Executive Summary

This research project aims to investigate the causes of long-term Unemployment Benefit dependency. It appears that being on the Unemployment Benefit is not a personal choice, but is rather due to the current global   economic crises which has in turn produced a  labour market downturn for  low wage and entry level  jobs. It has also resulted in a decrease in full-time employment as well as price increases in food, petrol and public transport. Each of these has an impact on low income families and unemployment beneficiaries. The New Zealand government offers financial assistance called the Unemployment Benefit with job seeking obligations (which require an unemployment beneficiary to accept any employment offer). It also has  an income abatement rate ( any income over $80 per week before tax, is reduced by 70 cents for every $1 of income earned).  There is also and no financial assistance for employment related expenses. Because of labour market constraints and the global economic crisis as well as the Unemployment Benefit abatement system, there are strong disincentives for unemployment beneficiaries to take up part-time work. However, if they decline to take up such work, they face penalties that either reduce their benefit or suspended it. These are very harsh conditions for unemployment beneficiaries: no additional support for work related living expenses, reduction in benefit payments when income over $80.00 gross per week is earned in alignment with the abatement rate. People on the Unemployment Benefit are trapped.

Policy recommendations to address these issues are:

  • The New Zealand government should provide financial assistance for employment related expenses for beneficiaries and non-beneficiaries who are working part-time.

 

  • Income abatement rate for the Unemployment Benefit should be changed, i.e reduce the benefit payment base on net (after tax) additional income, rather than before tax income (current system)

 

  • Should consider:
    • Australia style : Working Credits, or Work for the dole system
    • UK system of National Insurance Credit