Thursday, May 21, 2015

Government reduces incentive to move off welfare - John Key said it

According to MSD:

The package includes increased work obligations for sole parents on a benefit, more childcare support for low-income families, a $25 a week increase in benefit rates for families with children, and an increase in Working for Families payments to low-income families not on a benefit, Finance Minister Bill English and Social Development Minister Anne Tolley say.
“This package strikes a balance that offers more support to low-income families with children, while ensuring there remains a strong incentive for parents to move from welfare to work,” Mr English says.
“Moving to paid work is the best way to lift more families out of poverty, while an increase in benefit rates will help address our concern about children whose family’s resources have been falling behind other households.
“Over many years, beneficiary family incomes have hardly changed in real terms, while those for working families have increased. Two-thirds of children in more severe hardship have a parent on a benefit, and nine out of 10 of those are sole parents.”
As a result of this package, from 1 April next year:
  • Most sole parents, and partners of beneficiaries, will have to be available for part-time work once their youngest child turns three, rather than five as now.
  • All beneficiaries with part-time work obligations will be expected to find work for 20 hours a week, rather than 15 hours a week as now.
  • Benefit rates for families with children will rise by $25 a week after tax -  the first time since 1972 that core benefit rates have been increased by more than inflation.
  • Beneficiaries receiving Sole Parent Support will have to re-apply for their benefit every year – as people receiving Jobseeker Support already do.

Point 1

Benefits get more attractive relative to work. The increase to WFF does not offset the benefit increase*. Bad thing.

Point 2

Lowering the work-test age is only effective when and where there are jobs. Beneficiary parents in small towns and rural areas are incentivised even further to stay put.

Point 3

43 percent of sole parent support recipients have children aged between 5 and 13. There are thousands more who were moved to Job Seeker with children over 13. These remain dependent in spite of work-testing.

Point 4

Despite the policy change to discourage beneficiaries from adding children to an existing benefit, the trend continues. Increased benefit payments work against efforts to stem this occurrence.

Point 5

There is a wealth of research that links increased benefit levels to increased rate of unmarried births.

Point 6

OECD research shows for every 1 percent poverty alleviation via wealth redistribution, a 1% increase in workless households results.

In fact didn't the PM allude to that yesterday in Parliament? Let's remind ourselves

  As the member knows, that policy, which was introduced by Labour—and I think, in this instance, was correctly positioned that way—ensured that there was always a gap between welfare and work. And if there are not those incentives, all of the academic evidence shows you, actually, that there will be less incentive for people to move off welfare into work.

But today he increases the gap and reduces the incentive. So disappointing.

Oh and point 7, landlords - especially those in Auckland -  have been well-signalled that as of April 2016 their beneficiary tenants will have a bit more money in their pockets to help him pay his ever-increasing rates bill.


The official statement is, "Very low-income working families (receiving the minimum family tax credit, and In Work Tax Credit) will get $24.50 more a week from Working for Families, approximately matching the increase in benefit rates." The MFTC and IWTC = $26,156 net annually. Lower than  a typical sole parent of two living in Auckland gets currently when all assistance  is included. There will be many, many permutations as circumstances  vary across families and regions. I heard Paula Bennett saying that the reason the increase won't come in for almost a year is that it has to go before select committee yet. Systems have to be altered. Indeed, this will throw a spanner in the works as there will now be different core rates for the same benefit eg Supported Living Payment for the childless will be paid at a different rate for parents. Messy. IT nightmare ...  and a reverse on the stated objective - to simplify benefits.)


S>Beast said...

This new expectation will mean greater problems (inappropriate penalties etc) for those who fall between SLP and JSS with medical dispensation.

Otherwise I think a necessary change to allow for the inclusion of an internet connection and better food/clothing.

tranquil said...

What an abysmal Budget.

At least a billion dollars down the gurgler (if you include the Kiwirail bailout). A billion dollars up in smoke - literally, given that the beneficiaries will be spending the extra dosh on booze, smokes and Lotto.

This pathetic effort from Key and English has reinforced what a good decision I've made in supporting ACT. I think there'll be quite a few more people supporting them after this.

Lindsay Mitchell said...

ACT leader David Seymour said

“The move to boost core benefit rates is a welcome move, in combination with the welfare reforms to date and the tougher work tests proposed."

I get (and he's echoing) National's line about the carrot and stick stuff, the context of falling beneficiary numbers etc. except that so far, they've likely largely been picking low hanging fruit. Those most able to find jobs and stay in them. The more intractable get further reason to resist.

Work-testing when the youngest child is three is not a time- limit on welfare availability (ACT policy).
If that had been the other side of the benefit-rise coin, I could have seen some sense.

twr said...

Not much point voting for Act. They will vote to support this budget, so you may as well vote National or McGillicuddy Serious.