Social Security Act passed

14 September 1938

The cornerstone of the first Labour government’s welfare policies, the Social Security Act overhauled the pension system and extended benefits for families, invalids and the unemployed. The legislation has been described as ‘the greatest political achievement in the country’s history’.

From the late 19th century New Zealand had gained a reputation as the ‘social laboratory of the world’. Measures such as the introduction of a pension for the elderly in 1898 saw this country lead the way in attitudes towards social welfare. This reputation was severely challenged by the harsh economic conditions of the Great Depression of the early 1930s. Successive governments cut spending in a bid to balance the books. High unemployment, work camps and queues at soup kitchens shocked many New Zealanders.

Labour won the 1935 election with a policy that every New Zealand citizen had a right to a reasonable standard of living. The community was responsible for ensuring that people were not overwhelmed by circumstances against which they could not protect themselves. Labour’s ultimate response to the Depression was the Social Security Act.

The Act combined the introduction of a free-at-the-point-of-use health system with a comprehensive array of welfare benefits. It was financed by a tax surcharge of one shilling in the pound, or 5%. Pensions were renamed benefits. The Act made qualifying conditions less restrictive and created new classes of benefits. Prior to 1938 New Zealand’s pensions had been confined to the elderly, invalids, the blind, widows and miners. There was a limited system of family allowances.

The Act also established a Social Security Department to administer monetary benefits. Medical care benefits were administered by the Department of Health.

Supporters of the scheme extolled a welfare system that now protected New Zealanders ‘from the cradle to the grave’. These policies helped keep Labour in power until 1949. But critics complained that by increasing the range of benefits and the number of bureaucrats, Labour had created a welfare state that was too expensive, and encouraged more people to depend on handouts.

Image: Head office of the new Department of Social Security (Te Ara