Prime Minster Chris Hipkins has acknowledged that working families are really struggling. Cost of living issues are out of hand. Minister of Finance Grant Robertson has signalled a recession is on the way. Worse still it is in a time of high inflation.
Working for Families (WFF) is the major way NZ children are supported to ensure there is sufficient income for children in low and middle income families to live free of poverty.
But as a recent letter to the Herald suggested, it is time to name it more honestly.
Lets just call it NOT Working for Families (NWFF). The govt had nearly 6 years in which to reform NWFF. All we have seen are some over-due and inadequate inflation adjustments and an unconscionable rise in the abatement rate to 27% from a fixed household income of $42,700.
These tax credits need to be a secure cushion of income for families when hard times strike. Instead, in this recession, after just a two week grace period, when a family loses paid work, the NWFF cushion will become a hard landing and will be cut by at least $72.50 a week—with an extra $15 cut for each child in larger families. This cut will occur even if no welfare benefit is accessed.
Since 1 April 2021, you can keep receiving the in-work tax credit for up to 2 weeks when taking an unpaid break from work. This could be either as you transition between jobs, are unpaid for a period, or leave employment. If you’re taking an unpaid break from work, you’ll need to notify IR to ensure your IWTC payments continue. The best way to do this is through myIR.(IRD website)
And woe and betide the family that doesn’t realise they no longer qualify. They will have to repay any over-paid payments. NWFF debt to IRD continues to rise.
The payment of at least $72.50 is grossly misnamed the In Work Tax Credit. It should be called the Child Penalty for Poverty (CPP). It has nothing to do with being a work incentive. When low-income families in this recession find they need the support of a welfare benefit, it doesn’t matter if they obtain some part-time work and get only a part of a benefit, they still are denied this payment for their children.
How insulting to imply that families in this coming recession who lose work need a work incentive.
In this recession, if families, already overwhelmed in the aftermath of Covid and the cost of living crisis, have one parent lose their job, that parent may have no recourse to any welfare benefit. The crazy couples-based welfare system has also not been fixed in five and half years as the government toyed with an unworkable social insurance scheme.
Increasingly it is not just those on benefits who cram into social agencies seeking help. Too many families in paid work face impossible clawbacks from low income levels. How ironic is this for a scheme that purports to be about helping working families with work incentives? As Chris Brown says in his letter, they lose a very high percentage of income they earn over the low fixed household income level at which their family assistance reduces. This is doubly cruel as any increases in income to compensate for inflation is simply taken back or creates debts that must be repaid.
Urgent actions to prepare for the coming recession MUST include at bare minimum
- Renaming NWFF to reflect the needs of children, not paid work.
- Until the needs of children are put at the centre the poorest children will continue to miss out
- Add the offensive CPP to the first child entitlement so there is just one WFF payment. This would mean at least $72.50 weekly more for one to three children, and more for extra children in the worst-off families in the benefit system. The cost is around $500m pa, but would be highly cost effective in reducing poverty and remove discrimination on benefit/work status.
- Index all aspects to wages annually (and to inflation where it exceeds wage growth) as is the case for NZ Super.
- Also increase the threshold at which WFF starts to reduce to restore the real value last set in 2018. In 2022/23 it should be at least $50,000.
- Reduce the abatement rate from 27% to 20% as it used to be until it was ratcheted up by National.
- Make welfare benefits accessible on an individual not a couple basis
Lets not hear that ‘we cant afford it’ or that it will add to inflationary pressures. New Zealand has a very low level of government debt. If we can siphon of $2 billion a year for the New Zealand Super Fund, we can support our low-income families in the recession. Please don’t fudge this issue by saying there is a review going on- after over five years it is wearing thin.
I think the biggest problem with WFF (or NWFF) is that it’s simply a subsidy for employers who can’t be arsed paying a decent wage. No need for social responsibility – just pay the peasants you hired the bare minimum and the government you constantly whine will top it up so you won’t have to suffer the indignity of shaving an additional 2% off your gross margin.
I’d much rather see the government building on it’s good work (pun intended) with fair pay agreements to really raise the bar when it comes to setting a realistic, liveable minimum wage and a decent tax-free threshold.
I am sorry Luke but this is the way that that the government gets let off the hook and nothing changes. Every developed country helps with the extra costs of children and low income wages would have to be impossibly high without NWFF to meet the needs of families, while being far too high for those without children. Australia is much more generous with family tax credits than NZ even though it has a tax free threshold and 10% GST not on basics
I was stuck at the front of a road works queue a couple of weeks ago, so started chatting to the kid holding the stop/go sign. He said he was earning $37 an hour. He’d even been provided with a plastic chair so he didn’t have to stand up all day!
I don’t know about the rest of the country, but there are lots of jobs like that around Auckland, so the minimum wage is largely irrelevant. Meanwhile nationally there are over 380,000 people of working age on the dole. We cannot carry on like this.
Oh yeah, there’s lots of jobs… in China!
Auto industry gone, electronics industry gone, clothing industry gone, refineries gone, most toolmaking & machine building gone, half of the mining industry is gone, construction industry can barely get anything built, now the manufacturing grocers are leaving… it’s so easy to make money as a worker, isn’t it!
Never mind that all the jobs were destroyed on purpose, so Wall Street could make a killing running foreign sweatshops. And the politicians take their cut.
You only have to go out shopping and have a coffee at the mall to see the staff wanted signs .I am 75 and have been rung a few times to see if I can work in the kitchen as they have no one to back up when covid strikes
Many of those roles you mentioned were not viable in this free trade market .Rocket lab is a great example of where we need to head well paid jobs and a growing market.
Well put as ever Susan. How to get cut through on this seems as elusive as ever. A class left focused NZCTU might help, so it was pleasing to see Secretary Melissa Ansell Bridges speak out this week.
In real terms it is the continuation of an almost 40 year “War on the Poor” started internationally by the Chicago School, Reagan & Thatcher, and soon enough picked up by Roger Douglas, Ruth Richardson and nearly every NZ State Sector top, official and academic since.
There must be winners and losers in this monetarist neo liberal world–especially losers with bad, recalcitrant attitudes! The second tier COVID benefit was a classic example of this twisted thinking. Working class people approaching MSD for assistance with a partner in work would be shown the door promptly–but not the middle classes–oh no, these wee lambs did not have to endure nasty case managers and the rest of the sadistic WINZ regime.
I have previously resisted the concept of middle and upper class MPs being part of the problem–multiple property owning professionals of some sort or another. I now think it is actually a factor in an obvious disconnect, our legislators largely live in a different world. Michael Wood and Willie Jackson are excused.
thaks for this comment. I am in despair that Labour cannot grasp what they should do in these fraught times for families. Charity is assumed to be able to pick up the pieces.
This article is a stark reminder of how out of touch this Labour government is with
what is supposed to be its core supporter base . I know of 2 people I used to work with who got a pay rise but finished up worst off as they lost the support they were getting from the state .
This shows up a problem from 2 sides .On one side is the State is supporting business owners by way of a subsidiary to allow them to pay low wages on the other side it is hard for the worker to get out of their dependancy on the state .
The only way I see out of this problem in the long term is improve education work harder at getting all young people to a higher level of education so they can earn more . This is what Singapore did and it could work just as well in this small country.
The answer me old Trev, is s-s-s-socialism–but…but…that is socialism! Well yeah, it is.
Your beloved Natzos are only going to queer the pitch further for NZ working class people.
After the next election I hope to get the chance to see how National perform in the hot seat .I will be happy to agree with you if there is no improvement in the lot of the working class .
Trevor
And families having enough money to feed their children is fundamental to better educaiton outcomes
Feed them at school then you know where the money goes . I am not a benefit basher as the majority do the right think by their children but not all and it is these that need the most help to escape the cycle of poverty.
While there is logic in what you write & I do want to see working New Zealanders (including beneficiaries) prosper all we are doing is rearranging the deck chairs as the saying goes. WFF & the Accommodation Supplement are just a subsidy for employers & landlords that keep unproductive jobs & overpriced homes solvent. We have a major problem with productivity per hour worked for many jobs & society does not value many of the care or service jobs that are classed as low-skilled (ie rest home workers & supermarket workers) yet is happy to well reward almost all with a bit of paper to say they are qualified even though the quality of their work can vary.
While dairy owners/workers should be able to work safely & not be subject to criminal attacks the idea that a business should be mostly based on selling addictive products to sick people seems daft. The big food industry is just as bad as the most profitable products are usually all unhealthy the more people eat, this rewards increased selling of unhealthy food that makes the population sicker which increases the health cost where taxpayers pay the cost while owners of businesses get increased profit. A sugar tax should exist along with some sort of a vice tax to reverse that imbalance.
Actually creating productive jobs that enable job satisfaction is a bigger problem but that is no reason not to start looking at the options.
Very true.
Using government funds to compensate for atrociously poor wages — the fault of crooked bosses — is completely ass-backwards.
The way this was supposed to work is the Arbitration Court would rule on whether all wage rates in each Industrial Award were high enough to be a “basic wage”.
As Justice Higgins put it, “fair and reasonable” meant a wage that can support a family of five in “frugal comfort”, and able to support daily life “in a civilised community”.
Once union membership became compulsory, it also meant that an entire industry could walk out on strike, if that promise was ever broken.
The Full Employment Policy, which had eradicated unemployment, meant that there were no people that could not access the basic wage. High wage, increasingly skilled jobs producing complex goods were widely available.
But this is not the approach what works in a modern economy where two parents working is the norm. A minimum that meets the needs of the family of five is too much for a single person no children and not enough for the a family of 7
@Susan:
Thanks for the excellent information in your article.
I certainly agree that we could do with many more families of 7 (or larger!).
To maintain an equivalent living standard, the basic wage would need to incorporate the cost of childcare and other domestic help — if the homemaker is forced into wage labour all day, her living standard is collapsing if she is not compensated for the additional burden.
So perhaps the solution is a combination of the two: 1. A reinstated Industrial Award System must include basic wage judgements that incorporate a detailed “better off overall test”; and 2. The government should raise the birth rate using financial incentives for large families.
Excellent insights and suggestions. good work.
Some will recall the yellow billboards at the Sydney Football Stadium and Sydney Cricket Ground in the 1980s: “The All-New Honda Civic by N.Z.M.C. — Out Now!”
How did that happen? Both countries had tarriffs, import substitution, and a domestic auto industry. However, Australia never had a Honda factory, so Civics could be imported from Nelson (probably under a bilateral trade agreement).
Who were the investors? A combination of the Japanese (who could either have some sales in Australasia from licenced manufacturing, or no sales at all), and local investors who built the factory.
The economy of scale issue only matters for exports, not domestic production — because once the tariff wall is up, everyone must buy local (unless they want to pay a very high price). Of course, we know that local production is already possible at that scale, because it already existed before.
The solution for exports is to produce high-end, complex goods in those same factories. If I buy a Rolls-Royce or a Ferrari, these are produced in high-wage countries, in very small production runs, usually in small facilities. I don’t care that the price is higher — people buy high-end goods because they are the best in the world, using the very latest technology.
Is not capitalism,its excuse, blaim,the cancer,of our humanity.
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