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Welfare Reform; Real change or tilting at windmills?

We have been a little quiet on welfare reform recently, apart from a release on Allowances last week. This is because we have been carefully watching and analysing the changes. The recent reforms are significant, but perhaps not as much as first thought. Changing names and bringing in work obligations will not get more people into employment on their own. More support is needed, especially in tackling the real barriers disabled people face to get employment.

There has been a long history of welfare reforms in New Zealand by successive governments, especially over the last two decades. In many cases, however, it has been unclear how effective these reforms have really been. Behind all the tough talk, governments have struggled to reduce the number of people on benefits.

There are a wide variety of influences that impact the number of people on working age benefits, some of which are outside government control. These influences include; the availability of jobs, access to education, the number of people caring for children or relatives, wealth and poverty, accessible transport and infrastructure, and employer attitudes toward disability, aging and mental health conditions.

The most effective means of reducing numbers on benefits is to simply have a low unemployment rate. If jobs are available, working age benefits will decline. The years of low unemployment up to 2008 led to a steady decline in working age benefits as more and more people found jobs, particularly people on the unemployment and domestic purposes benefits.

The recent welfare reform amendment bills have given the Government a wide variety of new tools to change the welfare system, but it is uncertain how willing or able the Government is to use those tools. A speech early on from the Minister of Social Development indicated that New Zealand would follow the United Kingdom model of welfare reform. We questioned this and it appears the Government has moved away from the United Kingdom model.

The evidence from the United Kingdom is now very mixed on how effective their tough welfare reforms are. The reforms have involved controversial work capability tests for disabled people and have seen many people moved to lower paying, but more work focused, benefits. Here is what the reforms have achieved for disabled people in the United Kingdom.

There is also currently little evidence that the New Zealand Government’s earlier reforms in October are working. In October last year, the Government introduced new work obligations for certain people on the Domestic Purposes Benefit.

The Minister of Social Development said in her speech on the recent reforms that since October, 9,000 people on the Domestic Purpose Benefit have left for paid work. If this figure covers three quarters, this is about 12,000 a year, which is the average for the last two years.


Some changes have also not happened; the most recent welfare reform bill gave the government two tools to change the Disability Allowance. The government could force people to use preferred suppliers and could pass regulations to limit what people could buy with the Allowance.

The Government planned to use both tools and estimated that it would save $25 million this year and $30 million next year. Then without any public acknowledgment, the Government dropped that plan. Those savings disappeared in the recent budget. We asked the Ministry of Social Development about the tools and they told us that there is currently no plan to use either of them.

The Government could bring in the changes next year, but for now the tools will quietly gather dust.

The biggest change in the reforms is probably the new Jobseeker Support benefit. The Government is combining the Unemployment Benefit, Sickness Benefit, and people on the Domestic Purpose Benefit, with a child over the age of 14, into the new Jobseeker Support.

The Jobseeker Support will generally be run like the Unemployment Benefit with people expected to find work, unless they have temporary exemptions. People will face sanctions if they decline work.

Reducing numbers on the new Jobseeker Support benefit will be a greater challenge for Work and Income than the Unemployment Benefit. Out of all the benefits, the Unemployment Benefit is probably the easiest to reduce. The benefit is dominated by younger people who generally only stay on the benefit for a short period of time. Every year over 100,000 people cancel an Unemployment Benefit.


People on the old Sickness Benefit, tend to face additional barriers to employment. 41% of people on the Sickness Benefit have a mental health condition. Research on employers has found that 65% of employers were more reluctant to employ people with mental health conditions.

A further 35% of people on the Sickness Benefit had systemic disorders. This is a wide range of conditions from serious diseases to physical impairments. Inaccessible transport, infrastructure and workplaces can be a real barrier to employment for people with these impairments.

To effectively get people into employment, the Government will need to tackle these barriers and ensure support is available. Just like the Unemployment Benefit, the labour market will have a huge impact in people’s ability to find work. People on the Sickness Benefit were increasingly finding paid work until the recession. As the economy slowly improves this trend should return, regardless of reforms.


Ultimately, what matters to us is not the number of people on benefits or allowances, but whether people are included in society. For many, this means finding appropriate employment. For others, they may need income support, especially if there are barriers to employment, such as employer attitudes and high unemployment. The aim should be employment, but until these barriers are addressed, adequate income support is needed.

The data and government announcements on welfare can only tell us so much. What is more important is how people on welfare are finding the changes. Are the changes increasing people’s ability to find employment? Do they make people’s lives easier or harder?

What do you think?

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