FYI: Please read pages 12-14 to have an understanding of the government subsidised financial assistance of the UK and Australia for their unemployed residents and citizens.

The Current Unemployment benefit system in New Zealand is a very generous, simple policy design compared to UK and Australia.  The payment amounts on the Unemployment Benefit for individuals meets survival needs e.g. paying for accommodation costs, power and water bills, and basic food consumption expenses. If a beneficiary budgets well, he or she will have some spare money for personal expenses i.e entertainment related costs.

As discussed in the scenario case studies on pages 9-11 the income amounts each of them receive are very similar. It has become obvious that an individual on the Unemployment benefit without work can live comfortably with their income from the Unemployment Benefit in comparison to an unemployment beneficiary with part-time work and a non-beneficiary working part-time. Additionally, the facts and statistics reported in the background study on pages 5-6 indicates that there are more part-time jobs in the labour market and that they continue to increase due to economic downturn and recessions which decrease service demands in manufacturing, construction, administrative and support service, retail trade, and other domestic labourers. The majority of unemployment beneficiaries (without formal qualifications) are commonly dependent upon these labour markets for employment. Furthermore, a decrease in full-time positions among low wage jobs, and low-paid entry jobs decreases opportunities for a lot of the unemployment beneficiaries who want to escape from the low-wage and unemployment benefit dependency trap. Price increases in food, petrol, and public transport have put low income families and beneficiaries in extreme hardship. To further add to their problems, the new welfare reforms pressure beneficiaries to seek for and take up any employment offers without offering extra assistance for employment related expenses. Instead it increases the sanctions if beneficiaries refuse to take up an employment offer. The government focuses heavily on character and behaviour issues of beneficiaries and demeans them for being dependent longer-term on the benefit. These policies also intrude on personal space by constant monitoring of job seeking efforts and requiring them to take any employment offers. This paper argues that the government should create financial assistance which would in turn create   more incentives to work.

In 2010, the Welfare Working Group organized workshops around New Zealand and listened to what people had to say about current benefit systems. [1] They heard that the welfare system is not providing the support that people need, and for many, the system is not empowering, but leads people to disengage and feel disconnected from society. They also found that a number of people use the benefit system for long periods, and almost permanently for some.

Individuals with no formal qualifications were more likely to have long single spells or multiple spells, and to spend the greatest total time registered unemployed. [2]

Further back, in 2003, Ministry of Social Development did research on Barriers to Employment among Long-term Beneficiaries. Their research paper acknowledged that the issue of financial disincentives is complex because of the interaction of wages, taxes and benefits. Several studies show that benefit recipients have very low reservation wages, given their preference for working versus staying on-benefit. However, there is evidence that the transition costs associated with starting employment are inhibitory. Evidence suggests that earnings supplementation (in-work benefits) and other reforms aimed at decreasing marginal tax rates are having an effect on boosting employment levels, even (and, in some cases, especially) among long-term beneficiaries.[3] Furthermore, financial disincentives for working part-time as a result of the benefit abatement rate have also been identified.[4]

[1] The Welfare Working Group, “Long-Term Benefit Dependency: The Issues”, August 2010. P4.

[2] Susan G Singley, “Barriers to Employment among Long-term Beneficiaries: A review of recent international evidence: Summary”, Ministry of Social Development, Working Paper 04/04, June 2003, pp 5-6.

[3] Susan G Singley, “Barriers to Employment among Long-term Beneficiaries: A review of recent international evidence: Summary”, Ministry of Social Development, Working Paper 04/04, June 2003, p.4.

[4] Susan G Singley, 2003, p.5.