Urgent action needed to raise and individualise benefits – first step to a basic income for all
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.
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.
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.
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.
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.
Well done ‘SaveNZ and coutryboy’, good read both.
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.
Oh great. So, on $325 per week I would have $5 per week to live on after paying my rent.
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..
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.
Oh to all you detractors,….
Seriously…
Rowley Birkin QC ”Shoot him you fool!”
https://youtu.be/HkuBvL0rCSA?t=6
What does it take?
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.