How the team at Taylor Fry helped improve welfare outcomes for society’s most vulnerable

 

Changing lives by changing the way we measure social sector issues

The New Zealand government recognised that the welfare system was failing some people. Young adults and sole parents were entering the system too early and staying in it too long. When people find and sustain employment, they increase their income and wellbeing. But it’s hard to shape significant welfare reform through the lens of a four-year budget cycle.  

The government engaged an expert panel plus actuaries from Taylor Fry, to look at long-term welfare models and find opportunities to improve.

They examined the long-term welfare costs, considered various interventions and modelled the outcomes of different scenarios. They knew if they could change the way governments measured social sector issues, they could change lives for the better.

CHALLENGES

The team faced three key challenges:

  • Existing short-term approaches to welfare policy weren’t serving people across their life course
  • The risk governments could treat the welfare system as a cost burden to minimise
  • This was a highly complex model with many moving parts and millions of data points
Hugh Miller photo
 


“Focusing on the long-term trajectory as a tool to improve social policy is exciting. It is important work that helps governments really understand how to best help people who are most disadvantaged.”

Hugh Miller, Principal, Taylor Fry


ACTUARIAL APPROACH

Taylor Fry’s actuaries designed an individual-level micro-simulation. Their model was one of the most complex ever built in Australasia. They gathered millions of data points on hundreds of thousands individuals, including their age, gender, ethnicity, education, welfare history and other details. From this data, they built component models to better understand how people with different characteristics would move between different government benefits. Putting together those component models meant they could simulate out for the next 50 years or so to learn how people move through the welfare system and measure their time on welfare. Then they could put dollar values on that.

The research involved significant macroeconomic work. Large movements in unemployment are (largely) out of the government's control, so proper attribution of changes over time requires labour market adjustments. This allows better isolation of changes that can be attributed to government policy and operational changes. 

Importantly, the actuarial team focused on person-centred design. It ‘re-humanised’ the data down to the individual level, rather than treating people as one vast, homogenous cohort so they could understand individual consumer journeys and follow their pathways according to various futures. This means interventions can be better targeted to make a real difference.

 
   

OUTCOME

The welfare system is a more sustainable safety net. Successive annual reports show substantial decreases in long-term costs associated with future welfare benefits due to policy and operational changes. 

One benefit of these reductions is that it gave fiscal headroom to increase benefits to those who needed it. In 2017 the government  substantially boosted benefits to families through the Child Material Hardship Package, the first increase beyond CPI in many years. Subsequently there have been further packages to increase benefits, particularly for families. This has led to a reduction in the child poverty rate in New Zealand. 

This modelling was seen as a success, and helped justify some of the interventions taken. The government invested in youth coaching to support young people into education and employment. They changed work requirements for sole parents. Policy decisions on part-time work for parents brought New Zealand into line with other developed nations.

Actuaries continue to add new components to the model, projecting different potential futures. They’ve added justice outcomes and tertiary education outcomes and can project how people move through those systems alongside the welfare system. There’s an increased emphasis on mental health as a predictor for some outcomes, and how people move through the mental health system and access different services. There’s also been work around tracking income trajectories to ensure that jobseekers who exit benefits find and retain good jobs.

“It’s exciting to work in a team of actuaries affecting real change on a large scale over the long term.” Hugh Miller, Taylor Fry.

Analysing and modelling data with a human-centred approach and a goal to improve the lives of people over generations is just one example of how actuaries are using data for good.

 
   
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