide up the market, appearing “to avoid competing strongly with each other”, Rawlings noted. We, as consumers, bear the cost in inflated prices and poor service.

This point has been forgotten globally, where the worst monopolists are of course Amazon, Facebook and Google. In the US, their home turf, the political mood has shifted sharply against these tech giants, albeit action remains limited.

We cannot affect that global picture, but we can clean up our own backyard. It’s not just supermarkets. A handful of electricity “gentailers’’, some of them state-owned, dominate their market, apparently able to exclude competitors.

The banking sector looks like an oligopoly, although Kiwibank and others may partially constrain the big Aussie-owned firms. Our petrol markets have already proven uncompetitive. Fletchers utterly dominates some building supplies markets.

These developments should concern National just as much as Labour, because conservatives need capitalism to work properly and retain the public’s support.

For now, of course, the ball is in the court of David Clark. And he cannot allow this moment to pass.

Some of the commission’s suggestions – like forcing the big players to supply other retailers with groceries on “fair and non-discriminatory terms” – could be useful in the short term. Ditto action against the literally hundreds of cases where the duopoly have – outrageously – signed land covenants that block competitors from setting up shop.

But the basic point remains: only a guaranteed increase in competition will fix the problem. Step forward, big government. “Without intervention,” Rawlings said on Thursday, “we currently see little prospect of a new or expanding rival being able to constrain the major retailers effectively”.

Her bombshell idea is to ensure another entrant – by forcing Foodstuffs and Countdown to sell some of their shops to a third outfit, or by government’s investing in a joint venture with a new player then exiting “once competition is established”.

Though I can’t see the state running a supermarket well in the long term, this could be the short-term circuit breaker we need. The risks would require careful assessment, but the benefits to consumers and suppliers would probably be substantial.

Clark will need to pursue these options vigorously, and resist what will undoubtedly be a determined lobbying campaign by the supermarket duo. Politically, he has a chance for redemption after his unhappiness in the health portfolio. Being the man “who broke up the big two” would be some legacy.

It would mark, too, a realisation that markets don’t “naturally” work: they have to be constantly shaped and guided by governments, if they are to deliver consumers their promised benefits.

Stuff: Higher wages, lower unemployment — What if we took this chance to build a trickle-up economy?

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They said the quiet bit out loud, didn’t they? Earlier this week, the Employers and Manufacturers Association argued that unemployment, currently at 4.7 per cent, would be “on the too-low side” if it fell to 3-4 per cent, and 4-5 per cent would be “better”.

Superficially, it’s startling that anyone could want more people out of work. But such assumptions have been quietly nestled in our ideological fabric for several decades.

In the 1980s and 90s, New Zealand governments took a hyper-individualist turn. They abandoned the pursuit of full employment; indeed higher unemployment was accepted as creating greater competition among workers, which suppressed wages and in turn kept inflation low.

In this top-down economy, wealth was supposed to “trickle” from rich to poor (though that word was seldom used). The workplace power balance was tilted against employees and towards employers, notably with the 1991 Employment Contracts Act, which made it much harder for unions to organise.

After it passed, pay for supermarket workers fell up to 44 per cent in eight years. A newly minted shop assistant in 1981 would have been paid $18.62, in today’s dollars; by 2019, the average entry-level retail job paid just $18.22.

During this time, union membership also plummeted. Firms shed apprentices, viewing investment in skills as the individual’s responsibility. Wages might be low, but it simply reflected the individual’s ability and the inevitable playing-out of “market forces”.

So New Zealand became a low-wage, low-skill economy; and employers looked to immigration to plug workforce gaps.

All this is now contested. With the economy booming, and post-Covid immigration slashed, firms are struggling to find staff. Job ads are at record highs.

And in some cases, wages are up. Trade Me says salaries on its hospitality and tourism listings have risen 12 per cent.

But many employers are displeased. Restaurants are turning the lights out in protest. Owners are happy to accept market forces when they keep the wage bill low, but not when they might drive it up.

Firms want ministers to restore high immigration and resume the old normal. But what if we seized this inflection point and created a new, bottom-up economy, one that uses training and wage rises to drive growth, manage inflation and ensure better lives?

First, we’d scale up skills training. While complaints about “unemployable” New Zealanders are overstated, businesses are right that many lack relevant skills, and we calamitously underinvest here. High-skilled, high-wage Denmark spends 1.6 per cent of its collective income on helping the unemployed find work; we spend just 0.2 per cent.

Labour has launched free trades training and the Mana in Mahi scheme, but much more is needed. It can’t all be public subsidies, either: firms must spend more to upskill their workforce.

Second, while people will always be out of work short-term as they change jobs and life situations, we could aim for zero long-term unemployment, implying an unemployment rate of just 2-3 per cent.

Would that turbocharge inflation? Well, in 1956, New Zealand had precisely five people drawing unemployment benefits, and almost zero unemployment – but inflation did not spiral out of control. (That came later.)

In general, wage rises shouldn’t be inflationary if they match productivity gains, because the extra productivity allows firms to sell more things with the same cost base. And on those grounds alone, workers are due a huge pay rise.

If the average wage had kept pace with productivity gains since 1989, by 2017 it would have been $38. Instead, thanks to the Employment Contracts Act and related reforms, it was $33. A catch-up is overdue. Since better-paid staff are more productive (up to a point), that could spark a virtuous spiral: trickle-up, not trickle-down.

Wage increases aren’t inflationary if, instead of putting up prices, company owners accept lower profits. Small cafes can’t always afford that, but big corporates can.

If that’s to happen, we’ll need to soften the assumption that what firms offer always matches people’s ability, and acknowledge that often it reflects a power imbalance. When employees have more bargaining power, they can negotiate wages that better match their worth, and get a larger slice of the pie.

That in turn will require something like the Government’s proposed Fair Pay Agreements, which aim to take good terms and conditions enjoyed at one firm and spread them across an industry. As employers point out, it’s hard being the first restaurant to pay staff $25, not $20. But if everyone must, there’s no competitive disadvantage. Dining out becomes slightly dearer, but benefits can be increased accordingly, and the middle classes can go less often but savour it more.

The wider prize here? Better-trained Kiwis available for better-paying jobs. Then there’d be no danger of anyone’s being undercut by a renewed openness to immigrants, who are after all an economic – and social – boon. And we’d have started reordering the economy’s vast forces – wages, training, profits, productivity, inflation – into a new world of work, built from the bottom up.