Actuarial modelling is not evidence of effective social welfare

The Australian government is barking up the wrong tree in copying New Zealand’s reliance on actuarial modelling to measure the future cost of welfare and judge the success of its reforms, according to an Auckland academic who is in Canberra for a conference.

Lowering the government’s future fiscal liability for welfare does not necessarily indicate a better functioning social safety net, argues Michael Fletcher, a former public servant who spent over 20 years working on welfare and employment policy before swapping Wellington for the Auckland University of Technology, where he is now a senior researcher hoping to shortly be awarded his PhD.

“It’s simply a cost-saving approach,” he says of the NZ government’s attempts to reduce long-term welfare dependency, guided by actuarial reports, rather than more detailed evaluation that considers other indicators around employment rates or general wellbeing.

Michael Fletcher

He argues the NZ approach is “deeply flawed” because it focuses “purely” on welfare costs, which is not an adequate proxy for the kind of outcomes social assistance programs are designed to achieve.

The lifetime fiscal liability does not even include all the wider savings to other areas of the budget that would be expected from more effective social assistance, he points out.

“I just think that it is the wrong measure to use,” he told The Mandarin. “A welfare system needs to be focused on people’s welfare, people’s wellbeing, and promoting employment, not on measuring fiscal savings.”

Fletcher will sit on a panel at tomorrow’s Power to Persuade symposiumdiscussing “changing concepts of evidence” alongside Tara Oliver, the managing director of the Behavioural Economics Team of the Australian Government, and Australian National University academic Daniel Reeders.

The discussion will follow the keynote presentation on “evidence-based policy in a post-truth environment” by former Australian Human Rights Commission president Gillian Triggs. This should be a good introduction, as most critics of the NZ-style investment approach to welfare see it as a form of post-truth policy.

This article was originally posted in The Mandarin. 

About Michael Fletcher:  Prior to joining AUT, Michael Fletcher held various senior policy and research roles in the New Zealand public service, including Chief Labour Market Adviser at the Department of Labour, Principal Adviser for the Ministry of Social Development and Group Manager, Policy and Research for the New Zealand Families Commission. He has also consulted for numerous government and non-government agencies, including the Treasury, Ministry of Maori Development, New Zealand Immigration Service, Ministry of Agriculture and Forestry and the Office of the Children's Commission.

His doctoral research centres on a quantitative analysis of the economic consequences of partnership dissolution for New Zealand parents with dependent children and the impacts of the Child Support system. Since 2014, Michael has held the position of New Zealand Correspondent for the Max Planck Institute for Social Law and Social Policy, a role which involves reporting annually on the social situation in New Zealand and developments in social laws and policies.