Thursday, November 21, 2013

Persuading people to work

The Minister of social Development has taken the unusual step of spelling out how much benefits pay versus income from work. She's probably chosen South Auckland because that's where the numbers of welfare-dependent sole parents are highest :
An average sole parent with two children under thirteen, living in South Auckland would receive around $642 on benefit, including accommodation supplement and a minimal extra allowance for costs.
“If that sole parent works just 15 hours while receiving benefit, they would be $107 better off, taking home $750 a week.”
“If they are able to go off benefit and by working just 20 hours a week on a minimum wage, they would be $171 better off each week at $814.”
Going off benefit and working 40 hours a week on a minimum wage, that same sole parent would be $190 better off at $833 a week with the Family Tax Credit, Accommodation Supplement and In-Work tax credit.
“I get how hard it can be to make the move from welfare to work, but it makes such a difference to your state of mind, not to mention financially.”
Lisa, a sole parent in West Auckland wanted to work and earn her own money and found a part time job with 20 hours work a week.
Her work focused case manager did a Better Off Assessment and Lisa was able to see how much better off she’d be doing 30 hours a week, without a benefit but picking up the In-Work tax Credit.

The act of issuing the release tells me that the financial incentive to work is still not enough. People do their own sums and figure out it's easier not to work. But the release also angers me. People should be getting off benefits because they should be supporting themselves. If they are capable, it's wrong to live off someone else.They shouldn't need to be plied with incentives.

While the politician in me accepts beneficiaries need to be financially incentivised to work, the philosophical me finds the idea quite repugnant.

(And it's somewhat ironic to read the Minister pushing what was Labour policy in 2005. It highlights how National has moved to the left in the area of economic redistribution policy. This pushes Labour/Green further left. Which means that if we get a change of government next year, in the welfare area anyway, the new one will be worse then the Clark/Cullen administration.)


Anonymous said...

Seems they just become better funded beneficiaries when they work.
Not against them working, just think that the welfare treats them better than so many ordinary hard working people.

Anonymous said...

the new one will be worse then the Clark/Cullen administration.

the current one is worse than Clark/Cullen.

Whether it's increased tax take, increased benefit rates, and of course the mega-nanny statism of lowering the drink-drive limits, Key is already governing to the left of Clark in almost all important areas.

Assest sales were pretty much the only policy to the right of Clark, and they've stopped now, without actually selling any significant assets (KiwiBank, TVNZ, RadioNZ, Housing Corp).

Add in Key's willingness to shovel money to foreign-owned companies (Warners, Smelter, SkyCity) and crazy superannuation policy, and Key is to the left of Cunliffe.

Who knows what a Labour+Greens+NZFirst coalition would actually do ---- and such a coalition would in any case widely be seen as illegitimate (I doubt you'd accept it Lindsay).

But in terms of the polices Clark/Cullen enacted during their 3 terms (and especially the first 2) --- versus the polices Key has enacted in his 2 terms so far the current government is further to the left then Clark & co

Frank Davis said...

this analysis ignores the costs of getting to and from work such as clothing, transport etc and as you so rightly point out even the dumbest can do those sums and figure out that working can actually leave you with less cash and considerably less free time . Benefits should be pegged at less than half average HOURLY paid worker rates to actually incentivise. currently it is a lifestyle option

Anonymous said...

MP's just all got a backdated payrise, so not needed, they are already paid way more than the average worker. Less cash, less free time, less sanity.

I agree with Frank Davis, once you factor in the costs of travel, petrol, childcare etc, you can be left very badly off. Where is the incentive when the pay is so low in so many industries?

Anonymous said...

Benefits should be pegged at less than half average HOURLY paid worker rates to actually incentivise

Still doesn't help. That means someone going from the bludge to working 40hrs a week gets a pay increase that's only worth 20hrs as week.

The only way to make a bludger work 40hrs and get 40hrs worth of income from it is if the benefit is zero in the first place. That's just basic mathematics.

The minimum wage (not mean wage) is $11/hr or $440 per week. Say we set benefits at half the minimum wage, so the bludger gets $220.
When they go to work, they do 40hrs at $11 and get $440 - which is only $220 more than on the bludge - an effective rate of $5.50/hr. And this assumes someone would employ a bludger for full time.

Now with no benefits and no minimum wage, well someone bludging now would have the choice of no income whatsoever, or say working 40hrs/week for, I dunno, perhaps $5/hr or $200 per week. But they're $200 better off than having nothing.

There's no way to fix welfare if you keep benefits. No way at all.