“Ron F. - the government has economies of scale compared to even the most efficient not-for-profit (or for-profit) companies.”

There are apparently other considerations besides economies of scale. Here is a speech by the Governor of Indiana on why the State’s welfare program has been turned over to a private company. The emphases are mine.

by Governor Mitch Daniels (as printed in the Northwest Times of Indiana, January 2, 2007)

This week, after two years of study, competition and negotiation, I signed a contract to reform Indiana’s welfare system. Although this proposal has been under constant attack for weeks, it is one of the most straightforward and obvious decisions our administration has faced. Here’s why.

Today’s welfare system, as run by the monstrous bureaucracy known as the Family and Social Service Administration, is totally indefensible.

Its clients know it: In surveys more than two-thirds of them condemn its customer service as poor.

The federal government knows it: Because of chronic high error rates and the worst welfare to work record in America, Indiana is facing the loss of millions of federal dollars in penalties if the system is not fixed soon.

Indiana prosecutors know it: Over the last few years, they have brought dozens of cases against welfare workers who were defrauding the public through various scams or outright theft.

The only folks who may not have known how miserably the system is performing are Hoosier taxpayers, but many of them have suspected the truth.

For Hoosier taxpayers, reform means enormous savings: a half billion dollars over the next 10 years, and that’s only on the administrative side. When today’s high rates of errors and fraud are brought down, savings will probably exceed a billion dollars.

For those who actually do deserve food stamps, Medicaid, or welfare assistance, this change means far better service, with many additional phone and Internet options. No longer will they have to contact the system only at places and times convenient to the bureaucracy, then wait a month or longer for an answer or a decision.

For employees of the system, their new private sector employment with IBM or one of its partners means equal or better pay, benefits, pensions and career prospects superior to any state government can offer them. It also means they will be freed of pushing paper and able to spend more of their time helping citizens achieve self-sufficiency.

And for the Indiana economy, the bargain we struck with IBM commits the company to bring an additional 1,000 quality jobs to our state. Without any question, this change is squarely in the public interest; leaving the system as it is would have been not just wrong but immoral.

Since the status quo lobby cannot really defend the mess they created, they resort to broadside attacks on “privatization.” Again, taxpayers beware.

There is absolutely nothing new about government delivering a service by contracting rather than hiring more people on government payrolls. That’s how we build highways, train employees, service computers, and purchase plane tickets, for example.

Almost all of Medicaid is already “privatized”: The doctors, substance abuse counselors and hospitals are not government-owned, they are private businesses. The billing and back office functions are all under private contract, exactly as welfare’s now will be. Overall, more than nine out of 10 FSSA dollars are already spent through contracts with the private sector.

We contract for service for only one reason, to get a better deal for the taxpayer. We saved $12 million a year when we “privatized” the cooking of prison food, millions more by hiring private janitorial services and collection agencies to pursue tax evaders. We “privatize” functions to save tax dollars, but each time we do there is a secondary benefit: The Indiana private economy gets a little stronger.

The private sector that some interest groups and politicians love to bash is where most Hoosiers work, and thank goodness. That’s where the money to fund government comes from; without a strong private sector, there are no taxes for government to spend in the first place.

I wince when I hear Indiana politicians bad-mouth the private sector, using words like “profit” and “private” as though they were cuss words. Every day, we are talking to companies around the nation and the world about in-sourcing new jobs to Indiana. All of them have other options, and few will take their dollars to a place where business is the target of contempt and abuse.

Indiana deserves a government run for the benefit of the taxpayer and not special interests. When you consider the source, the howls you’ve been hearing only underscore the extent to which our upcoming welfare reforms put taxpayers first.

RonF again:
Now, we’ll see how it works in practice. It’s not like fraud and theft or bad service or inefficiencies don’t occur in private business. But there’s also more recourse, since Indiana can cancel and move the contract if those occur, and the private owners have investors that put pressure on them to keep those from occurring. But economies of scale don’t seem to be doing much in the present case.

“The unemployment insurance (UI) system is a unique federal-state partnership, grounded in federal law but executed through state law by state officials.”

“Compulsory unemployment insurance (UI) was created during the depression of the 1930’s by the Social Security Act. Funding for the program was provided through the Federal Unemployment Act. UI was designed both to alleviate personal hardship and stabilize the economy by providing insured workers with temporary and partial replacement of wages lost by involuntary unemployment.”

“Benefits are available as a matter of right to unemployed workers who meet state qualifying and eligibility requirements. State laws vary regarding eligibility for benefits, the amount of benefits, and the amount of weeks which may be paid.”

“State unemployment benefits are financed through state payroll taxes which are held in individual state trust fund accounts in the U.S. Treasury’s Federal Unemployment Trust Fund. These funds are invested by the Secretary of the Treasury in government securities in the same manner as social security trust funds. Federal law prohibits the use of these funds for any purpose other than payment of unemployment benefits.”

“Revenues from the Federal Unemployment Tax are held in three federal accounts in the Unemployment Trust Fund:

1. The Employment Security Administration Account from which state and federal administrative costs for unemployment insurance, employment services and certain veterans employment services are appropriated.

2. The Extended Unemployment Compensation Account, which provides the federal share of extended unemployment benefits that are available during periods of high unemployment.

3. The Federal Unemployment Account from which repayable advances are made to depleted state trust fund accounts to ensure that benefit obligations are met.”

“The program is funded by an employer payroll tax and provides weekly unemployment benefits to those who meet the eligibility requirements set by state law. In general, employer contribution (tax) rates are directly related to the amount of benefits received in the past by those employees laid off from the business. ”

“Generally, to be found eligible for benefits, you must be unemployed through no fault of your own, have earned wages in “insured” employment, be available for new work, and be actively seeking work.”

“You may be disqualified from receiving benefits because you:

1) quit your job
2) were discharged for misconduct
3) refused suitable new employment
4) were involved in an ongoing labor dispute, or
5) you return to work.

There are other disqualifications, as well.”

So:

Benefits are financed mainly by employer payroll taxes, with a small amount of it coming out of general revenues.

They are not intended to replace your previous wages.

They end after a certain time, regardless of whether or not you have a new job.

An employer’s UI taxes will go up if they lay people off and those people file for benefits.

You have to get fired to get them.

If you are fired for taking drugs, stealing, not doing a good job, cursing out the boss, you went out on strike and lost your job on that basis, etc., you are not eligible.

If you are laid off of your job, but your boss offers you a similar one and you don’t take it, you are not eligible. I’m not clear on the meaning of “similar” in this context. I don’t know what the effect of having to move to take the new job or having to work a different shift has on that.

I was laid off once (along with 600 other people). I filed the next day. I collected for 9 weeks until I got a new job. During each of those 9 weeks, I had to go into the unemployment office and give evidence that I had contacted at least 3 different employers about jobs, either through phone calls, sending in resumes, filling out an application, etc. I had to provide names, phone numbers and addresses for each employer. The caseworker could call them up, and deny me benefits for that week if they did not confirm that I had contacted them. The benefits were due to run out in 20 weeks. During time periods of high unemployment, the Feds have extended them another 20 or 26 weeks, but no more than that.

The unemployment office would provide me with contacts, etc., but they were mostly generally useless for someone looking for a skilled or professional job instead of a McJob.

Aaron - they actually told us at the session that 70% of jobs come from networking, and only 3-5% come from WINZ - if that’s the case why don’t they leave us alone.

Compare the overhead and administrative costs between Medicare and any private health insurer, or the Social Security Administration and private pension or financial services companies, and you can see a huge savings in having the government do it.

How effective is the service at actually getting people into work? Obviously, a *good* job pays more than the benefits, but how effective are they at connecting people to good employers (not just KFC, McDonald’s, etc..)? Are there training programs for skilled labor, or basic office work classes people can take?

Also, how are unemployment benefits funded in NZ? In the U.S., corporations pay money to an unemployment fund. I don’t know if any portion of unemployment benefits are funded by tax money, but certainly at least a substantial portion of it is funded by employers.

There is more to this life than having our labour exploited.

Yeah; there’s exploiting someone else’s labor so that you can get the government to reallocate their money to you while you don’t labor.

A couple of questions:

1) Why should it be the function of the government to provide money to people who are unable to support themselves? Why shouldn’t it be a private not-for-profit function?

2) Should there be a distinction in benefits eligibility between those who can work but don’t want to (for whatever reason) and those who cannot work (again, for whatever reason), or work but don’t earn enough money to support themselves? If so, what means should the agency supplying the support money use to distinguish between the two?

I recognize a moral obligation to help the poor, the sick and the needy. I personally think that it is wiser policy to teach someone to fish rather than simply giving them a fish, but sometimes you have to do the latter while they’re learning to do the former. However, if someone can fish but doesn’t care to do so I think that presenting them with the options of either fishing or starving is not inappropriate. I think it’s entirely justified to require someone to do all that they can for themselves, and only providing what assistance will make up the difference to provide for their needs. Whether NZ (or the USA) has a system that does that correctly and effectively is a valid subject for inquiry. So is “what constitutes ‘needs’?”

Don’t worry Sandy, there will be lots of installments.

Currently, the unemployed are given self-marketing classes, which attempt to present the old definition of a proletarian as someone who has nothing to sell but their work as the latest news, and good news at that, because having something to sell makes one an entrepreneur… very funny, in a way.

Anecdote: A friend of mine had to go to court to get his disability pension. The judge, with three years worth of paperwork in front of her said, “You are obviously quite intelligent, educated, and have been organzied enough to get this matter to court. Why don’t you work?” Implying that the only people entitled to disability pension are those too sick to navigate the system. (The answer was quite long, after all, that was what the heaps of paperwork were about. He got his pension in the end.)

I wish you good luck!

I look forward to reading your stories of humiliation by gatekeepers and young ‘managers’ to anyone who dares cross the WINZ office threshold. I await with glee the private and initimate details of those who are being interrrogated at reception. I also cant wait to find out where 25 copies of the same form actually get filed, the rent on that building must be huge.

In anticipation…

It’s a pretty good solution to the problem of “I don’t have any money”.

I’m fairly certain that I’ll get the benefit…

Out of curiosity, why are you applying? You’re clearly literate and articulate. Is there some personal concern that prevents you from working? (Pardon me if there is, and it’s something personal. I don’t mean to pry.)