Thursday, April 01, 2021

April 1 marks another egregious error by this government

Indexing benefits to wages last year set a precedent. They've been indexed to inflation since 2001 but indexing to wages had always been resisted.

For many people the margin between income from a benefit and income from work is a cost they are prepared to pay. Fix that margin and they will always be prepared to pay it. Increase the margin and work becomes attractive.

Covid highlighted NZ's heavy reliance on imported workers in areas where benefit dependence is also high. With benefits linked to wages, that's the way it will stay.

The previous Labour government (a godsend compared to this lot) understood the importance of keeping a margin:

 " is desirable to create a margin between being dependent on a benefit and being in employment....

The Labour Party isn’t the party that says living on a benefit is a preferred lifestyle. Its position has always been that the benefit system is a safety net for those who are unavoidably unable to participate in employment. From its history, the Labour Party has always been about people in employment."

Michael Cullen, 2008

Not Jacinda's Labour Party.

1 comment:

Zoe Black said...

Benefit increases of last year predictably penalized those who were suffering the most, and then the latest press release trumpeted (incorrectly) that it is now possible to earn $160/week before any benefit was abated.

The structure of TAS is such that it only picks up one third of disability related costs. These are the people who need to earn more, so they can pay for "necessary and essential treatment" which is part of the definition of a disability related cost. Instead, the system design deducts the gross amount these people earn immediately while they receive a net amount that is subject to secondary tax.

Likewise, the earlier benefit rate increases actually penalized the same group of people as their TAS was reduced while people who already had enough were given even more. Sorry I went off on a bit of a rant...I'm meant to point out that the April 1st benefit increase will repeat the same issue.

Unsurprisingly Stats came out with this

TAS of course picks up other costs such as hire purchases which are paid in full up to a set limit (car is the highest around $63/week). This alone should demonstrate the design flaws - grown adult making a choice to purchase something is fully funded in most cases, but disability costs aren't even close.

So back to TAS. The way it works is that disability costs get to a certain point which is one third of the base benefit that is received (eg JSS, SLP..) then the calculation changes and something called the disability exception kicks in. Around that point the benefit can jump around $60ish. That of course means that it can work in reverse too when the base rate is increased. Yes, that's right...some really unfortunate disabled people in this country will have taken a massive hit due to the changes. This is a breach of something, even if it's just common sense.