Wednesday, 6 July 2011

Welfare reform and drug use

The New Zealand Drug Foundation wrings its hands about potential changes to New Zealand's welfare rules:
The Drug Foundation says punitive measures being considered against drug users who are on benefits could exacerbate poverty, increase crime and harden substance dependency.

It is so concerned about the Welfare Working Group's "flawed populist assumptions" about substance abuse that it is urging the Government to work with mental health and addiction specialists when considering its recommendations.

The group wants strong rules and obligations for drug and alcohol use by beneficiaries, enforced by a graduated sanctions regime.

Drug and alcohol-dependent beneficiaries would be offered free treatment services and those who failed drug or alcohol tests would face cuts to their benefits and a 13-week stand-down for the third offence.
Hope Corman visited Canterbury's economics department a couple of years ago. She found pretty strong evidence that American welfare reform, which included sanctions for drug use, strongly reduced drug use. Here's her NBER working paper:
Exploiting changes in welfare policy across states and over time and comparing relevant population subgroups within an econometric difference-in-differences framework, we estimate the causal effects of welfare reform on adult women’s illicit drug use from 1992 to 2002, the period during which welfare reform unfolded in the U.S. The analyses are based on all available and appropriate national datasets, each offering unique strengths and measuring a different drug-related outcome. We investigate self-reported illicit drug use (from the National Surveys on Drug Use and Health), drug-related prison admissions (from the National Corrections Reporting Program), drug-related arrests (from the Uniform Crime Reports), drug-related treatment admissions (from the Treatment Episode Data Set), and drug-related emergency room episodes (from the Drug Abuse Warning Network). We find robust and compelling evidence that welfare reform led to declines in illicit drug use and increases in drug treatment among women at risk for relying on welfare, and some evidence that the effects operate, at least in part, through both TANF drug sanctions and work incentives.
The paper was also written up in the Wall Street Journal.

So I really hope that the government takes the Drug Foundation's recommendation and consults with specialists. In particular, they should fly Hope Corman back to New Zealand. It would be great to see her again.


  1. Just a couple of quick comments on this one. What are the financial implications on govt for this strategy? I would have thought the cost of testing and treating beneficiaries, and the administration of this scheme, might be prohibitive. I don't imagine that a 13 week stand down for those dumb enough to get caught 3 times would be enough to offset the cost in testing even long-term unemployed, although I may be wrong.

    Secondly, this smells a bit of electioneering and beneficiary bashing by the Nats. I think Ross Bell from the Drug Foundation has a good point when he says "The tests don't test for whether you're addicted or not, you may just be a recreational user. Your drug use may not be the thing that means you can't get work."

    At a time where there simply aren't enough jobs to go around is it really acceptable to find excuses to not provide support for these folk? The Nats are starting to sound like an insurance company trying to weasel out of its obligation to cover damage included in your policy.

    "The group's recommendations aim to get 100,000 people off benefits and slash the cost of welfare from $47 billion to $34b by 2021." Well then, enact a few policies to create job opportunites for these people, because for the majority its not their fault, or their desire, that they are out of work.

  2. Drugs are both leisure goods and substitutes for work. If welfare is for the deserving poor, then a sane system wouldn't give unemployed drug users the maximum amount of money.

  3. The WWG recommendations are focussed on substance abuse among those on SB and IB I believe. Whereas the research you quote is about the effect of AFDC (DPB equivalent) becoming TANF (T for Temporary) which mainly affected single mothers. The two groups - single, mainly male substance abusers and female, parent, substance abusers may respond quite differently to reforms.

    My understanding is that the US reforms to SSI (Supplemental Security Income) for Drug and Alcohol Addicts have had mixed results. When made ineligible for cash benefits for addiction, many cases were able to attain a reclassification as needing SSI for another primary incapacity (usually related and psychological). One Washington DC study found that the predicted increase in crime didn't happen, a good few moved into work but there were also more cases of destitution.

  4. @Lats: I don't know whether policy would be cost effective. If the government wants to reduce drug use, and if voters don't like that beneficiaries might take drugs, then policy isn't crazy. I don't particularly care whether beneficiaries use drugs. But it's not automatically beneficiary-bashing to suggest policy-links.

    @Lindsay: You're entirely right on that the Corman piece was on TANF and that results may vary; I don't know the lit on SSI changes.

  5. @Eric Agreed that the policy makes sense in a National Party context, especially during an election year. I hear grumblings from behind me from a workmate (who is very much in the blue camp) about bludgers, etc. Still, he felt that Alasdair Thompson was on the money, so I'm not terribly predisposed to be sympathetic to his cause :)

  6. @Eric "I don't know the lit on SSI changes."

    But you were still happy to have a crack at our 'hand wringing'?

    I'll send you a copy of our policy briefing when we release it - it should give you a better grasp of the literature.

  7. @Ross: The TANF evidence was pretty compelling that drug dependence didn't harden; rather, drug use dropped sharply.

    I'm not a particular fan of making welfare benefits contingent on drug tests, mostly because it doesn't bother me if people on welfare use drugs, but it's not crazy to think such a move would reduce drug dependence. The combination of treatment options and welfare sanctions was effective in the TANF group.

  8. @Eric - it's worth reading the WSJ link you provided above:

    But the researchers note an important caveat, especially considering the current economic environment. “We have estimated average effects that coincided, for the most part, with a strong economy,” they said. “The overall effects could mask considerable heterogeneity within the target population and might look very different during periods of economic recession.”

  9. @Ross: Definitely. What I've seen on the welfare reform numbers is that the effects (employment anyway) held up through the recession of 2001-2; I've not seen analysis on the latest recession.

  10. The problem with NZ isn't drug dependence - it's welfare dependence.

    The solution to drug dependence is to stop paying the drug dependent: the solution to welfare dependence is to stop paying the welfare dependent.

    Which - in NZ - includes the "civil service", and the staff and users of "state" hospitals, schools, GPs, KiwkBank/Rail/AirNZ/TVNZ/RNZ etc etc etc.