The Return of Pygmalion

“What is middle-class morality? Just an excuse for never giving me anything.” – Alfred Doolittle from the George Bernard Shaw play, Pygmalion

There have been a number of articles written by commentators in relation to the immediate past Budget and the way forward.  As most people are aware, the Government has implemented a series of programmes that are designed to stimulate and maintain employment. Foremost among these has been the implementation of a series of subsidies and the introduction of “special benefit payments” for those people who have lost their jobs because of the COVID 19 crisis.

For those, very few, people who are unaware of the situation a large number of people will have access to these new special payments due to them losing their jobs as a result of COVID 19.  However, if you were made unemployed or were on the job seeker benefit prior to the COVID lock down your benefit rates do not change.

With New Zealand staring down the barrel of an economic calamity unseen since the early 1930s, these payments could be perceived as a generous and well-meaning intention by the Government to alleviate genuine economic distress to a large number of newly unemployed people because of a dramatic and unforeseen event.

However, the road to hell is paved with good intentions and the result of this proposal will be to implement an unjust two-tier system that penalizes existing beneficiaries. Simply because a number of them were unemployed prior to COVID 19.

Worse, the payment of the additional money to the new unemployed is a tacit recognition by the Government that the existing levels of unemployment benefit are simply inadequate for people to live on.  Additionally, the suggestion of the implementation of a social insurance scheme sounds suspiciously like what happens in the US, where people are paid a high rate equivalent to their job for several months and then drop down to a subsistence level payment afterwards.  If this is the case, then such a scheme should be definitely opposed as it would cement in a two tier system.

Of course, the obvious solution to unemployment is employment and the Government’s role in creating employment.  In the past, Governments recognized that they had a responsibility to ensure the wellbeing of its populace.  Part of that responsibility was the maintenance of employment and the right for people to work. (The early Labour party was an advocate for full employment.  Its leaders and members knew (often firsthand) what economic and social damage could be done to workers individually and in a wider economic context by unemployment or underemployment.  Hence, the demands from the Party for full employment, the 40 hour week and adequate compensation).

Currently, private firms are doing what you expect private firms to do in the face of a recession.  They are cutting costs.  They are retrenching and this means cutting wages and jobs.  The outcome of that will be a drop in employment, wages and effective domestic demand.  As an example, people who are paid less, spend less.  They spend less in the shops and in cafes with the result that cafes and shops face falling demand.  So, they eventually cut costs.  They cut people’s wages or make staff unemployed.  The result is that people then spend less in the shops …. and, so it goes.

The final outcome is that under these sorts of circumstances a recession can very easily turn into a depression as Walter Nash observed in Parliament in 1931; “I know that the Government has a fairly difficult task to face. I know that that what it has to face is two major problems.  The first is to arrest the decline in income by stimulating production and to eliminate waste in production and in marketing.  The second problem is how to distribute that income in such a manner as to obtain a legitimate return for the various parties associated with production, primary and secondary production and distribution.”

My suspicions are that the hold up in the Government taking up a number of reforms in the employment area to deal with this situation are due to the conservative political brake on the coalition Government that is New Zealand First.  For example, NZF shut down the options of additional holidays and, the move toward the implementation of the Fair Pay Agreements.  Both, of these decisions were done on the basis that these were perceived as being unfair to small business.

However, I think that the NZ First opposition to new concepts is creating a disadvantage to those same small businesses that it seeks to champion.  For example, the opposition to the fair pay agreements has effectively meant that there is no wage stabilization across sectors at the time when wage increases, and stabilization could be very useful economically as a means of ensuring ongoing demand.

(It is for this reason that I do not support the proposed helicopter payments which have been suggested in some quarters.  I do not believe that they will have the ongoing effectiveness that their supporters believe that they will.  They are a one-shot solution to economic recession. Once the helicopter bullet has been fired that is it, the chamber is empty).

A fully funded and accessible benefit system can be an exceptionally useful companion to wage increases.  Not only allowing people and families to meet their immediate bills but to continue to contribute to society until employment can be created.

Too often over the past decades the debate over social security has been mired in a conversation about morals.  It is very reminiscent of the debates that used to rage in the 19^th century about the deserving and undeserving poor.  It is not a helpful debate.  It minimizes the subject and removes blame from the role of the overall economic system in creating and maintaining mass unemployment and hardship. (Actual long-term unemployment was exceptionally rare prior to the rise of neoliberalism).

My own thoughts are that there needs to be significant work done in the Social Security area to restore the idea of benefits to what they were originally envisaged.  This was a means to provide suitable support to those who require it during a time of need.  Benefits should be Universal (as they were originally intended) and the payments need to be increased to 2/3 of the average wage.

Those on benefits or allowances should not be penalized for being unemployed or sick or old or have a disability etc.  This was not the intention of those who originally designed the scheme.  Benefits should be based on the need to ensure that people who have suffered an economic or personal misfortune.

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