Benefit and Abatement System – a poverty trap
Why do we need a benefit system – aims
The New Zealand benefit system was originally designed to provide a safety net that delivered support to people who were temporarily or permanently unable to achieve self-sufficiency. It featured different benefits for people with different needs, such as people with disabilities, and was enough to meet people’s basic needs i.e. rent, food, power etc.
The Ministry of Social Development sets out the current aims of the benefit system:
New Zealanders get the support they require
New Zealanders are resilient and live in inclusive and supportive communities
New Zealanders participate positively in society and reach their potential
So as to improve:
equity of outcomes, particularly for Māori
people’s trust and confidence in the welfare system
effectiveness of support
awareness of and access to support
support to people, whānau, and families in hardship or insecure housing
the safety and strength of people, whānau, families and communities
how we connect and partner
our contribution to business and regional development
sustainable employment outcomes
people’s readiness for work, including through training and education.
The Benefit system is no longer fit for purpose
While we agree with the aims set out above, the experience of those people supported by a benefit tells us the system doesn’t achieve these aims and Budget 2024 did not address this. Changes by successive governments have included bringing several benefit streams together under the current Jobseeker benefit. Because benefit levels have not kept pace with the real cost of living, various supplementary payments have been added, all with their own eligibility criteria and compliance requirements. The application process is difficult, and people often miss out on payments they are eligible for because they do not understand the system. Regular reporting and other compliance requirements are challenging for people to meet.
The system is badly integrated so an increase to the basic benefit can sometimes reduce a person’s eligibility for extra support, leaving them little or no better off. Frustratingly, asking for extra help can reduce peoples’ priority status on the housing register. Changing the benefit system to make it simpler has in reality made benefit administration more complex, labour intensive and expensive to operate.
People tell us that the focus seems to have shifted from providing support that meets their basic needs to minimising costs by bundling them into any available job and moving them off the benefit. Sustainable employment requires, at the very least, a good fit between the available role and a person’s training, skills, career aspirations, and needs.
The culture of service provision can also be a barrier because people supported by a benefit often report that they are treated as undeserving, subjected to humiliating questioning or compliance requirements and treated disrespectfully.
Benefit levels are too low to meet even basic needs for short-term survival
Benefit levels are now too low to meet the basic costs of housing, food, power and transport even with extra assistance for housing and other needs. In large part this is because of the substantial increase in the cost of housing. The housing supplement is not indexed to the real cost of housing, so it has never come close to meeting accommodation costs. Any health costs or unexpected expenses, such as an appliance breakdown, push people into debt that is almost impossible to repay. The benefit system needs to reflect the real cost of living, an individual’s or family’s support needs and be indexed to the wage index, so benefits remain at appropriate levels.
Impacts on children and society
Children need a safe and stable environment for their learning and development. Food and housing security have become an enduring problem in New Zealand. Local and international studies have clearly shown that living in poverty, poor housing and living with frequent moves and changes of school (to find cheaper housing) has a profound and lifelong impact on their development. This shows up in many ways including poor physical and mental health, lower educational achievement, behaviour problems (later offending), addiction, unemployment or low productivity and family breakdown. The wider impact on society of these poor child development outcomes is obvious and the long-term cost is high.
In the September edition of Touchstone, we will discuss ways the benefit system could be updated to work better.