Urgent action needed to raise and individualise benefits – first step to a basic income for all

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In Australia the government almost doubled the value of the unemployment benefit to $557.85 a week.

New Zealand should do something similar. 

I propose that for at least the next six months we should give all unemployed, sickness, invalid and sole parent beneficiaries a tax-free benefit equal to the net national superannuation rate for a single person – $425 a week with a tax on all other income of 39%. I will explain where I got this idea and how it will work a bit later. 

$425 a week is about 40% of the average net wage which is what adult unemployment benefit values were in the 1980s before being slashed to about 33% in the 1990 budget. Since 1990 their value has dropped again to only 20% of the average wage because they have only been increased by the Consumer Price Index movement rather than the average wage movement. This was changed in this year’s budget and the increase matched the average wage increase but the damage has been done and without a substantial real increase the losses over two decades will never be made up.

There was also a near halving of the percentage of people qualifying for an unemplyment benefit around 2008 when deliberate and punitive barriers were put in place to block people being able to access benefits despite their legal right to do so.

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This has been an important part of what has driven the explosion of poverty levels, homelessness and dependence on foodbanks over the last decade before the most recent crisis.

It is this sector of society who have suffered the most over the past decade and needs the biggest help during the crisis period. 

It can also be made into a first step towards a universal basic income at a meaningful value to make a difference.

Economist Susan St John has proposed something similar for those on national superannuation that hasn’t been given the attention it deserves.

Susan St John was proposing this change to National Superannuation as a fair and progressive alternative to the right-wing economists demanding cuts to national superannuation because it is allegedly “unaffordable”. Her proposals would have saved a lot of money but be much fairer than raising the age or cutting the value, for example.

She proposed we establish a non-taxed basic income grant equal to the current living alone net national superannuation income of $425 a week.

All other income would then be taxed at a set rate to ensure those on high incomes do not benefit unnecesarily. That rate could be set at any number, but Susan gave two examples in her paper. In one she used a 39% tax rate which would mean anyone earning over $123,000 a year would lose the entire benefit. Another alternative was 20% on all income up to $20,000 and then 45% beyond that which would cut off any benefit at around $100,000. 

The beauty of these simple suggestions is that the benefit doesn’t get paid to people who don’t really deserve it but national superannuation would retain its universal character and be available to everyone at age 65.

In Susan’s proposals Superannuitants earning more than the cut off points would simply choose not to receive the benefit. But in my view, it makes sense to have the respective marginal tax rates of 39% or 45% apply on all incomes over $100,000 or $123,000 examples as well to help fund an extension of the benefit to others. Personally I would then add even more marginal rates at higher incomes until we reach 100% at $250,000.

We should also bring in wealth taxes and death duties for anyone with accumulated wealth above $5 million to make sure that this class of people (property owners in particular) who have avoided taxation their entire lives can no longer do so. I’d also look at a Financial Transaction Tax but would prefer that to be used to replace the regressive GST tax.

But with a universal non-taxed grant in place for those aged 65 and over, Susan St John did think it could easily be extended to other groups if we chose to. She suggested we may want to start with sole parents, or those aged 60 and over have worked in manual jobs. 

But the same basic income grant could be extended to anyone who was unemployed, and also used to replace student allowances if we had the income to pay for it.

At the moment, when were are in a crisis, and we are literally printing money to deal with the problems we face, then we need immediate steps to deliver money to the poorest sections of society and those who have suffered the biggest loss of income – the newly unemployed and those already on benefits.

Current benefit levels are simply starvation rates – $250 net for an adult. It is only $200 each for a couple. Youth rates apply aup to 24 years of age. And you can’t access a benefit if your partner works. Then to add insult to injury a sole-parent family loses $75 a week from an In Work tax Credit for their child if they lose their job. That also must change. 

We need all benefits (including national superannuation) individualised so you aren’t punished for being in a relationship. 

All benefits should be set at the single rate for national superannuation ($425 a week), made tax free and all other income taxed at 39%.

Making these benefits as universal as possible also undercuts the ability of some groups to criticise others for receiving them. It has been interesting that there was little criticism of the winter energy payment (now $40 a week for singles) going to beneficiaries and others on low incomes, when it was also given to those on national superannuation.

The wage subsidy has been effective in keeping most people in employment for at least the next three months. But tens of thousands of workers have still lost work and that could easily grow to several hundred thousand. Many workers in grey areas of the economy doing cash jobs also could not access support. Workers on temporary visas have also missed out on support if they lose their jobs. These workers need much more support immediately.

We can certainly “afford” to do it for six months while we debate the wealth and other taxes that may be needed to sustain this proposal longer term.

26 COMMENTS

  1. Would have been a lot better to have paid NZ citizens and long term residents (aka 30+ years) that keeping the ponzi of takeaways afloat which are very likely not be employing NZ citizens for the most part and are sunset non essential businesses that apparently the government is more eager to support than the NZ citizen beneficiaries and the disabled in NZ who got $25 ….

    https://services.workandincome.govt.nz/eps/search

    A few examples of the wage subsidy – who knew that takeaway companies and overseas nationals were more important to support than health and education here, and businesses like the below are more deserving of NZ state support than the NZ disabled under our kind face!

    Privitise the profits, socialise the losses!

    AMASIAN LIMITED 5 $32,318.40 16/04/2020
    EUROASIA LIMITED 11 $51,859.20 16/04/2020
    ASIAN KAI LIMITED 4 $22,459.20 16/04/2020
    ASIAN TAKEWAY LTD 3 $18,259.20 16/04/2020
    ACTIVE ASIA LIMITED 9 $60,436.80 16/04/2020

    SKM SUPERMARKET LIMITED 7 $49,207.20 16/04/2020
    METRO SUPERMARKET LIMITED 71 $482,124.00 16/04/2020
    Y & Z SUPERMARKET LIMITED 13 $88,555.20 16/04/2020
    ALPINE SUPERMARKET LIMITED 37 $245,947.20 16/04/2020
    PAIHIA SUPERMARKET LIMITED 13 $74,407.20 16/04/2020

    MIN & HWANG 3 $21,088.80 16/04/2020
    ZHENAI WANG 3 $21,088.80 16/04/2020
    WANG 1979 LTD 4 $28,118.40 16/04/2020
    K F & L C WANG 3 $18,259.20 16/04/2020
    MR ZHISHU WANG 6 $30,859.20 16/04/2020

    KWON THAI 6 $36,518.40 16/04/2020
    ITHAI LIMITED 34 $205,051.20 16/04/2020
    THAI LAGOON LTD 14 $72,948.00 16/04/2020
    SO THAI LIMITED 3 $21,088.80 16/04/2020
    JAITHAI LIMITED 9 $57,607.20 16/04/2020

    ZINDIA LIMITED 7 $49,207.20 16/04/2020
    INDIA GATE LIMITED 4 $25,288.80 16/04/2020
    INDIAN SOUL LIMITED 11 $71,666.40 16/04/2020
    INDIA TODAY LIMITED 12 $64,548.00 16/04/2020
    CURRY INDIA LIMITED 4 $19,629.60 16/04/2020

    TOURISMHQ LIMITED 3 $21,088.80 16/04/2020
    GM TOURISM LIMITED 5 $26,659.20 16/04/2020
    HY TOURISM LIMITED 7 $49,207.20 16/04/2020
    GP TOURISM LIMITED 4 $25,288.80 16/04/2020
    AIS TOURISM LIMITED 8 $56,236.80 16/04/2020

    KOREANA RESTAURANT 6 $30,859.20 16/04/2020
    KOREANA CO. LIMITED 6 $42,177.60 16/04/2020
    CALVARY KOREAN CHURCH 3 $18,259.20 16/04/2020
    HANSANG KOREAN BBQ LIMITED 3 $21,088.80 16/04/2020
    KOREAN NOODLE SHOP LIMITED 4 $25,288.80 16/04/2020
    KOREAN NOODLE SHOP LIMITED 4 $25,288.80 16/04/2020

    If this is NZ’s best and brightest to subsidise along with dysfunctional construction in NZ in the marketing led, “shovel ready” projects, no wonder they are predicting a recession here!

    Shovel ready to take NZ to our doom, looks like it!

    Doesn’t have to be, but they are creating it with bizarre policy and who the state has decided to support and who the state is underfunding while supporting the NZ visa takeaway brigade.

    • I wonder why New Zealand has the third highest adult obesity rate in the OECD, and our rates continue to increase. One in three adult New Zealanders (over 15 years) is classified as obese, and one in ten children when takeaways and poor food businesses, is now such a supported NZ ponzi industry!

      Excess weight (obesity) is associated with many health conditions including Type 2 diabetes, ischaemic heart disease (IHD), stroke, several common cancers, osteoarthritis, sleep apnoea and reproductive abnormalities in adults.

      Even 20 years ago obesity in NZ has a social cost exceeding hundreds millions….. why is our government propping up more and more unhealthy food businesses that contribute to this health statistic!

      • why is our government propping up more and more unhealthy food businesses that contribute to this health statistic!

        Totally agree – That is so wrong, in so many ways. The long term costs for NZ have, clearly, never been considered.

  2. Was on last nights news.
    “Susan St John was last seen putting a cart before the horse. The horse was not amused.”
    In defence, Susan St John argued that the cart was the right way around, it was the bloody horse that was in backwards.
    What do I know about economics? Fuck all, would be a fair assessment I think.
    But what I think I do know is that any increase in payments made from our government to ensure there’s zero poverty and hardship in our rich and beautiful AO/NZ must come second to making sure that the foreign banks get their $6 billion dollar in net annual profits from us to be sent off-shore and that must be enduring. That’s much more important than ensuring our most at risk are in some comfort. A sturdier cardboard box to lie on, perhaps? A spongier board on the park bench? A not quite so sucked on fag end in the gutters outside the Clubs on Ponsonby Road?
    I’d also like to draw attention to the AO/NZ electricity retailers because without them our electricity would cease to be. Electricity would vanish into outer space where it would hide behind a Quasar until an electricity retailer could coax it out with a tub full of money. It’s a fact. Look it up?
    Without electricity retailers we’d have not only no electricity but no gravity either. And no static build up in our polyester underpanties to reach full charge from slouching across the nylon carpet, none of your natural rubbish, mind? And therefore no spark on the end of the early morning diddle after that first piddle. Better than an alarm and not entirely unpleasant.
    Without our brave and noble electricity retailers maintaining and supplying us with that most mysterious and as yet unknowable gravitational force we’d all float off ! We’d be cluttering up the atmosphere with floating ephemera! What then of Air NZ? Can’t fly through floating ephemera without a massive OUR government bail out can they? Nope, would be my suspicion.
    When common things come under threat, all life as we know it will come to an end and there’s nothing more common than a whining, capitalist corporate with its hand out.
    So, before we, the workers, who are by default the tax payers who then try to managed OUR government despite the entirely repugnant and greedy overtures of an above-the-law corporate criminal elite sucking at OUR government’s tits, we, must sort out those parasites BEFORE we hand them ever more of OUR money on the long suffering meat platters who are our most vulnerable.
    Put simply; If the banks are not driven off and if our once-were-ours natural resources are not returned to the collective US, any money given to the poor will be diverted into the rapacious pocketssssessssssss of the foreign corporate criminal elite ( And not so foreign criminal elite either, aye boys? ) waiting at the letter box….

    • +1 Countryboy

      With the woke you lead their horse to the water of practicality and fairness, but you can make them drink. (or think and actually decipher real statistics, 60,000+ Asian pensioners on our pensions in NZ and about to hit 170,000+, Harvey Norman getting 12million wage subsidy, 1 hour of work is employment, ‘relaxing’ visas https://www.odt.co.nz/regions/queenstown/relaxed-visas-essential-workers).

      Our woke horses defiantly seem to back overseas everything first like the right wingers, while expecting the Kiwis to pay for it by bankrupting their future pensions and infrastructure costs on the above freebies!

      • The unemployment definition is a standard definition used by statistics departments around the world.

        However, since it’s not that helpful for getting a real sense of people who want work but don’t have it, Stats NZ also measure underutilisation, which is everyone with less than 30 hours work per week who wants to work 30 hours per week (that being the definition of full time work in NZ for various purposes).

  3. “The beauty of these simple suggestions is that the benefit doesn’t get paid to people who don’t really deserve it ”
    First up is to define who deserves it. Someone who has never paid tax presumably deserves it more than someone who has potentially paid $1 Million plus in taxes? Really?
    Secondly, doing this would act as a massive disincentive for people to save for their own futures.

    • It’s also a disincentive for low paid workers to get out of bed in the morning. Lot’s of us would be no worse off on a benefit than going to work, once costs are deducted. The worst thing about multi generational benefit dependancy is the the social alienation it involves. I’ve had some great discussions with local kaumatua who believe this is the single most pressing issue for our Maori people. Too many rangatahi not getting out of bed in the morning, and finding some mischief to get into instead of going to bed at night. An entire generation feeling disenfranchised because they are not actively contributing to wider society is always a bad thing. The us/them dichotomy is hard to avoid.

      I would suggest spending the money on getting people into life-affirming work patterns that allow them to perceive themselves as part of a wider society is far more beneficial than merely keeping them alive with more money.

        • Like drinkin’ piss an strumming guitars?

          Isn’t that what Varsity students do?

          Sure they do.

          They just need a little coaxing to follow the right ideology , of course.

          Like democratic socialism.

          Not a biggie, really.

          • Having both taught at university and (of course) studied, yes of course plenty of University students do that.
            In fact I have said here before that we need to DRAMATICALLY raise the barrier for entry to university so that we:

            1. Get rid of the time wasters, and
            2. Free up funding to better support those people who aren’t wasting their time and our money.

            However, I am not sure how your point relates to mine???
            Simply put, we all need a purpose. Whether you are employed or not.

  4. Alternatively, you could have a universal, unconditional basic income for everyone over the age of 18, whether employed, unemployed, or retired, by setting it at $400 a week (untaxable) and paying for it with a flat tax of 50 cents in the dollar on all income (including the deemed income from wealth, or at least land, which is already valued for local-body rates). Everyone with an income less than $71,500 a year would be better off, assisted by everyone with an income above that. This would replace all NZ Superannuation except for people outside New Zealand, and, with the addition of universal child benefits (at the present rates for orphans?) could replace most of the benefits paid out by MSD. There would be no queueing for benefits: proof of permanent residence would be the sole qualification. Sadly, company tax, trust tax, and PIE tax would have to be 50% too, to hamper the tax avoidance industry.

  5. Even simpler Mike. Dismember MSD/WINZ.
    Make the UBI 95% of the living wage or minimum wage, then there will always be a ‘pool’ of willing people who ‘can’ work, ready to work.

    Lets not fuck about with theories of what these experts say, ffs! They’ve failed to address these issues for 30 years or more!

    When the Welfare Budget is $26 billion and those on welfare receive $4.8b (315,000) annually from that welfare budget. The ‘pig’ is well and truly getting fed.

    In 3 weeks $9.9b gets paid out to the ‘technically’ unemployed who, a majority of are about to become unemployed.

  6. Yes Mike, we support Susan St Johns 100% there.

    I am 75 now and paid tax since 11 yrs old when I ran a paper run and still pay taxes.

    All we want is our pension income to keep pace with the cost of living as we are gall going broke now as all costs are rising now.

    QUOTE;
    “Economist Susan St John has proposed something similar for those on national superannuation that hasn’t been given the attention it deserves.
    Susan St John was proposing this change to National Superannuation as a fair and progressive alternative to the right-wing economists demanding cuts to national superannuation because it is allegedly “unaffordable”. Her proposals would have saved a lot of money but be much fairer than raising the age or cutting the value, for example.
    She proposed we establish a non-taxed basic income grant equal to the current living alone net national superannuation income of $425 a week.” Unquote.

    • You may have paid taxes Cleangreen, but a helluva lot of it was to the Canadian Govt when you lived there plus other countries worked in outside NZ!
      Just saying you have paid taxes since you were 11 isn’t the full story of your moaning about your NZ pension is it?

  7. Thanks Mike for promoting this incredibly important debate about the design of welfare assistance at this critical time.
    Just a small correction. I have not advocated for a UBI= $425- the single living alone rate of NZS. We use the married person rate of $325 ( 2020 figures). The modelling show that the single living alone rate is too high for a sensible outcome. The idea is that over time the married rate is raised by indexation to the rate of single sharing which is frozen in the meantime. See for the full modelling: St John, S., & Dale, M. C. (2019). Intergenerational impacts: the sustainability of New Zealand Superannuation Retirement Policy and Research Centre, prepared for the Commission for Financial Capability.
    https://cdn.auckland.ac.nz/assets/business/about/our-research/research-institutes-and-centres/RPRC/OtherPapers/ToR%206%20FINAL%20St%20John%20and%20Dale%204%20Oct%20revised.pdf
    The proposal was discussed pre virus and there was a strong case then for redistribution from the wealthier superannuitants to allow assistance for others ( ie beneficiaries pre crisis) to be more generous. The Covid-19 crisis has added a huge extra dimension and makes the contribution from those who don’t need NZS even more critical — . But the problem is that the welfare system is about to be overrun and that these extra costs will require borrowing or money creation for some time to come.

      • Ae. The experts arbitrary ‘price points’ are fuck’n ridiculously low.
        Kinda tells you whose side theyre on and have been for decades.

        Whats their hourly charge out rate I wonder?

      • on $325 per week I would have $5 per week to live on after paying my rent.

        It does not add up. The impossibility of just trying to stay alive..

        • Ae. These people dont understand that these rates have only changes by 2%-3% in 29 years.
          Less, buying/purchasing power -56.10% and less compounded inflation of -85.00%.

          Basically means the rates need a massive hike by more than 200% for people to be able to sustain life.

          $4.8b of a $26 billion Welfare Budget says volumes.
          $9.9b spent in 3 weeks for the nearly unemployed, speaks volumes.

          Say no more.

  8. Christ!
    Sometimes when I look at the NZLP (albeit with complete admiration for JA), AND The Standard, AND much of what now constitutes the senior ranks in our PS, AND a number in academia, I’m haunted.
    “Whoop Whoop ………. Pull up Pull up! …….. neo-liberal terrain approaching!”
    “Check your fundamentals before lowering your landing gear going forward”
    “Whoop whoop”
    There’s a tough battle ahead and there’s going to be quite a few martyrs.

  9. So years back it was fair play to bag the beneficiary, make them feel like shit by calling them bludgers but now the shoe is on the other foot and everybody is on some form of welfare and all these businesses are getting help, even the Taxpayers Union who vowed never to take govt hand outs is taking govt hand outs and now people are crying out that there needs to be some fairness and increases to the benefit system.
    Just hope people dont have short memories when all this is over and go back to making beneficiaries feel like shit.

  10. The UBI idea for super does not mean that there is no need for recognition of accommodation costs for those whose rents are high and other income low. The single sharing rate would be frozen and the married rate catch up over time. Most will notice no difference in what they are getting in the bank. If it is too low then that needs a separate debate.

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