The benefit cap in the UK

January 29th, 2015 at 7:00 am by David Farrar

The Express reports:

MORE than 50,000 workless families have had their benefits cut because they were getting more from the state than the average worker brings home, official figures revealed yesterday.

And to prove that the Government’s radical reforms are working some 12,000 of them have been spurred into finding jobs. 

Work and Pensions Secretary Iain Duncan Smith said it showed the “staggering” positive impact of the decision to cap benefits for most unemployed households. 

Some 51,200 non-pensioner families have had benefits reduced since April 2013 because they were getting more than £500 a week from the state for couples and lone parents or £350 for single adults, the Work and Pensions Department report revealed.

Nearly half of those affected by having their Housing Benefit cut to bring their total benefits below £26,000 were in London, thanks to high rents in the capital attracting state subsidy.

The NZ Government should look at a cap also, so that people in work are NOT getting less than those on welfare.

But a few saw their benefits reduced by as much as £600 a week – which meant they had been getting £57,000 a year from the state which a worker would need a salary of £74,000 to bring home after tax.

That’s a staggering amount.

The UK Government has said that if they get re-elected, they will reduce the cap from £26,000 to £23,000.


Cutting welfare helps job growth

January 28th, 2015 at 11:00 am by David Farrar

Five Thirty Eight reports:

Title: “The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?”

Authors: Marcus Hagedorn, Iourii Manovskii, Kurt Mitman

What they found: The elimination of emergency unemployment benefits at the end of 2013 played a major role in spurring the subsequent acceleration in job growth in 2014.

Why it matters: When the recession struck in 2008, Congress voted to extend unemployment benefits beyond the standard 27 weeks offered by most states. The program was gradually pared back during the recovery, and at the end of 2013, Congress allowed it to expire entirely. Many conservative economists said the program was doing more harm than good by providing the long-term jobless an incentive not to look as hard for work. Liberal economists were more skeptical, as was I; in an article last spring, I found little evidence that the end of emergency benefits was pushing the jobless back to work. But in this paper, the authors argue that conservatives were right and that the cutoff of benefits helps explain the surge in hiring in 2014. They use county-level data to show that places where the reduction in benefits was greatest also experienced the greatest job gains. They estimate that the policy change led to the creation of 1.8 million jobs in 2014, and that nearly 1 million of those jobs were filled by workers who otherwise would have stayed out of the labor market.

That’s a compelling figure. Maybe we should have a limit also for how long one can stay on a benefit?


Less welfare fraud

August 7th, 2014 at 10:00 am by David Farrar

Chester Borrows announced:

With the seven key initiatives in the package now all underway or in force, Mr Borrows today released figures showing the programme had already recouped or saved over $47 million and stopped thousands of illegitimate or fraudulent benefits.

The effect on the lifetime liability of current beneficiaries is estimated at a reduction of between $119 and $134 million as of March 2014.

“This Government has put in place a package of reforms to get smarter with the way we approach welfare fraud, and it’s very pleasing to see these reforms delivering such positive results,” says Mr Borrows.

“While we know it is only a tiny minority of beneficiaries who take money they’re not entitled to, those who do cost tens of millions of dollars each year, and we’re committed to stopping them.

“With the addition of these new measures, the Ministry of Social Development is stopping more fraud than ever before.  Investigators completed 4,614 investigations, established 2,270 overpayments and prosecuted 893 people during the 2013/14 year.  In total $88.4 million of fraud and illegitimate overpayments were established.”

That is not an insignificant amount of money.

“In its first year of operations this enhanced information sharing has prevented an estimated $44.8 million in illegitimate benefits from going out the door, and resulted in almost 6,900 benefits being cancelled.

The Greens will be outraged that someone had their benefit cancelled.

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Benefit numbers down 5%

July 18th, 2014 at 1:00 pm by David Farrar

WINZ has released the latest benefit stats, and they’re good news.

  • 16,196 fewer people on a main benefit than a year ago
  • A 5% decrease for all benefits from June 2013 to June 2014
  • An 11% decrease for sole parent support benefits
  • A drop in the proportion of working age adults on welfare from 11.2% to 10.5%
  • Lowest number of people on welfare since 2008 before the Great Recession
  • Welfare numbers peaked at 352,000 in 2010 and now 294,000.
  • The number of teen solo parents is down 12%. On average a teenager who goes on the benefit stays there 19 years and has a lifetime cost of $246,000

It is great to see the welfare reforms working. The best way to boost incomes is for people to move from welfare into work.

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Mitchell on teen parents

July 10th, 2014 at 4:00 pm by David Farrar

Lindsay Mitchell blogs:

I wanted to get the whole picture before I wrote this post. Yesterday some detail arrived from MSD.

For years I have agitated about the long-term DPB population being derived from teenage births. The children of these parents form the most at-risk group.

But from 2008 the number of teenage births started dropping. In 2013 there were 29 percent fewer than in 2009.

But even better, at March 2009 there were 4,425 teenage parents on any main benefit. By March 2014 the number had dropped to 2,560. A 42 percent reduction.

The really important news is it’s happening across all ethnicities.The proportions are reasonably stable. …

This means thousands fewer children experiencing poor outcomes – ill-health, disconnect from education,  in and out of fostercare, potentially abused and neglected, having the cards stacked against them from the outset.

Thousands of would-be teen mums will continue on with their own lives and fulfilling potential, and hopefully have children when they are ready to. 

It’s a fantastic development. 

National deserve at least some credit for it with their new young parent mentoring and benefit management regime.

The reduction is huge and significant.

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Disadvantaged youth doing better

July 3rd, 2014 at 1:00 pm by David Farrar

Stuff reports:

The Government’s flagship youth welfare programme is making significant inroads toward lifting educational achievement, a new report has found.

The best results were achieved when teens on the Ministry of Social Development’s youth services programme achieved NCEA level two in their first 12 months.

The numbers were not so good when the 16 and 17-year-olds were trying to achieve that level after being enrolled for longer than a year.

The programme involves providers working directly with about 3000 young people who are on benefits, or unemployed and not receiving any education or training.

Among its goals is for youth to “not be on a benefit or receive a custodial sentence” for three months after the end of their school year or training course.

The young people involved must participate in education, training or work-based learning and budgeting, and are given little control their benefit.

The ministry will release its first evaluation of the programme today. An early copy shows two-thirds of the teens had made marked strides in education, leaving school with at least a NCEA level two qualification.

I don’t think you can over-estimate the importance of the improvements being made here. This is the stuff that will make a huge difference in 15 to 20 years time.


Welfare reforms working

June 28th, 2014 at 9:00 am by David Farrar

Stuff reports:

Social Development Minister Paula Bennett admits the Government “took a punt” on sweeping welfare reforms targeting youth, relying on little more than common sense.

But a new report appears to have validated that gamble, showing significant inroads have been made toward breaking the cycle of welfare dependency.

Ministry of Social Development figures released yesterday showed 16 and 17-year-olds on a benefit accounted for 70 per cent of the ministry’s future welfare liability.

By June 30 last year, that welfare liability was $76.5 billion, $7.4b lower than forecast, with $4.4b of the savings directly related to the reforms.

Hopefully that is just the start. The benefits from having a young person spend most of their life in work, rather than on welfare, is immense.

Just 18 months in, the Youth Services Programme has already seen a reduced risk of long-term benefit dependency among participants.

Most youth in the programme were also achieving at least NCEA Level 2 and had “improved social outcomes” for them and their children.

Ministry figures show that of those receiving the Youth Payment, 38 per cent were victims of domestic violence, 76 per cent had suffered emotional neglect and 5 per cent were either homeless or victims of sexual abuse.

“These are in general difficult and challenging young people,” Bennett said.

“You do not go and seek state support financially at 16 and 17 if you have had a blessed life in a warm loving environment, that’s been nurturing and had education as one of the foremost things of importance.”

And this has not been about just work testing people. It has been about investing money to help them get skills, get training, and have a pathway into work. It’s about spending money in the short-term to save in the long-term.



A disabling bug

May 19th, 2014 at 7:00 am by David Farrar

Sarah Wilson writes in the Nelson Mail:

I had a stomach bug. That’s all it was. A bit of an upset, when I was in Bali for a friend’s wedding two years ago.

Most of us did – even the bride and groom had a couple days spent in their rooms. But when I got home . . . the pain didn’t stop.

It would come and go, but then I’d have weeks where I couldn’t get out of bed, and I didn’t know why.

I lost weight. Foods that had never been a problem made me vomit. I stopped consuming gluten, dairy, alcohol. Nothing made a difference.

Six months later, I was finally diagnosed with an intestinal bug called Dientamoeba fragilis. It’s nasty. But not as nasty as what was about to happen. …

I was in hospital for about 12 days. It should have been longer, but I discharged myself after being told that I now probably had ulcerative colitis, which is an incurable auto-immune bowel disease.

Eventually this diagnosis was revoked . . . but nothing was put in its place.

I had no proper diagnosis. I had no prognosis – no-one knew when I would get better.

I had to quit work and go through the harrowing process of applying for a sickness benefit – at a time when I couldn’t even get out of bed.

My work was everything to me. I felt empty, lost. Betrayed by my own immune system, which continued to flare out of control.

It’s now a year since I was in hospital – almost two since I first got sick.

I’ve made tiny amounts of progress. I can get around on my own, mostly.

I walk with a cane, because often I’m too weak and too sore to stand up alone. My body reacts badly to a large number of foods and, even if I can manage to eat enough, my system doesn’t extract or retain the nutrients.

I’m constantly undernourished and extremely tired. I’ve had to write this all in bits, and afterwards I’ll have to go and sit down for a while.

Frustrating isn’t the word for it. Frustrating doesn’t begin to cover the fury I’ve felt, going from being a healthy 26-year-old – to being bedridden, quitting work, losing friends.

To having a visible and debilitating disability.

Being disabled is political. It’s public, especially when it means that the world around you no longer fits your needs.

It’s not surprising to me that I have ended up using what limited energy I have to fight for disability rights – which is what my battle with Work and Income is really about.

Sarah’s story is gripping, and as you read it I guess the reaction is that this could have happened to me – it was just a bug after all.

Sarah has become an activist on welfare issues, after her frustrations with WINZ – which she wrote about here. WINZ has apologised for what happened.

But it does highlight that there is a balancing act with welfare reforms, and how WINZ implements them. And we shouldn’t assume the balance is absolutely right.

There are some on welfare who are able to work, and some of the measures introduced are necessary to target them.

But there are also many on welfare who have had horrible things happen to them, and a system which makes them prove every x months they are still unable to work needs some flexibility and judgement involved.

UPDATE: Sarah has written a sort of response to this blog, on her blog.

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MSD using data

February 20th, 2014 at 12:00 pm by David Farrar

CIO reports:

Paula Bennett, Minister for Social Development, reveals the critical role data analytics is playing in reducing the number of people on welfare, and deciding which programs to target vulnerable citizens, especially children.

Analytics has helped in investing and using this data for positive action and make a massive influence in the lives of New Zealanders.

“Without using data analytics, we will be throwing a lot of money,” she says in her keynote the SAS User Conference in Wellington. “We will not be getting into the heart of the problem, we will not be putting resources and investment where these are needed,” she says. 

“Since 2011, analytics has been at the heart of our welfare reforms,” says Bennett. While cognisant of the criticisms against her when the welfare reforms were announced, she lists the compelling figures on how the government applied analytics to determine funding for programs and beneficiaries.

A key feature used by the government is analytical technical segmentation, she says. This looked at the welfare system at macro level, an overall evaluation, and how much it is costing over a lifetime of the current population.

We spend an average of $22 million dollars a day on welfare, $8 billion a year, she says. The projected lifetime cost for people on benefit was $78 billion.

This baseline valuation of the welfare system is at a level that has not been attempted anywhere in the world, she says. “It is a pretty compelling story on why we want to look at this population to see what we can do,” she says.

The way MSD is using data analysis is gaining attention around the world. The lifetime cost and investment approach is leading edge stuff, and there is a lot of interest from other countries about how NZ is doing it.

This doesn’t necessarily mean spending less in the short term. To the contrary it has often meant spending more to help people into work, as the short-term cost of that assistance is less than the longer term cost of them remaining on welfare.


Results matter, not location

January 23rd, 2014 at 10:00 am by David Farrar

The Herald reported:

Beneficiary advocates are angry that an Australian company has emerged as the big winner in an experiment that will pay contractors up to $12,000 to help a sole parent or a person with mental health issues into paid work.

How terrible. A company wins a contract to help people into work.

Perth-company Advanced Personnel Management (APM) has won pilot contracts for people with mental health conditions in Auckland, Waikato, Christchurch and Southland, and for sole parents in the Bay of Plenty, Wellington, Nelson and Canterbury – more than any local agency in the Work and Income tender.

So why is this?

APM’s website describes the company as “the largest private sector provider of Australian Government funded vocational rehabilitation services and disability employment services”. It says New Zealand operations started in 2012 with vocational rehabilitation contracts with the Accident Compensation Corporation (ACC).

Because they already have significant experience in this area.

Beneficiary Advocacy Federation co-ordinator Kay Brereton said the contracts should have gone to more local agencies such as the West Auckland Living Skills Homes (Walsh Trust), which won one of the mental health contracts, and the Kawerau Job Centre, which won a sole-parent contract.

So they also won contracts, but the whinge is that this Australian company won some also. I’m in favour of having lots of companies win contracts, and then judge them on results.

Strive Community Trust chief executive Sharon Wilson-Davis said she did not bid for the contracts and allowed an existing sole-parent contract to end late last year because she felt it would be impossible to achieve the work placements required to earn fees under the new pilots.

“A lot of these people certainly want to work but sometimes you are better off to get them into further training,” she said.

“Otherwise if you push them into these low-paying jobs, then when those jobs go they are back in the same place.”

Glad they are not one of the companies, with an attitude that it is better to remain out of work entirely, than take up a low paying job which might not last forever.

After the outward signs of success collapsed around her, Misty Leong was comforted by her teenage son.

When her husband left, she had to give up her successful real estate business to look after her daughter who was just 2, her son, and her own elderly mother.

It was 2009, in the early panic of the global financial crisis, and no one was buying houses anyway. Ms Leong went bankrupt. Her $1.8 million property was lost.

“I lost my health, money, property, everything,” she says. “But my son, he says: ‘Mum, you are still strong.”‘

Born in China 46 years ago and brought up in Macau, Ms Leong came to New Zealand in 1989. She worked as a waitress, then in a factory, but quickly opened her own takeaway bar in Forrest Hill on Auckland’s North Shore.

Later she and her husband and a partner started a gardening and home service business, and from there Ms Leong moved into real estate with Century 21 in 2002.

When it all collapsed, she was bereft. “I had no food, no income, no anything. My husband left me with all the business debts and didn’t help me with the children at all,” she says.

Sounds an awful situation. To go from being a business owner with significant assets to bankrupt would be a terrible blow.

She got the domestic purposes benefit. She never stopped looking for a job but had no luck.

But then …

Her break came when Work and Income referred her in February last year to In-Work NZ, the country’s biggest private contractor of welfare-to-work programmes. Within two months she landed a checkout job at Devonport’s New World supermarket. It was only 16 hours a week at first, but in July her hours increased to 22 and the in-work tax credit of an extra $60 a week, paid to single adults working at least 20 hours a week or couples working 30 hours between them, allowed her to move off the benefit.

Still a long way from where she was, but what a great work ethic to not turn your nose up at working in a supermarket.


17,000 fewer on benefits

January 18th, 2014 at 7:00 am by David Farrar

Paula Bennett announced:

Figures for the December 2013 quarter released today show over 17,000 fewer people are on benefit compared to December 2012. …

“The decrease includes over 8,000 sole parents who have gone off the benefit, a 9.4 per cent drop compared to the same time last year,” Mrs Bennett says. …

Over 19,800 people cancelled their benefit to go into work in the last quarter.

Here’s the benefit levels compared to three years ago.

  • Jobseeker – Work Ready – 20.3% lower
  • Sole Parent Support (SPS) – 13.0% lower
  • Supported Living Payment (SLP) – 0.7% higher
  • Emergency Benefit (EB) – 14.6% lower
  • Emergency Maintenance Allowance (EMA) – 13.2% lower
  • Youth Payment/Young Parent Payment (YP/YPP) – 15.4% lower
  • All Working Age Benefits – 8.7% lower

Good to see most heading in the right direction.


Welfare costs reducing

January 16th, 2014 at 4:00 pm by David Farrar

Paul Bennett announced:

Social Development Minister Paula Bennett has welcomed the latest valuation of the welfare system showing a significant reduction in the liability.

The June 2013 valuation shows the current lifetime liability[i] is $76.5 billion.

“Of the $10.3 billion reduction in liability[ii], $4.4 billion is due to Work and Income actively exceeding expectations by getting more people off benefit for longer, and less people coming onto benefit,” says Mrs Bennett.


“This translates to benefit payments being $180 million lower than expected for the year.”

Just over $1 billion of the $10.3 billion liability decrease is due to more sole parents going off benefit and fewer going on during the year.

“I hear from sole parents every week who say they’re really grateful for the support from Work and Income case managers; who are often the first to ask them what they want to do with their lives and then help them find work.”

“We provide childcare assistance, training, assistance with CVs, handling job interviews and help with the actual work search,” says Mrs Bennett.

The value in investing close to half a billion dollars in welfare reforms over the last two Budgets is evident in the results.

This is key. The Government did not just change laws around work testing and the like. They have invested hundreds of millions into training, childcare assistance and job placement to help people move from welfare into work.

The June 2013 valuation shows 62% of 30-39 year olds currently receiving benefits; first went on welfare as young people and constitute almost 80% of the total liability for this group because they’re long-term dependent.

“What’s really interesting; is that two thirds of people who went on benefit aged 16 or 17 also came to the attention of Child, Youth and Family as children and 90% lived in benefit dependent homes as children.”

A cycle of dependency.

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10 years on the widows benefit

December 26th, 2013 at 10:28 am by David Farrar

Stuff reports:

Hamilton mother-of-six Kaye Nonoa received an unexpected letter on Christmas Eve – a court summons from her son’s former high school for unpaid fees.

This comes after he was banned from attending his school ball earlier in the year for having outstanding fees, despite being head boy.

Mrs Nonoa is upset that Melville High School is using such a forceful method to recover money she doesn’t have.

The letter, handed to her by a plain-clothes woman at 7.30am on Tuesday, said the school was taking legal action to retrieve $1166.84 in sports and subject fees from 2011 to 2013 and $1133.50 in legal costs – $2300.34 total.

Her son, Johnboi, 18, finished school this year.

He was head boy, captain of the First XV rugby team, a member of the top basketball team and also took part in cultural activities.

The fees Melville High are seeking are for sports and specialist subjects like photography and food technology, not the voluntary school donation.

Mrs Nonoa has been on a widow’s benefit for the past 10 years and said she paid off small amounts when she could afford it.

This to me seems to be the crux of the issue. Of course it is difficult to afford all these additional costs on a widow’s benefit. But we live in 2013, not 1953. Why do we deem it acceptable to remain on a widow’s benefit for 10 years? I’m all for supporting someone whose partner suddenly dies – but maybe for a year, not a decade, and/or until all the kids are at school (as must be the case if you have been on the benefit for 10 years).

Labour abolished any  work-test requirements for the Widow’s Benefit in 2003. If they hadn’t done so, it is likely Mrs Nonoa would have found part-time work, and be in a better position to afford the additional school fees.

As it happens last year the work-test requirements were re-instituted, and the Widow’s Benefit merged into the new Sole Parent Support benefit.

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UK Labour may scrap benefits for under 25s

November 22nd, 2013 at 11:00 am by David Farrar

The Telegraph reports:

People under the age of 25 would be barred from claiming unemployment benefits under proposals being considered by the Labour Party.

The Institute for Public Policy Research will publish a paper later this week proposing a new means-tested “youth allowance” for 18 to 24-year olds who are not in work or education.

Only those who prove they are in “purposeful” training or carrying out an “intensive” job search would be eligible for the allowance, the group will say.

The allowance would be dependent on family income, with the children of parents earning more than £25,000 a year unable to claim it, the IPPR will suggest.

The youth allowance would be set at £56.80, the same level as Job Seekers’ Allowance.

Under-25s would be banned from claiming additional benefits including Employment Support Allowance and Income Support. Paying those two benefits to under-25s costs taxpayers almost £1.3 billion a year.

It is understood that Rachel Reeves, the Labour shadow work and pensions secretary, is considering adopting the policy, though is undecided about applying a means test.

Ed Miliband, the Labour leader, has also hinted at taking young people out of the benefits system.

Good on UK Labour. But can you imagine NZ Labour ever adopting such a policy? They have opposed almost every single aspect of the reforms designed to prevent long-term benefit dependency.

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99% respond to work testing sanctions

October 23rd, 2013 at 12:00 pm by David Farrar

The Herald reports:

Almost 13,000 parents with dependent children have had their benefits cut for failing work tests in the first 2 years after sole parents first had to look for work.

Data released to the Child Poverty Action Group under the Official Information Act shows 1310 parents had benefits cut for failing work tests in the first three months after sole parents with children aged 6 and over were required to look for part-time work from September 2010. A further 5,074 parents’ benefits were suspended or cancelled for failing work tests in 2011 and 6,418 last year.

Most parents then met their obligations quickly enough to have their benefits restored, but 157 had benefits formally suspended or cancelled in the first three months of the new regime.

So 13,000 initially were sanctioned for not being available for work etc, but only 157 of them didn’t end up being work ready and seeking work. I call that a huge success.


Sanctions working

September 25th, 2013 at 9:00 am by David Farrar

Michael Fox at Stuff reports:

Threats to sanction beneficiaries on the run from the law are leading to the clearance of more outstanding arrest warrants, the Government says.

One change revealed in the Government’s welfare reforms this year was the ability to stop payments to beneficiaries if they were subject to an arrest warrant.

Social Development Minister Paula Bennett said it had resulted in 161 arrest warrants being cleared within six weeks of operation. …

Bennett said the police were notifying Work and Income after their own efforts to track down those beneficiaries had failed.

Work and Income staff were then contacting the beneficiaries to tell them they needed to contact police or have their benefits slashed.

 The new rule affects those who have had an outstanding criminal arrest warrant for 28 days or longer.

Those people get another 10 days to clear the warrant. If they don’t their benefit is stopped if they have no children or halved if they do.

Not bad for just the first six weeks.


Getting people into work is “sinister”

July 28th, 2013 at 12:00 pm by David Farrar

Stuff reports:

Thousands of beneficiaries will be managed into work by private employment agencies in a new nationwide pilot programme some are labelling “sinister”.

The Ministry of Social Development has been seeking tenders from community and private employment agencies to put beneficiaries into paid work.

Annually, 2000 beneficiaries will be involved nationwide and the agencies will earn up to $12,000 for placing a client into a job.

They will earn more for placing higher classified patients, such as those with “entrenched mental health issues” and those with serious barriers preventing them returning to work.

Overseas, similar welfare-to-work programmes have been criticised as ineffective and costly. Some groups are worried the same thing could happen here, and that there’ll be too much focus on “bonus payments”.

But Social Development Minister Paula Bennett said the Government was willing to pay more to help those who are likely to find it harder to get into work and be independent.

This is what Labour and allies are calling sinister?


Welfare reforms

July 15th, 2013 at 11:00 am by David Farrar

Stuff reports:

Wide-ranging benefit reforms have come into force today, with beneficiary advocates voicing a mix of cautious optimism and criticism of the changes.

From today there are fewer benefit categories, as well as compulsory drug testing for jobseekers, sanctions for fugitive beneficiaries and stricter healthcare obligations for parents of young children.

A new way of dealing with hardcore beneficiaries will also be introduced, with the Government trumpeting the success of a pilot trialled in 24 Work and Income offices since October.

Work and Income says the results are “some of the best from any case management trial” in recent years, with 6000 of the 10,000 people in the pilot no longer on a benefit. More than half of those people found work, the rest opted out or cancelled benefits for reasons such as no longer meeting eligibility requirements.

Imagine if we can replicate that, on a larger scale.

The ministry also has a pilot planned in the next two months to get 2000 sickness beneficiaries with mental and physical disabilities into work, she said.

Few disabilities prevent someone from all work. They may prevent certain types of work, or full-time work.


UK options for welfare reform for large families

May 14th, 2013 at 10:00 am by David Farrar

Charlie Cooper in The Independent writes:

Whether or not one accepts a link between thePhilpott case and the argument for welfare reform, the tragedy has focused attention on one of the most difficult questions in modern politics: how the state should discourage people on benefits from having large numbers of children and expect the welfare system to pick up the bill.

And the options:

Docking benefits when children miss school:

One proposed policy, already in place in some US states, is for the parents of children who miss school to be docked benefits. In Michigan, parents whose children play truant for ten days see their social security cut.

In the UK, a senior government advisor suggested that the UK employ a similar strategy, extracting truancy fines from family’s state benefit.

Pros: encourages parents to be responsible for children’s education, without automatically removed their child benefit.

Cons: does not address issues of welfare dependency.

NZ has gone down this path.

Capping benefits:

A policy that is about to come into force in four London boroughs and will soon be rolled out nationwide, is that total benefits payments will be capped at £500 a week, or £26,000 per year for families of all sizes. The aim of the policy is to “make work pay” by bringing maximum benefit payments below the average full time salary.

However, the impact is expected to be predominately felt by large families, who make up the largest number of people currently receiving benefits above the cap. 73 per cent of households affected have three or more children.

The Institute for Fiscal Studies said in its Green Budget 2013 that the policy may have an impact on fertility rates “since the cap will effectively reduce the state financial support for some large families”.

Pros: tackles the problem of families having children for the sake of the benefit they bring while also encouraging people into work.

Cons: will cut the income of families by an average £93 per week – plunging many into poverty.

I wouldn’t do this for current families, but you could announce this as a policy so people in future know that if they choose to keep having more children on welfare, they won’t keep getting more money.

Cutting the number of children eligible for benefits:

An idea that would once have been considered extreme now has the backing of senior Conservatives and is being considered by Iain Duncan Smith, the Work and Pensions Secretary. David Davis, a former Tory leadership challenger, has said in the wake of the Philpott case, that there is “a strong argument to restrict child benefit whether it is to two, three or four children”, although he added that policy should not be made “on the back of one story”.

His words echo Mr Duncan Smith last year, when he suggested that he would consider capping benefit payments for new claimants after the birth of the first two children – a scheme that was dubbed the “two-child policy” and earned comparisons to China’s population control methods. Charities said any such move would have “a devastating impact on children”.

Pros: directly targets the problem of families having children for the sake of the benefit award they bring.

Cons: will unfairly penalise the children of families that exceed the cap.

The Clinton reforms cut off funding for any additional children if the parent/s were already on welfare.


Welfare reform legislation passed into law

April 10th, 2013 at 1:00 pm by David Farrar

Paul Bennett has announced:

Three new benefit types will replace the seven current benefit categories, in addition to the new Youth Payment and Young Parent Payment introduced in August last year.

The new categories this Bill creates are:

  • Jobseeker Support for those actively seeking and available for work

  • Sole Parent Support for sole parents with children under 14 years

  • Supported Living Payment for people significantly restricted by sickness, injury or disability.

This is a fairly major reform, which changes the focus far more onto having welfare as temporary assistance, except for those incapable of any significant work at all.

“The legislation also introduces new social obligations to ensure children in benefit-dependent homes get quality Early Childhood Education, are enrolled with a doctor, get their Well Child checks and are in school if they are school-age,” Mrs Bennett said.

The law will also require Jobseekers to be drug-free, and will allow benefits to be stopped for outstanding arrest warrants.

I can’t believe it has taken this long to say you can’t claim a benefit if on the run from the Police!

The investment approach will target interventions and support to those most at risk of long-term welfare dependence.

“By investing in people sooner, we can actually start to break that cycle of dependence.”

It may cost a bit more in the short-term, but is a good long-term investment.


US Disability Benefits

April 8th, 2013 at 10:00 am by David Farrar

In case you needed convincing about the need for welfare reform, this story from the United States should help convince you.

It was an exclusive story for Planet Money on National Public Radio. It has had great resonance in the US, as it has exposed how great the growth in numbers on disability welfare has been.

Some key findings:

  • 14 million people a month now get a disability check from the Government.
  • In one county in Alabama, 25% of working adults are on a disability benefit.
  • That the proportion of those claiming a disability benefit with a difficult to test problem (back pain, mental illness) has increased from 18% in 1961 to 53% in 2011.
  • That some states have as many as 9% of their adults on a disability benefit.
  • Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since then.
  • The disability benefit pays $13,000, just $2,000 less than the minimum wage, plus Medicare so some are better off financially not working.
  • The number of children on a disability benefit has increased seven fold since 1974 to over 1.2 million.
  • If these children with learning or other disabilities get a job, their parents lose the $700 a month disability check.
  • Disability welfare now costs $260 billion a year, and will run out of reserve duns by 2016.

People should remember this story, when Labour and Greens constantly say there is no need for welfare reform in New Zealand. Note that the numbers receiving the Invalids Benefit in NZ has increased eight fold since 1976 from 10,000 to 84,000. Now by no means should anyone conclude this means everyone on that benefit shouldn’t be there. To the contrary I know some people on that benefit who would love to be able to work, or work longer hours than they can. So we need to be careful not to stigmatize those who are in genuine need.

However as the US story shows, the growth in the level of such benefits has been massive, and I encourage people to read the full story about what happens when the incentives to be on welfare are greater than to be in work.

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Dom Post on work tests

April 1st, 2013 at 12:00 pm by David Farrar

The Dom Post reports:

An important social contract underpins New Zealand’s welfare system. At its heart is the principle that society will provide for individuals who are unable to support themselves on the understanding that those who are able to work will make an honest effort to look for employment.

Yep, and support for the former is undermined when the latter does not occur.

Sadly, however, some beneficiaries see it as their God-given right to remain on welfare for life and not only make no effort to improve their lot, but add to the burden on taxpayers.

They include women on the domestic purposes benefit who seem to believe they can have as many children as they want while remaining dependent on the state, and that workers will be happy to pay for them to have that privilege.

It is a minority, but it is not an insignificant minority. We should be full of compassion for parents who suddenly find themselves without a partner because they die, flee, turn abusive. But that is a different situation to having multiple babies to multiple partners over many years, and hence never being in employment.

The number of women who have had additional children while on the DPB is undeniably cause for concern. Between 1993 and 2011, almost a third of women who drew the benefit had at least one more child. In 2010 alone, 4800 children were born to solo mothers already on the DPB – 7.5 per cent of the total live births that year.

A third is far too high. Mistakes will and can occur, but at a third that suggests many of them are deliberate decisions to have further children despite being unable to even provide for existing children.

That is not fair on working parents who would dearly love more children, but who have put off increasing the size of their families because of economic pressures.


It is also not fair to the children of those beneficiaries.

It has long been established that children in working families have far better health, education and social outcomes. That is true for children with one parent as well as those with two.

Not only do children in sole-parent families benefit from their mother or father having a higher income than they would get from welfare payments, they also benefit enormously from seeing their parents go out to work every day.

This is the part that I think is most important. A child who grows up in a household where no adult ever works in paid employment is going to probably start life very disadvantaged.

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Why we need education reform also

March 23rd, 2013 at 9:27 am by David Farrar

Narelle Henson at Stuff reports:

Frustrated bosses say they can’t find suitable workers for even the most basic of labouring jobs despite the high unemployment rate, as they deal with people who turn up drunk if they come to work at all. …

But despite the many jobless, employers say continual absenteeism, substance abuse and poor work ethic appear to be making a lot of them unemployable.

Dave Connell, vice-president of the New Zealand Contractors Federation and managing director of Connell Construction, who is juggling operations in the Waikato and for the Christchurch rebuild, said 100 people responded to a Trade Me job advertisement for a junior construction role, but not one was suitable to hire.

“We are letting seven people go for every one we keep,” he said.

“I have had some people last half a day and walk off the job with $800 worth of [work] gear on them; one guy had six sick days in two weeks, and we have had issues with physicality too.”

Mr Connell said he was desperate to fill positions, but could not find anyone with the right attitude.

It will take many years to fix these problems.

The first is we need to stop people leaving school with inadequate literacy and numeracy skills.

The second is we need to install a work ethic in people from their teenage years. That is why I don’t support a minimum wage for under 18s, and why I support welfare reform.

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Bennett on welfare reforms

March 21st, 2013 at 12:00 pm by David Farrar

Kate Chapman at Stuff reports:

As the second round of welfare reforms come back before Parliament Social Development Minister Paula Bennett says the 650 children born to women already claiming a benefit in January are reason enough for her tough reforms. …

There were 659 subsequent children born to parents already claiming a benefit this January, she said.Under changes introduced last October, they will have to return to work when that child is 12-months-old, if their older children are aged over 5.

Bennett said Work and Income staff used discretion to excuse 22 of those parents from the work requirement, largely because of timing around the announcement and implementation of the policy.

Meanwhile, in 2010 more than 7.5 per cent of live births – 4800 of 63,900 – were babies born to sole parents on the Domestic Purposes Benefit (DPB) and Emergency Maintenance Allowance.

And between 1993 and 2011, 29 per cent of sole mums on the DPB had another child.

”It does tell us that those that are already on benefits with children are still having subsequent children,” Bennett said.

I think there is a fundamental difference between having a child, and then ending up on welfare (because your partner leaves you, turns violent, dies etc) and already being on welfare and choosing to have further children.

Bennett admits work testing for sole parents was among the ”tougher” reforms.

But in 10 months of last year there were less people going onto the DPB that coming off. A feat which has only been achieved twice in the last 16 years, once when Working for Families was introduced.

A good start.

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Why not inform people of whom is right?

March 4th, 2013 at 12:00 pm by David Farrar

Stuff reports:

It’s another case of she said, she said. Labour MP Jacinda Ardern was yesterday bemoaning record benefit numbers during National’s reign.

DPB, sickness and invalid beneficiary numbers were at the highest since records began in 1940, she said.

It didn’t take long for Social Development Minister Paula Bennett to respond with her own gloating statement.

The number of people on the DPB, unemployment and invalids benefits all decreased last year, she said. It seems statistics are everyone’s friend.

Rather than just report that both MPs are claiming different things, it would be nice if the media actually provided the full data and allowed people to decide for themselves.

I blogged yesterday that the numbers cited by the HoS and Ardern were over a year out of date. That’s not opinion – it is fact.

The excellent Stats Chat site also gives people the full data, in graph form. Sadly the number of people who read that site is far far less than those who read newspapers.

Lindsay Mitchell also has some useful fisking of Ardern’s claims.

Ironically Anthony Robins at The Standard is also unhappy with the article. Not for the misleading claims, but because a Labour MP is suggesting that it would be a good thing to have fewer people on welfare!

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