One in ten working-age New Zealanders are on a benefit. Prior to Covid, 71 percent of main benefit recipients had been on welfare continuously for more than a year. All the while, New Zealand businesses are crying out for more workers. We must ensure more beneficiaries return to work.

Over 350,000 working-age New Zealanders were receiving a benefit at the end of June 2020 quarter, and even before the Covid crisis, the number was typically 300,000.

That’s one-in-ten working-age New Zealanders on a benefit (the average percentage on a main benefit over the past 6 years has been 10.5% of working- age adults).

Prior to Covid, 71 percent of main benefit recipients have been on welfare continuously for more than a year.

The worst impact is on children.

  • One out of every ten children is born onto an existing benefit.
  • One in five babies is living in a benefit-led household by their first birthday.

These children face a bleaker future than children born to parents in work; they face worse outcomes on nearly every social indicator.

This often inter-generational scenario is an ongoing, slow-moving social disaster for our country.

ACT's reforms will help to stem this tide through changes to the Jobseeker and Sole Parent Support benefits. We would make no change to the Supported Living Payment, Young Parent/Youth Payment, or Orphan’s/Unsupported Child benefit.

It is often difficult for sole parents to work. Sole Parent Support is also an important aid for women who seek to escape violent relationships. ACT would continue Sole Parent Support but with one change: We cannot continue to have so many children - approximately 6,000 per year - born onto a benefit (usually Sole Parent Support but Jobseeker Support to a lesser extent). Welfare is not there to support beneficiaries who keep having children when so many New Zealanders wait, save and sacrifice before starting a family. Consequently those who have additional children while receiving a benefit will receive support in the form of Electronic Income Management.

Needing Jobseeker Support (Work-Ready) for a long period of time is also a sign that a person needs a new approach. Under ACT’s policy, Jobseeker Support (Work-Ready) will also become subject to Electronic Income Management after an initial seventeen-week period of traditional cash welfare. This initial period gives most recipients plenty of time to find work before Electronic Income Management kicks in. The entitlement to cash-based welfare would rebuild at a rate of one week of cash welfare per three weeks of off-benefit work. Thus, to receive cash welfare for the full 17 weeks again, a recipient would have to be in off-benefit work for at least 51 weeks between spells on the benefit.

Income management would also apply to those who seek hardship assistance repeatedly; have received an imprisonable criminal conviction; have committed benefit  fraud; or have a primary incapacity of substance or alcohol abuse.

Chronic long-term dependency on welfare is damaging the spirit and wellbeing of too many New Zealanders and their children. This needs to change.

How Electronic Income Management Would Work

Electronic Income Management has been successfully trialed in Australia. It issues an electronic card with tracked spending and restrictions on alcohol, gambling, and tobacco expenditure. Almost all of the benefit comes in this form, with a small amount left in discretionary cash. It has been shown to improve child well-being by reducing spending on ‘harm’ and increasing spending on children.

The technology already exists within the New Zealand system as income management for Youth and Young Parent beneficiaries.

Some will see Income Management as a restriction on freedom, but two points need to be made clear. Under ACT’s policy, initial benefit payments are paid in cash to be used as the recipient sees fit. Electronic Income Management primarily applies after a recipient remains on Jobseeker Support for a long period or has more children while on a benefit. The second point is that it is not the recipient’s money. It is taxpayer money and has always been given under a range of conditions such as seeking work.