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Lindsay Mitchell: The price of reducing poverty

The benefit system was originally about providing secure income for those genuinely unable to work. That inability to work did not include causing one's own incapacity or having dependent children.


It has since evolved to become a government tool for equalizing incomes between the employed and unemployed and advancing other ideological goals like the financial emancipation of the female parent from the male parent.


To some degree benefits have become an alternative source of income for those uninterested in the obligations and constrictions involved with being employed. Those who disagree with that statement argue nobody would willingly choose to live on a meagre benefit income.


That may hold water for single people. But the latest incomes monitoring report from MSD shows a couple on a benefit with two or more children receives over $800 weekly after housing costs. Additionally,


In real terms, total incomes after housing costs of people supported by main benefits were, on average, 43% higher in 2022 than in 2018.

Which brings us to the gap between income from benefits and income from work.



Until 2016 wage growth outstripped inflation hence the growing gap. Since 2019 benefits have been indexed to wages. Previously they were only indexed to inflation. Accordingly, the report notes the 2022 "main benefit increases reduced the gap". That is, income from work became less attractive.


As well,

...there are still reasonably poor financial incentives to increase the level of hours worked for many low-income families. This is because when earnings increase, their income support payments are withdrawn relatively quickly. High childcare costs and low take-up of in-work assistance can also have a negative impact on financial incentives to increase hours of work.

Little wonder worker shortages are endemic.


So, the income support/benefit system is contributing negatively to the economy in that regard.


But worse, it is being used by the Prime Minister to achieve her primary goal of reducing child poverty.


According to the report, using Labour's chosen measures which show percentage drops since 2017, she has been successful in this endeavour.


What is omitted from this report is the increasing number of children reliant on benefits.




Is this increase a reasonable trade-off for reducing child poverty? If the higher incidence of neglect and abuse for children growing up on a benefit is acceptable, then the answer is yes.


I disagree. The increase may even be described as the exploitation of children to make the Prime Minister look good. There is no reason why the welcome downward trend for state-dependent sole parents would have reversed bar financial encouragement.


Another finding from the report throws a further spanner into the works for redistributionists.


Asian households feature the lowest percentage of children experiencing material hardship - around 4% compared to the Pacific rate of around 24%


And yet when it comes to income support:


Eligible families with Asian parents had low estimated take-up in recent years. The late 2010s was a period of rapid growth in the Asian population of Aotearoa New Zealand. Low awareness, uncertainty about entitlements, administrative, personal and cultural barriers to claiming, or reluctance to claim payments among recent migrants may be factors explaining the trends.

So the benefit system cannot be credited with low Asian hardship. Something else is protecting their children. Probably the self-reliance and work ethic of their parents.


The government can fiddle all it wants robbing Peter to pay Paul under the guise of 'fairness and equity'. But the downsides to this interference are corrupting incentives which will continue to blight New Zealand's future.



Lindsay Mitchell blogs here

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74 Comments


No one is denying there is a need for at least some financial assistance to those in need from either side of the political spectrum but unless they suffer from some form of permanent disability there needs to be a definitive and short time limit to how long an individual can receive one and that also needs to include social housing.

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Welfare is for the needy not the lazy or greedy! There needs to be a tough selection process to get benefits and not having work within a comfortable distance is not an acceptable option. many of us have had to travel away to find work.

Being idle encourages idleness, work and success at work gives a person pride and self-respect so that they would be ashamed to ask for a hand-out. Men who father children must pay for them, women who become professional breeders are not to be supported by the state - after decades of education how any woman can get accidentally pregnant beggars' belief!

The old, the infirm and the unfortunate I would have no problem in supporting…

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winder44
winder44
Jan 07, 2023

I don't want to be sounding unfair, but let us look at the benefit situation reasonably logically.. The first three cost the country the most money

Unemployment Benefit: A helping hand after a job loss and until you are re-employed.

That does not mean a permanent arrangement, and it should be addressed after 3 months or so. Then if still unemployed there should be some sort of Government organised work for the benefit. Even if it is to tidy up beaches, mow berms, clean graffiti, clear bush and reserve walking tracks, etc., etc.

While doing that they should still be actively seek paid employment. After 3 months without getting a job, the benefit should cease.


Domestic Purposes Benefit: Originally it…


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lynnsam112
lynnsam112
Jan 07, 2023
Replying to

perfect logic - not difficult if your focus is on the country and not your reinstatement into the trough of power....

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ron
ron
Jan 07, 2023

Unfortunately there is no practical solution to reducing the numbers of children who are materially deprived that does not involve some children being even worse off in the short term, as the dole is deincentivised etc. No gain without pain, no free lunch blah blah. Similarly the housing problem will not be solved by solutions that don't involve a significant drop in the value of houses, as land is released for building etc. The nation needs a Government with longer term vision, ready and able to persuade us to suck up the pain needed to fix such entrenched problems created by our own weaknesses.


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Just a query on " kob. kevin" Its obvious he is well educated on benefits, question, would you have carried on working if there were "no" benefits? As for retiring, remarrying, and starting a new family, was there any extra benefits attached to that at that age? Seems like one can prosper if one really knows the system ( as do a vast majority of beneficaries).I had a friend who for interest sake attended a meeting which was designed to assist the unemployed to find work, after about 10 minutes it became a discussion on the best ways to receive a variety of benefits and how to go about it, I dont believe there is any obvious solution, but i…

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