The Social Security Act 1938 is the law enacted by the New Zealand Act of Parliament concerning unemployment benefits that established New Zealand. This Act is essential in the history of social welfare, as it showed the first-ever social security system in the world.
After taking the 1935 election, the newly elected First Labour Government immediately announced a Christmas bonus to the unemployed. However, a standard unemployment benefit was not introduced until the enacting the Social Security Act 1938; that benefit “is payable to any persons 16 years of age and over who lived in New Zealand for at least 12 months and is unemployed, is capable of starting suitable work and has taken unreasonable steps to secure employment.
New Zealand did contain several extant social welfare benefits started by the Liberal Government, which implemented a tax-funded means-tested old-age pension in 1898 and widow’s blessings in 1911. The United/Reform Coalitions created a limited form of payment to the unemployed during the Great Depression of the early 1930s by United/Reform Coalitions. The development of social security policy is a commitment that all Labour MPs were enthusiastic about, was a subject of considerable division within the Government. Finance Minister Walter Nash initially proposed a contributory, national insurance type scheme though the caucus refused. After much discussion and debate, the committees recommend a project for a means-tested pension, universal superannuation, provisions for universal medical benefits, financed from direct taxation. The recommendations became the foundation of what was to be incorporated in the Social Security Act. Prime Minister Michael Joseph Savage broadcasted to a nation on April 2, 1938, outlining the Labour’s government intentions and details of the proposed bill. He outlined the details of a comprehensive scheme of social security to provide a “Condition of social security surpassed in any other country in the world.” He stressed that the system had been carefully coasted and was easily affordable to allay fears of tearing away government spending. The details specified a means-tested old-age pension of $89 a year to women over 60 and men aged over 65.
A national superannuation scheme of $10 per annum, raised by $2 each year to reach the same level as the old-age pension to all aged 65 and over.
All existing allowances for the widows, unemployed, orphans, veterans, and the disabled were continued or increased. A universal health care system provides free hospital treatment, complementary medicine, a maturity benefit, and subsidized doctor’s visits.
The scheme was funded by raising the current income tax level on wages from $8 and continuing the current levy of $1 on every man over 20 years of age. To implement and administer all of the Government’s promises, the Social Security Department would be established, which would absorb the existing Pensions Department and the Employment Division of Depart of Labour. Prime Minister Savage also announced that the bill would contain a provision that it would not come into force until April 1, 1939, thereby allowing the opposition National Party to revoke it if they won the election scheduled October that year as an inducement to re-elect Labour for another term. The initiative received international attention as well. A 1939 government in the United States of America for the Roosevelt Administration described New Zealand as having “the first attempt on a national scale to combine under one integrated system of economic security position against all hazards which are covered by social insurance in other countries.”
The policies emphasize the Social Security Act would set the social pattern of New Zealand for several generations. New Zealand was to remain a regulated welfare state until the 1990s, when neoliberal policies superseded the successful policies of the first Labour government.
The Act introduced a range of new benefits, including sickness, unemployment, orphans, and emergency coverage. Without an income test, a unique superannuation benefit was also introduced to co-exist alongside the age benefit. Several other significant changes were also made, including removing restrictions on Asians and other aliens.
The Act incorporates and liberalizes the services provided under previous legislation for old-age assistance; pensions for widows and orphans, invalidity, miners, and war veterans; unemployment relief; and family assistance. It adds new provisions for universal superannuation, maternity care, and cash benefits during sickness. Furthermore, the Act represents the first attempt on a national scale of economic security protection against all hazards covered by social insurance in other countries. Only the workmen’s compensation legislation remains separate. The New Zealand Act differs from social insurance in its usually accepted form. Benefits are not measured in terms of contributions paid. Instead, they are conditional upon the fulfillment of specific residence requirements. The medical and universal superannuation benefits are granted only if the beneficiary’s income is below a specified amount. Moral qualifications have been included in the liberalized provisions taken from earlier legislation.
A person entitled to claim medical benefits is authorized to select his doctor from among those registered, but the doctor’s acceptance must in each case be obtained. If the person fails to choose a doctor, or if the selected doctor does not agree to serve, the selection may be made by an appropriate committee to be appointed by the Minister of Health. Although the Act does not include how this administrative procedure will be carried out, the assumption may be made that, since the Dominion is divided into several health districts, the medical officers of health will act as the Government’s representatives. All persons entitled to medical treatment are also entitled to medicines, drugs, materials, and appliances as may prescribe. The Minister has the discretion to fix the terms they are to be supplied.
A woman confined in a maternity hospital shall be entitled to all necessary medical and nursing attendance, maintenance and care during confinement and 14 days following the child’s birth. When the detention is at home, provisions are made for the services of a medical practitioner and an approved midwife for the same period—the stipulations concerning payments to public and private hospitals.
From the Social security, funds are the same as described in the previous paragraph. The woman has the right to select her physicians, but the doctor’s authorization to practice in the hospital of her choice. The patient may also choose the nurse or midwife who attends her own home.
One section of the Act combines and liberalizes pensions of various types already in force under existing legislation. It also introduces the principle of “universal superannuation” described by the Prime Minister as a “system that will eventually provide universal superannuation of an adequate amount of every citizen irrespective of other income and property.” The benefit under this section is to be administered by a Social Security Commission, acting under a minister of a Crown’s general direction and control.
Under the Pensions Act 1926, Amended in 1936, old-age pensions were payable to women at age 60. The maximum payment under this earlier legislation was $58 per year, subject to a reduction of $1 for every pound of income over $52 and an additional reduction of $1 for every $10 net capital value of the accumulated property. The income limit, including the pension for eligibility, was $110 a year for a single person and $160 jointly for a married couple.
Under the 1938 act, Superannuation benefits are available to all persons reaching 65, without regard to other property income. The sole qualification is that residence, namely ten years for a person living in New Zealand from March 15, 1938, and 20 years for those arriving in the country after that. Payment will begin on April 1, 1940, and amount to $10 in the first year until the maximum of $78 is reached in 1968. These automatic increases will apply to recipients in the first tear and annuitants entering later; thus, a person reaching age 65 in April 1941 would start with a pension of $10, the amount payable in the fiscal year 1941-1942.
However, superannuation benefits do not replace the existing provisions for old-age pensions on a moans-test basis. The latter is retained and further liberalized by making such allowances payable to men and women at age 60, thereby taking care of aged persons between 60 and 65. These pensions referred to in the Act as ‘aged benefits’ maintain the means-test principle by disqualifying as recipients single persons with a total weekly income of over $2. In addition, the rate of age-benefit for persons who have a child or children under the age of 16 may be increased by the Social Security Commission by such amount as “it considers fit,” not to exceed $13 per child. Moreover, persons receiving age benefits may, on reaching age 65 in 1940, after that, qualify either for the universal superannuation payment or continue to receive age benefits if the latter is more excellent. For example, a single man who was 63 years of age in April 1939 and had no private income would be qualified to receive $78 per year under the age benefits provision.
The original Widows’ Pensions Act, 1911, as amended in 1926 and 1936, for a maximum of $1 a week to a widow with one child under 15 years of age. For each additional child under 15 years old, the aggregate does not exceed $4 awe다. Under the new Act, the maximum payment remains the same, but the child’s age limit is raised to 16 years, and the weekly amount to a widow with one child is increased to $1.15.
Under the Family Allowances Act, a part of the Pension Act 1926, provision was made for allowances at the rate of 2s, for each child under 15 after the first two, so long as the total family increase from all sources did not exceed $4 per week. Even though both parents were living and in good health, these were granted and represent a somewhat unusual degree of liberality, especially when the comparatively high income of $4 week is considered. The 1938 Act further liberalizes this provision by increasing the allowance to 4s a week, the age limit to 16, and the total allowance income to $5 a week. The commissioner may also extend the grant beyond the age of 16 if the child is capacitated physically or mentally and unable to earn a living. These allowances must be used exclusively toward the education and maintenance of the children, and the benefit may be discontinued at any time if, in the opinion of the Commission, this stipulation is not being followed.
As far back as the seventies, New Zealand had a program of public works to cope with the problem of unemployment. At various later periods, unemployment has assumed serious proportions. The Unemployment Act 1930, superseded by the Employment Protection Act, 1936, provided subsidies to local communities for work relief and employment on public works under the Public Work Department. In addition, it granted sustenance payments to unemployed individuals for whom work could not be found under any of the subsidized schemes. These weekly payments ranged from $1 for a single man 20 years or over and $1.15 for married men without children to a maximum of $3.3 for a married man with children, allowing $0.40 for each child. Under the 1938 Act, unemployment benefits are payable to every person age 16 who is unemployed, is capable of working and willing to work, and has taken reasonable steps to obtain suitable employment. He must also have resided continuously in New Zealand for not less than 12 months. A married woman can qualify only if the Commission finds that her husband cannot support her.
In the case of unemployed persons over 16 and under 20, the benefit rate will be 10s weekly. In all other cases, the rate shall be $1 per week increased for a married man with a dependent child by $0.15. In no case shall the total income, including the benefit, exceed $4 a week for a family. The Act stipulates a waiting period of 7 days, which the Commission may waive. Similarly, the Commission may postpone the commencement of an unemployment benefit for as long as six weeks or even terminate it altogether if the applicant lost his job through misconduct, left voluntarily without good reason, or failed to accept an offer of suitable employment. A benefit may also be refused to a seasonal worker if, in the opinion of the Commission, his earnings for the season are sufficient for the maintenance of himself and his family. With these exceptions, benefits are payable as long as the recipient meets the essential qualification and unless he becomes entitled to receive some other help under the Act.
As there is an example from many European countries, special provisions are made for miners sowing to the especially hazardous nature of their occupation. Every person over 16 who has resided continuously in New Zealand for at least 12 months will be entitled to sickness benefits if he passes the Commerce Commission “that he is temporarily incapacitated for work through sickness or accident, and that by reason he has suffered a loss of salary, wages, or other earnings.” The incapacity is to be certified by a resident medical practitioner. The sickness benefits are payable at the same rate as the unemployment benefits, namely, $0.10 a week to a person under 20 and $1.00 a week to persons over 20, increased in the case of married men by $0.15. For each child, up to a maximum of $4.00 per week. These payments may be reduced at the discretion of the Commission if the applicant receives other income. Several friendly shall be allowed to receive payment of sickness benefits for the Social Security Fund in addition to sickness payments from his society as long as total income during the illness does not exceed $5.00 a week. A payment receiving sickness payments from other sources may also receive benefits under the Act as long as total income does not exceed $5 a week or two-thirds of his usual weekly earnings, whichever is lower. A waiting period of 7days is set. However, it can be waived by the Commission for exceptional circumstances.
In addition to the benefits already discussed, the use of $78 a year is granted under the Act to every person who served any of the Maori wars and was awarded a medal for active service if he has resided in New Zealand for at least ten years immediately preceding application. Emergency benefits are also provided for persons who, for any reason, are unable to earn a sufficient livelihood for themselves on their dependents and who cannot qualify for any other benefits are left to the discretion of the Commission. No person may receive more than one benefit under this part of the Act.
Targeting has been consistent legislation in New Zealand’s social security system since its first origins hundreds of years ago. Throughout its history, arrange of means have been used to target provisions to the neediest groups in society, within the framework of a definite, income-tested system of non-contributory benefits and pensions funded from general taxation. Some programs are symbolic, and these have remained in place for long periods in some cases. However, despite these counter-examples, it is no exaggeration to claim that targeted provision has been the dominant and preferred model in New Zealand.
The incremental development continued through to the 1930s, when the depression demanded a different response. The first Labour government provided this in the Social Security Act 1938, which affected a systematization of the whole existing system and extended coverage to new groups. The Act introduced a new range of benefits, including sickness, unemployment, orphans, and emergency coverage. Without an income test, a unique superannuation benefit was also introduced to co-exist alongside the age benefit. Several other significant changes were also made, including removing restrictions on Asians and other aliens. The 1938 Act placed social security on a more systematic footing and established a framework that would survive unchallenged up to the present day. But the Act was not revolutionary in any sense since it did this without changing the essential character of what already existed. A definite, income-tested benefit system funded from general taxes on a pay-as-you-go basis. Indeed, it endorsed the approach of earlier legislators by essentially building a more extensive and more comprehensive version of the same system. Its significance instead resides in providing much more comprehensive coverage of people who might be in need. Furthermore, while it retained flat design, the targeting emphasis shifted to means-testing as the principal means by which resources were targeted to the most required.
The examination of the early origins of the New Zealand social security system explains that it is deeply rooted in a tradition of targeted payments to people in need. The decision by early legislators, which progressively built up a system of unconditional, means-tested, non-contributory benefits and pensions funded from general taxation, were endorsed by successive generations, which continued to develop a strategy around fundamental design parameters. Indeed, it might even be said that these system characteristics have been bequeathed down the years as fundamental design axioms for the social security system.
There have been some significant exceptions to the general model, but these have been exceptional cases. In particular, the universal family benefit, which was instituted immediately after the close of the Second World War, owed its genesis in significant part to the Government’s desire to signal a return to the normality of the family life, to boost the birth rate to free up jobs for returned serviceman which a woman had taken up in response to a call to work to support the war effort. As time passed and these goals were achieved, the value of the benefit was allowed to atrophy away until it was abolished in 1991. It was replaced by targeted family assistance payments directed towards low-income families.
The main exception to the prevailing mode of means-testing has pensions, which have stood apart from different social security arrangements. Pensions Policy has been somewhat confused in recent years, as the matter has increasingly become politicized. Indeed, the other policies of various governments since 1975 have almost run the whole gamut of available solutions, including a mandatory contributory scheme, a tax-funded system, partly run and universal. A national referendum in September 1997 voted down, by a resounding margin, the proposition that a mandatory private scheme replace the existing public system.
References
Atkinson, A.B. (1995) Incomes and Welfare State, Cambridge University Press
Beaglehole, Ann (1993) Benefiting Women: Income Support for Women, 1893-1993, Social Policy Agency.
Besharov, Doug (1997) Social Welfare’s Twin Dilemmas: “Universalism versus Targeting,” 2nd International Conference on Social Security, Jerusalem
Daizial, Paul (1996) The New Zealand Macroeconomy: A Briefing on the Reforms: Oxford University Press.
Department of Social Security, Annual Report of Department, 1971
Department of Social Welfare, Annual Report of the Department, 1972-1991.
Royal Commission on Social Security (1972) Social Security in New Zealand: Report of the Royal Commission of Inquiry
Sawhill, V (1988) “Poverty in the US: Why is it so persistent ?” Journal of Economic Literature, 26.
Stephens, Roberts (1995) “Measuring Poverty in New Zealand,” Social Policy Journal of New Zealand, Issue 1.
The Treasury (1996) Briefing to the Incoming Government, 1996
Whale, Adrian (1993) Voluntary Welfare Provision in a Landscape of Change: The Emergence of Foodbanks in Auckland, Unpublished thesis, University of Auckland.
