Photo: 123RF
- Benefit sanctions are set to ramp up next year
- The government believes the welfare system has become a "drag net," with people staying on Jobseeker Support for too long
- The opposition says there is no evidence that sanctions will work, and the government is kicking people while they are down
Explainer: The government has confirmed its long-signalled changes to the welfare system, with a scaled up sanctions regime due to kick in next year. So how will they work?
Jobseeker Support recipients will be required to re-apply every six months, as opposed to every year, and any blips will stay on their record for two years, instead of one.
First-time failures to meet obligations, such as someone not demonstrating they are actively looking for work or attending seminars, could result in a new sanction like enforced community work, or a money management card.
Opposition parties have pointed to an expert advisory group report which stated sanctions would not work, and the government was engaging in beneficiary bashing at a time where jobs were hard to come by.
It comes as a new traffic light system comes into play, which the government hopes will make the consequences clearer for people who fail to meet their obligations.
Red light, green light
The traffic light system was canvassed during the election campaign, and came into play on Monday.
It applies to recipients of Jobseeker Support, Jobseeker Support Student Hardship, Sole Parent Support, and the Supported Living Payment.
At green, a client is complying with all of their benefit obligations.
At orange, the client has failed an obligation and has five days to make contact with the Ministry of Social Development to dispute the failure, or arrange how they will meet their obligation again.
And at red, payments have been reduced or stopped, and the client is yet to re-comply.
On Monday, the Social Development Minister, Louise Upston, admitted she was "not sure" what happened to people once their benefits got cut.
How much do people receive at the moment?
On Morning Report on Tuesday, Prime Minister Christopher Luxon was unable to say how much people were receiving on a benefit.
But later on that morning, he had read up on the numbers.
"In the heat of an interview, I don't want to go off and not have time to actually explain how it actually all works, because it's not as simple as just a single number as was being framed in that question," Luxon said.
Christopher Luxon had to do some homework today on how much beneficiaries are paid. Photo: RNZ / Reece Baker
Essentially, the amount of support someone receives varies depending on their circumstances, such as their age or whether they have dependent children.
A single person aged 20-24 on Jobseeker Support or Jobseeker Support Student Hardship receives $307.87 net weekly, increasing to $353.46 for those aged over 25. Married couples without children receive $300.73 each a week, those with children get $317.55 each.
A single person aged 18+ on the Supported Living Payment receives $402.84 weekly, while married couples without children receive $342.24 each, and those with children get $359.07 each.
The Sole Parent Support is $494.80 net weekly.
The rates are reviewed every year, and changes come into place every 1 April.
What the government has already done
In February, the government announced a ramping up of sanctions which kicked in in June.
The Ministry of Social Development would begin "work check-ins" for jobseekers who have been on a benefit for at least six months.
At the start of August, Upston announced an additional $9.45 million would be spent on expanding community-led employment programmes for 18-24 year olds from 5400 places to 7500.
Upston said 97 percent of the sanctions the government has applied have been on Jobseeker Support recipients, with the main reason being because someone did not attend an appointment or failed to prepare for work.
What's coming next year
While the traffic light system has already started up, the main changes and sanctions will not come into place until next year.
The period of time where a failure to meet an obligation will be marked against their record will be extended from 12 months to two years.
Jobseeker Support recipients will also have to re-apply every six months, rather than every year.
They will be required to set up a Jobseeker profile which lists their work experience, qualifications, driver's licence status, and the kind of employment they would like to move into.
First-time obligation failures will have the option to get a sanction without having a direct cut to the benefit.
A community work experience sanction will require a benefit recipient to find and complete work experience for a specified time period, before the sanction is lifted.
The government will also introduce a money management sanction, which will put 50 percent of someone's benefit onto a payment card, which can only be used in approved shops and spent on 'essential' items.
The card already exists for recipients of the Youth Payment, but Upston wants to see it extended.
A similar scheme was abolished in Australia last year, after the Australian National Audit Office found the Australian government could not demonstrate it was meeting its intended objectives.
There are also concerns about the restrictions people may face if their rent is more than 50 percent of their benefit, or if the card will be enough to buy the essentials it has been ringfenced for.
"Louise Upston's making a huge range of assumptions on people's lives and circumstances, and the work-for-dole type schemes are a reheated, failed approach that didn't work in the '90s and won't work now," the Greens' social development spokesperson Ricardo Menéndez March said.
The annual inflation rate was at 3.3 percent in the three months ended June, and Upston said the government was focused on bringing that number down, to ensure the money management sanction did not become too punitive, while still being made to feel like it was having an impact.
Coalition partner ACT wanted the policy to go further, and for the money management sanction to also apply to people who kept having children while on a benefit.
"If you continue to have children while on a benefit, or if you stay on a benefit for a large amount of time, then the money should be received in the form of money management, an electronic card that can be used for purposes to ensure the money actually goes to the children," ACT leader David Seymour said on Monday.
Luxon said the government plan was what it would implement "this term" but did not rule out going further in future terms.
The government expects to introduce the legislation by November.
David Seymour, left, and Ricardo Menéndez March have opposing views on the sanctions. Photo: RNZ
Where are the jobs?
Labour's primary criticism of the scaling up of sanctions is that there are fewer jobs for people to go into.
"Sanctions don't get people off benefit and into work if there aren't jobs for them to go to, and at the moment there aren't jobs for them to go to," leader Chris Hipkins said on Monday.
The unemployment rate rose to 4.6 percent in the three months ended June, with the Reserve Bank predicting it will rise to a peak of 5.1 percent in mid-2025.
Upston told Checkpoint on Monday that beneficiaries would not be sanctioned for not getting a job.
"What we do want to see is that people are taking the steps to improve their chances of finding a job. There is no sanction because you can't find a job, it's if you're not taking the steps and you're not taking your work obligations seriously."
She said MSD would work with people to help them upskill or retrain, to improve their chances of work.
What's the evidence for sanctions?
The prime minister insists he has seen enough evidence to justify ramping up sanctions, saying the number of people on JobSeeker benefits increased by about 70,000 under Labour, with 40,000 receiving it for a year or more.
At the same time, the number of sanctions applied decreased from 60,588 in 2017 to 25,329 in 2023.
But a Welfare Expert Advisory Group set up by the previous government found there was little evidence to show sanctions worked.
In 2019, the WEAG's report said the application of sanctions was "problematic," with no evidence they changed behaviour, instead contributing to more hardship.
Opposition parties have referenced the report to say there is no evidence sanctions helped people get into a job, and the government was "beneficiary bashing" at a time when people were doing it tough.
"None of those interventions have shown to actually work to help people into employment, and the government at the same time has shown little ambition or interest into addressing things like child poverty," Menéndez March said.
Hipkins said: "They like to pick on people on benefits rather than actually focusing on creating jobs, growing the economy, and getting people into good, well-paid work. They don't have a plan for that so they've just resorted to kicking people when they're down."
In government, Labour removed some sanctions, such as the Subsequent Child Policy sanction, which placed obligations on parents to look for work and return to work earlier if they had an additional child while receiving a benefit.
But other sanctions still remained under Labour, like a warrant to arrest sanction, which cut someone's benefit if they had an outstanding arrest warrant.
In its final year in government, Labour started work on reviewing the warrant to arrest sanction, concerned at the impact it was having on children.
While Labour kept the ability to sanction beneficiaries who did not meet work obligations, the Ministry of Social Development was applying a lighter touch in response to Covid-19.