The welfare system is dangerous to our COVID-19 future

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The ignorance of  Work and Income was on display when it was revealed that  staff tell benefit  applicants that their redundancy money has to be used up first

New Zealand’s core benefit system is subject to an income test but never to an asset test as clearly spelt out in 1972

None of the standard categorical social security benefits is subject to a means test. All except universal superannuation, family benefit, and miners’ benefits are, however, subject to an income test set at the level of the benefit plus a varying amount of “allowable other income”. Apart from ad hoc emergency payments, it is only in the area of supplementary assistance that assets as well as income are taken into account (Royal Commission of Inquiry on Social Security in New Zealand, 1972, p. 139) 

Importantly, in the NZ system, asset and income tests apply only to what should be limited and unusual cases of top-ups to relieve unexpected hardship.

It is necessary to look more deeply at the confusion at Work and Income  because the reason has bred a culture that lies at the core of the administration of the welfare state and will be dangerous to the COVID recovery. 

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Controversially, in 2007 Labour included a new statement of purpose and set of principles in an amendment to the Social Security Act 1964. The intent was not only to put a strong emphasis on paid work as the tool of social inclusion, but also to introduce the idea that an individual should use resources available to them first, before seeking help from the state:  The purpose became:

  • “to enable in certain circumstances the provision of financial support to people to help alleviate hardship:
  • to ensure that the financial support referred to in paragraphs (a) and (b) is provided to people taking into account—that where appropriate they should use the resources available to them before seeking financial support under this Act”

It is no wonder staff have been eying things like redundancy money. The culture facilitated by that amendment stresses the need for applicants to “draw on other resources first” and go away to become the ‘deserving poor’ before asking for anything from the state.  

Other social security programmes like ACC and NZS have no such poverty inducing requirements.  The idea that a welfare benefit is a social insurance payment to tide people over so that assets are not run down just to survive has disappeared. As part of the engrained MSD culture, benefits are rarely referred to as ‘social security’ but have all the negative connotations of ‘welfare’.

What does looking to your own resources first mean? Because core benefits are set well below poverty lines, supplements such as the Accommodation Supplement and hardship top-ups are required. These are tightly means-tested and require that cash assets are run down to low levels.  They effectively force applicants to look to their own resources first even if the core benefit itself is only income tested. 

The supplementary payments are no longer an unusual addition and the system has become wildly distorted. The picture below shows the numbers of means tested top-ups in contrast to the numbers of core benefits. 

But what does this “looking to your own resources” mean in practice? Should  Kiwisaver be drawn down? What about taking out a bigger mortgage, getting loans from family or loan sharks, cashing in assets like the car?    

It is no wonder when so much staff time is needed to pry into people’s affairs for these complex supplements that such thinking spills over into the way applicants for the core benefit are treated.

In fact, staff have been acting on the mis-information on their own website that has since been corrected to remove redundancy payments.

MSD now say

 “When a person applies for income support because they are finishing employment, the payments they receive when they stop work may delay the date when their benefit starts.

“Payments that impact the benefit start time include holiday pay, sick pay, long service leave, pay in lieu of notice and retirement payments. Redundancy payments are not part of this calculation.”

But even now this is wrong. There will be many older workers whose COVID-19 job loss experience sees them exiting employment with early retirement payments.  Section 422 of the Social Security act says quite clearly:


in calculating the income of a person for the purpose of determining the rate of benefit, to take no account of a redundancy or retirement payment.”

Clearly, there is a long way to go before the conditioning of staff into this mentality of “stand on your own two feet’ gets sorted. But in the meantime it will be a tragedy for the COVD-19 recovery.   

In the coming long, drawn-out and painful recession, the better-off will emerge with scarcely a dent to their balance sheets, while the worst-off will struggle for decades to repair theirs. 

For those close to retirement recovery of retirement savings may never occur, and elder poverty will soar. Others of working age will become entrapped in the welfare system with poverty traps punishing them when they attempt to get on their feet, when retraining, insecure casual or part-time work is all that is on offer.

Meeting Child Poverty Reduction Targets seems a pipe dream for the foreseeable future and family and child poverty will surge with its associated costs of poor health, stunted potential and high levels of transience, domestic violence and suicide.

As WEAG and CPAG have said multiple times, first fix the Act and frame our purposes and principles intelligently. That is the way to get the culture shift we will so desperately need.    

 

13 COMMENTS

  1. It was good to hear it clearly stated in an interview with John Campbell that benefit levels have been set at, and kept at, a subsistence level which induces ill health and social problems.

  2. The Byzantine rules of WINZ are at the core of the problem of the New Zealand underclass. It’s almost as if they’re *designed* to keep people on benefits, when every effort should be made to do the opposite.

    I’m particularly thinking of the ‘stand down’ rules regarding temporary work. We have great need for seasonal pickers in NZ yet we import people rather than employ our own. It seems that this is mostly because the benefit rules discourage beneficiaries taking up seasonal work because of the subsequent stand down.

    Neither political party seems capable of tackling the obvious

    • No other policy got more people on a benefit than Rogernomics privatisation and deregulation blitz. My simple solution for keeping people of benefits would be to do the opposite of Sir Roger Douglas’s suggestions on anything economic.

    • Good comment. When I was on the benefit I was told I could earn $80 and it would not effect my benefit .With this in mind I took a part time job earning $90 . When I declared this they said as I was earning I would lose my accomadation benefit of $50.
      This was not explained so after tax and travel costs I was $ 5 better off . I said well I may as well stop working but then they said if I gave up the job the accomadation benefit would not be reinstated for 6 months . I showed me how people can be trapped in the benefit as it is so hard to move off it in small steps.

    • Andrew, there are political solutions, but they only make the people on a social security benefit better of and happy, because it’s ataxcut for the rich they are missing out . they are the ones that will punish any politician that wants to do this, since the low incomes are known for not caring about politics because of the old saying. why would I vote, it’s same old same old, nothing will change.

      what we need to do is say the opposite, if we don’t go and vote we definately will keep the same old, but every vote not done is a win for the same old same old.
      so let’s go to the polls a mass, even if it would be online .

  3. The actions by winz, leads to people setting up things like limited liability companies, or trusts or get the executor of a will to hold onto a payout, because WINZ don’t have 1 set of rules to follow, it is taken on by the staff interpretation, not even a lawyers, and not uniform between staff members within a office.

    Winz allow perpetrators of Domestic Violence a Avenue to breach their protection orders which is a crime and conceal it. A WINZ investigator are so focus to get a result they side with the perpetrator over the victim, being a aid to re-victimizing then at Tax payers expense. And the abuser gets off scott-free with no punishment.

    These action encourages to keep vindictive people while not helping those who care to stay in the job, it encourages people that have that mindset to use their little hitler power to abuse innocent, vulnerable people to the mercy of these power tripper. It help creating mental health issues, and destroys trust between MSD and the beneficiary. It makes the person go, if I enquirer, to be honest will it be a statement, like what happens if my mum, puts $50 into my bank account, to, we taking $50 off you because its income, thanks for the declaration.

  4. The benefit system is cruel and punishing because it is a bizarre, complex piecemeal and patchwork system of add-ons, changes, and tinkering over many decades (primarily the last 30-odd years). We still have many nasty fish hooks in the system that have not changed since the 1980s or 1990s, and these generally all involve limits set in 1980s or 1990s dollars so over time inflation has excluded more and more people. What makes it worse is that Work and Income, despite the people who work there seeming to want to do the right thing and wanting to help, is in a word, a shambles. We can see this in the most recent in a long line of legal bungles. Most of my work time involves fixing their mistakes or helping people navigate the jungle of our benefit system. Fundamental change is desperately needed, and has been for decades.

  5. I was discussing the difficulty of dealing with W&I last month on a different site’s OM. Where I transcribed a printout; “No court ordered split care arrangement”, that had mysteriously somehow got shuffled into my papers (there are no privacy markings on the paper, so no legal reason not to that I know of – I just hope that the MSD are too busy at the moment to hunt me down and retaliate anyway):

    https://thestandard.org.nz/open-mike-16-04-2020/#comment-1703057

    To which, a commentor who had previously been a WINZ advocate replied:

    “Noticed the abbreviation “map” in your comment. It’s been a while, but I seem to remember that WINZ works from their own interpretation of the law, which is contained in (I think) map documentation…”

    It just so happens that I have found a couple of other; “Map. The Guide to Social Policy”, documents in older papers (from the same year – 2019) that I was sorting through. Strange how so many not-exactly-confidential-but-not-generally-seen-by-clients documents seem to have made it into my own paperwork; accidentally like. These are; “Shared care”, “ Split care”, & “Court ordered split care arrangements”, which I won’t transcribe in full (unless people really find the above linked one fascinating enough that I bother doing so). However here are some excerpts:

    “Shared care only applies when the parents of a child are living apart, the child lives (for at least 40% of the time) with each parent and both parents apply for a benefit in respect of that child. In shared care situations you can only pay a sole parent rate of benefit to the parent that has the greater responsibility… Emergency Benefit cannot be paid to the ‘other’ parent on the basis that they care for the child for part of the time…”

    “You can only pay Sole Parent Support to one parent, unless, there is a court order awarding split care… in some cases parents have made their own arrangements without court involvement. However, to recognise a split care arrangement for benefit purposes, we must see a court order recognising the arrangements. An agreement between the parents is not sufficient, even if this has been formally drafted by a solicitor…”

    The gist is that the MSD would prefer to split up families to save time and money on their end. The amount of time and money that is required for a divorcing couple (also negotiating division of marriage property) to lawyer up and go through the Family Court process is simply unavailable to many beneficiary parents. So we get perverse outcomes of; (often, but not always) fathers walking away from their families because they can’t afford to be around the children; domestic abuse in beneficiary families that can’t afford to separate despite the toxicity of a failed relationship, and; children split between parents and rarely seeing siblings. Despite research showing that shared care at stable homes with separate parents would be a much more socially desirable (and long-term more economic) option.

  6. Put an end to Capitalism. That fix the need for a commodification of people as units of values based on the productivity of the unit.
    Then we all be equals of equal value?

    Remove subsidies to the private sector who profit from Welfare and increase the core benefit to a liveable income. Then remove the subsidies to employers and have that subsidy transferred to the beneficiary as a training allowance.

    Basically, there many ways to solve this simple problem, but the first step is to overcome is inertia.

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