Defining social investment, Kiwi-style, NZIER public discussion paper 2016/5

20 December 2016

By Peter Wilson and Killian Destremau

The current New Zealand Government is following a “social investment” approach to improving the lives of disadvantaged New Zealanders

The background to this approach is widespread agreement that for a small proportion of New Zealanders, improved economic performance has not been reflected in improved living standards and life chances, despite years of active policy interventions and considerable social spending. Further, there is limited evidence about the impact of current programmes.

Social investment, Kiwi-style, represents an internationally unique approach in designing and implementing social policy

Investment is applying resources today in the expectation of earning a return tomorrow. We define social investment as “a programme funded by the Government that entails applying resources today in the expectation that a measurable improvement in a dimension of policy interest will result at some point in the future”.

New Zealand isn’t the only country using a social investment approach but while many approaches to social investment have been developed, social investment as practiced in Europe (where it is most predominant) presents some consistent themes. In general, it is applied very widely across the government’s activities, encompassing issues and themes such as gender equality, knowledge economy, youth unemployment and income redistribution.

Since the early 1930s, successive New Zealand governments have based social policy on the idea that the state could provide for the basic needs of families through uniform approaches. Basic needs could be met with universal programmes. This approach has however not proven successful in addressing the needs of and providing equality of opportunities for New Zealand’s most vulnerable.

The New Zealand social investment approach can be best described by its three innovative features which work intimately together

The first is client segmentation: identifying groups and individuals with very specific needs by using administrative data more effectively. This is a move away from the uniform approach to policy of the past.

The second is intervention innovation: tailoring interventions to better address the specific needs identified through client segmentation, setting very clear expectations about the returns sought from the intervention and measuring those returns. There is a clear shift in focus away from broad programmes covering large groups of people (e.g. the unemployed, single mothers, the injured, the disabled, etc.) to designing interventions that are focusing on specific clients with specific characteristics.

The final and perhaps most novel but least developed feature of the social investment approach is a new mode of governance. Client segmentation and intervention innovation are respectively the demand and supply side of the social investment approach, but without a structure which allows for and rewards risk taking in investing and learning what works, the social investment approach is merely a continuation of the past supplemented by better access to data. The governance and institutional change made possible by client segmentation and intervention innovation is necessary for the full implementation of the social investment approach in New Zealand. What institutional changes are required is still uncertain and needs significant attention from policymakers for this policy to succeed.

Some aspects of the New Zealand social investment approach are not new and largely are a re-labelling of existing polices. There are, however some new, and internationally unique aspects, together with a clear intention to address long-term policy problems using new analytical and measurement tools to both define target populations and test results.