Introduction

The current controversy about long-term benefit dependency and the new social welfare reform in New Zealand has inspired me to investigate the issue of long-term benefit dependency. In New Zealand, an Unemployment beneficiaries’ second source of income i.e. a part-time job, affects their benefit entitlements. If they do choose to work to supplement their benefit, the government imposes additional earnings ceilings. Firstly, if they earn more than NZ$80 gross per week from their part time job, their benefit is reduced by 70 cents for every $1 of income they make.  Secondly, their second source of income is taxed at the secondary rate.   Thirdly, they are responsible for all employment related expenses. Each of these creates disincentives to search for part time work while on the benefit.  The higher taxes and reduced benefit associated with part time work nullifies any advantages gained by the additional part time work. This may become a factor that inhibits unemployment beneficiaries re-entering New Zealand labour market. The object of this report is to investigate why unemployment beneficiaries are trapped in the benefit system, and to compare and contrast overseas governments’ subsidised financial assistance for their unemployed residents and citizens. It compares the systems used in Australia, New Zealand and the UK, by examining how they differ in terms of financial systems, payment rates, and abatement rates. This research report focuses on unemployment beneficiaries who are single and couples without children.