National does not understand what a work incentive requires

By   /   November 18, 2015  /   25 Comments

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The government’s policies on welfare and work have been deeply contradictory. Beneficiaries are expected to be working, but when they do, after a minimal amount of earnings, they lose most of their efforts in tax and abatements of their benefits.

welfare

With all shenanigans the last week in parliament something very, very important fell under the radar screen.

How many New Zealanders missed the brave attempt by Labour’s Carmel  Sepuloni  to force an utterly crucial change to the welfare benefit system in her private member’s Social Security (Pathway to Work) Amendment Bill?

The government’s policies on welfare and work have been deeply contradictory. Beneficiaries are expected to be working, but when they do, after a minimal amount of earnings, they lose most of their efforts in tax and abatements of their benefits.

The unemployed have been able to earn only $80 a week without losing any of their net benefit. Each extra dollar over $80, after tax and abatement and ACC, leaves them with only about 10 cents. The threshold of $80 has not been adjusted since the late 1980s.  It would be around $170 today If it had been adjusted for inflation, and much higher again had it been linked to increases in wages.  While for some beneficiaries such as sole parents the threshold and abatement are slightly less draconian, here has been no adjustment for them either for many years.

Government’s policy is supposed to be all about encouraging work effort.  In fact, it is only interested in a leap from the benefit system into full time work. For many on a benefit, full-time work is not an option because of barriers such as childcare and travel and ill health.  Nor is the work of the right kind at appropriate hours necessarily available, especially in a casualised labour market.

Sepuloni’s bill was to raise the threshold so that beneficiaries could earn $150 before any loss of net benefit.  It didn’t even propose radical reforms to the cruel rate of abatement of 70% above that for the unemployed, or to abolish the Minimum Family Tax Credit with its astonishing 100% abatement (i.e. dollar for dollar). Nor did it grapple with the iniquitous joint income treatment of those deemed to be in a relationship.

This bill was long overdue and should not have frightened the horses. It should have gone to select committee so the issues could be thoroughly debated.   Shame on parliament.

It nearly did get to select committee, but for- you guessed it- the most powerful man in politics, Peter Dunne. Mr Family Values. His vote meant the bill was defeated 60:61. Of course David Seymour did not cover himself with glory either, revealing no depth of understanding at all of the issues faced by beneficiaries.

What a shocking debate.  

Here is this from JONO NAYLOR wilfully missing the point with a garbled defence of inaction from the government:

“ I am concerned about what I have heard from members on the other side of the House when referring to this bill today. I am concerned because, actually, they have been saying that all we need to do is offer people a bit more money and that will give them the incentive to go to work. If you think of the underlying premise of that, it is almost like saying that people will not bother to go to work unless they are absolutely going to make lots of money out of it. That is the underlying assumption that seems to come out of that, from what I have heard from the other side of the House. What we do know is that if people actually get themselves into work, they improve their own opportunities for further work and otherwise. That should be a good enough reason for anybody to want to get out and work.”

How willing to work would Jono be if he had a basic income retainer and then could keep next to nothing for anything earned above $80 a week, which in his case would be just over one hour’s work on a backbencher ‘s pay?

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

25 Comments

  1. saveNZ says:

    Shockingly outdated. They need to raise it higher than $150 before any loss of benefits.

    Of course then it will show up how low full time wages are on the minimum wage.

    How disgraceful and unfair to not vote this in crumb of reform in.

  2. Rosemary McDonald says:

    “I am concerned because, actually, they have been saying that all we need to do is offer people a bit more money and that will give them the incentive to go to work. If you think of the underlying premise of that, it is almost like saying that people will not bother to go to work unless they are absolutely going to make lots of money out of it.”

    Whew!

    So glad our tax dollars are paying for the likes of that. The script will have come from his overlords, as I doubt if he is capable of constructing sentences with that many words in them himself.

    As for the twisted logic…he clearly is incapable of basic comprehension…I think we should pity Jono for the sacrificial pawn he clearly is.

    Susan…the work done by the CPAG does NOT go unnoticed. If I were in charge, the Women Of Influence Award line up would have read much differently.

    Thank you for all you do.

    • Richard Christie says:

      “I am concerned because, actually, they have been saying that all we need to do is offer people a bit more money and that will give them the incentive to go to work.

      Ironically, that justification is much of the argument used by the reich wing to justify obscene salaries for CEOs and others who happen to control their own pay scales.

  3. wild katipo says:

    Yes…..its peculiar that these neo liberals supposedly endorse the uber capitalists dream of rags to riches and hard work making good etc..

    Yet when it comes down to it what they really mean is the endorsement of low wages and a vast bulk of ordinary working people being a cheap source of labour , an underclass and basically what we would call ‘ work slaves ‘.

    Similar to what the 19th century used to have with the East India company and the like… vast hordes of Indians working in slave labour conditions to generate vast profits for English toffs .

    Preying on the fears that it would call into question such things as the Living Wage – approximately calculated at around $18.50 per hour , not a minimum wage of $ 14.75 per hour as it is currently – this amendment has been deliberately voted down to hide the fact that both beneficiaries and workers have been shafted systematically for 31 years.

    The same number of years that neo liberalism has been introduced by the Lange govt and under the auspices of Roger Douglas. To tamper with this cosy arrangement would not only mean upsetting the oligarchs but exposing the true costs of the theft of the commons wealth via wages in general.

    That’s right , – theft.

    And this is why it was voted down.

    To advance any such logic such as ‘ it would create a loss of jobs if wages were raised ‘ or ‘ if beneficiaries can earn more it would disincentivise wage earners’….. immediately creates several oxymoron’s in the whole neo liberal premise.

    First off , – the fallacy that neo liberal monetarist policy’s create wealth.

    The reality is it creates wealth indeed , – but only for those who hold the economic and political clout . That wealth being built upon the backs of low paid workers and a perceived competition for jobs that drive wages down ,…and to do that , there needs to be ( preferably ) a large demographic of not only unemployed but a state of poverty within both the former and the latter.

    Secondly , – and this is where the lie becomes turgid and reprehensible – the neo liberal boast of wealth creation has been shown to be erroneous simply because of the unprecedented levels of poverty we now have in this country … poverty that never existed before its introduction here. Arrogantly , the neo liberal will boast of more opportunity’s and increased trade – however they will never mention the social costs incurred and definitely will never disclose the methodology used to achieve their wealth nor the motives behind it.

    In summary therefore , what we have now is little better than the slave labour conditions of early pre union 19th century Great Britain.

    Using the same poverty techniques of pittance wages , minimizing of health and safety conditions, stonewalling of opportunity’s for real personal advancement by entrapping in poverty , … it has been a deliberate and systematic methodology to reverse society and to re-concentrate wealth back into the hands of the modern ‘ruling classes’.

    Nothing more, nothing less.

    Yes , – you may have that flat screen tv,… yes , – you may have that microwave , but these are merely the trappings of an advancement of technology – and even that from many country’s who produce those items with the same relative low wage underclass that is being duplicated here. Particularly as many wealthier country’s create unemployment in their own country’s by moving offshore for cheap labour.

    So we see now why Mr ‘Family Values’ Dunn voted that amendment down .

    The truth is Mr ‘Family Values ‘ Dunn is nothing more than a sycophant and advocate for creating systematic poverty among families by giving full support to the neo liberal mantra of dis-empowerment of the worker and the unemployed.

    It is not only insidious , but nefarious in its motives.

    And should be seen simply for what it is :

    Theft.

    • Susan St John says:

      Thanks Rosemary for those comments. hopefully there will be a proper attention to these issues when the Child Hardship Bill is debated. But I am not holding my breath…

  4. Peter Parasite Dunne, that man has not got a brain in his head, it is all about him and his bloody ego.

    Cannot the voters of Ohariu see through this useless Politician ?

  5. Others who get caught up in this abatement are couples where one is not yet 65 and called a non qualifying spouse where the other person is receiving National Superannuation. That under 65 is treated like a beneficiary if the couple have to choose the married rate of superannuation. This is totally unfair and extends even to shareholder funds in a privstely owned family company. If you draw on that fund as a shareholder while receiving the married rate, it is counted as income and effectively taxed again.

  6. Nick says:

    In a well organised society there wouldn’t be any “Benefits”.
    There would be a work policy, a study policy and a medical policy.
    People without work would collaborate with a dedicated manager to find State-funded work which would improve their chances of finding permanent employment. (This should be self-generated work where practicable, because there is so much to learn when you try to organise your own small business). An alternative would be to find and select study courses, paid or otherwise, with the same objective. However, if the person is incapacitated for one reason or another, the goal would be to manage the condition with a view to improving their employment chances further down the track if it is feasible, (and to find other ways for the person to contribute if it is not).

    Once people are working in such a scheme, they should be paid a living wage for a set, but fairly generous number of hours’ work. After that they are fully entitled to earn as much as they like because there would be no reason for their work-generated income to be means-tested.
    In all the above cases, serious conceptual input from the person would be of the highest importance. To facilitate work is not just to extract value to the society, although that is not valueless, but because life on a benefit is no life at all, as anyone who has done it tough will witness.
    Until we put the person, his or her needs, and his or her ability to participate in society at the centre of the process we will get nowhere.
    In most cases, the State-paid work would only be needed for a relatively short period. But some previously unperformed but useful work might become permanent (and that would be a good thing).
    It’s not like we are fresh out of things that need doing but don’t get done.

    (Note: if you take it that this is just another work-for-the-dole scheme, you will miss the point entirely. it is about dignity, self-determination, self fulfillment and a partial way to escape the poverty traps of current benefit structures).

    • Sam Sam says:

      Have you heard of the education system? That fulfills most of you objectives out lined in your public works policy?

      Why all this fails is because private investors (the top 20%) know they are receiving all the new income. And the rest don’t have enough money to use new investment opportunities.

      It use to be earn or learn. Now it’s just earn and the the article implies. That’s a failure to.

      There is a fix. Government has to tie the minimum wage to the supply of money. So when the supply of money increases 20%, wages increase 20% the following year. This is the only way of undermining debt and increasing investments in entrepreneurs.

      Because fundamentally the private sector have no solutions to your policy proposals.

    • Cagey says:

      Good to see recognition for the socialist, pre-neolib system which operated in New Zealand before Roger and Ruth destroyed it by stealth. Watch this documentary if you want to know the facts about our history re: unemployment policy.

      https://youtu.be/TN8HHHfNEhE

    • phil_ivey969 says:

      Running a small business is hard work, and requires quite a bit of knowledge and skill to become successful. Whilst that would suit a small percentage of benefit seeking folk, i suspect the majority would still be better off working for someone else.

      I do like the idea of catering to each individual differently though. In my experience with WINZ you are all treated the same…as the lowest common denominator. Which of course means that the vast vast majority do/did not get what they needed in terms of work, study, cv help etc.

      • Sam Sam says:

        All of New Zealands best produce gets exported. That’s why NZ restaurant food looks like it’s been cooked by first year cooking students, and why we will never brake out of our low wage hypocrisy.

  7. Sam Sam says:

    A lack of welfare that drives people to engage in criminal activity starting with robbery to avoid starving to death on the streets is a long standing outdated idea.

    Sam

    • Jack Ramaka says:

      If people can not afford to feed, cloth and house their families what do you think they might do?

      Unfortunately the disparity between the haves and the have not’s has increased in recent years, the GST increases nailed the poor further and JK granted his support base tax cuts as a thank you present for voting him into power, meanwhile we continue borrowing from overseas to fund these tax cuts. Mindless stuff?

  8. Expat says:

    Silly thing is that if you raised it $300, these people would spend all of it in the local economy, contributing to a growing economy and helping to increase the number of available jobs to all Kiwi’s, this is just common sense, but we have a govt hell bent on punitive, vindictive, dumb persons ideology that sees the economy being “sacrificed” just to hurt a few people at the bottom of the ladder, I use the term “few” loosely, as before this govt there were only a few in comparison to the latest unemployment figures (3 to 4 hundred thousand people looking for work, job vacancies that don’t exist).

    Here’s a prime minister that has tripled his own personal wealth since becoming PM through tax and law changes, he introduced, come on NZ, time to wake up.

  9. Chch_Chiquita says:

    I was thrilled to learn about this bill, though highly disappointed (but not at all surprised) it was voted down. If Labour will turn this into a policy and acomapny it with similar policies I would dare hope this will get them some traction amongst those feeling forgotten.
    Discussing this in our household, no one can understand why it was voted down. It makes so much sense! Oh, wait, now I know why it was voted down.

    • saveNZ says:

      You will not get justice from Health and Disability commissioner – another rout of the taxpayers money posing as a ‘check and balance’ in the current system.

      • Mike in Auckland says:

        You are so damned right! Someone else has (like many) had extremely disappointing experiences with that Office of the HDC, and published this:

        https://nzhealthcarefraud.wordpress.com/

        Read through that and you can see what “rot” sits in that supposedly “watchdog office”!

        Maybe some allegations on that website go a little far, but in fact, it is not far from the truth, I fear.

  10. Jack Ramaka says:

    With inter generational dependency in NZ we need people to be given a hand up rather than a handout, successive Governments have been obsessed with handouts rather than looking at the root cause of today’s employment and social problems.

    • Cagey says:

      Like not allowing people to get proper gateway jobs as the abatement rates for benefits are too punitive?



Authorised by Martyn Bradbury, The Editor, TheDailyBlog, 5 Victoria St East/Queen St, CBD, Auckland, New Zealand.