Why some teenagers are spending 24 years on benefit and will National’s welfare reforms help them?

Monday, 29 April 2024

• The National-led government is overhauling the welfare system, and the Ministry of Social Development is using sanctions against more beneficiaries.

• It has also changed the way benefits are uprated, by indexing benefits to inflation, which was a National Party manifesto commitment.

• Officials estimated this move could save the government $669.5 million over the next four years, and bring an extra 7000 children into poverty.

When Social Development Minister Louise Upston outlined plans to aggressively pursue benefit sanctions, essentially fines for people on welfare, she used a striking statistic: some teenagers are forecast to spend 24 years of their working lives on a benefit.

It was a possibility she said she was not prepared to accept, as she used the figure to justify moves to add more layers of bureaucracy onto beneficiaries, making them reapply for the benefit every six months, and setting up more work check-ins.

But the figure she used to justify her decision making - found in two government documents - does not go far enough in telling the whole story of these young people - who are expected to stay in poverty for the rest of their lives.

What the reports say

Research commissioned by the Ministry of Social Development, written in July 2023 and published under the official information act this year projected 16 to 19-year-olds on a youth benefit could spend an average of 24 years of their working lives on a benefit. The document was called the Taylor Fry report after the consultants who put it together.

Its key message was that younger people were staying on benefit for longer independent of labour market conditions.

The teenagers get the benefit because they can’t live at home, or their parents can’t support them. There were 2031 young people supported by a youth benefit as at September 30, 2022. This makes up 0.5% of all people on a benefit, according to the Ministry of Social Development.

Another government document, published in September 2021, drew from a wider pool of 16 to 24-year-olds. It found young people with seven risk factors could spend an average of 24.8 years on a benefit.

The seven risk factors paint a picture of a young person who has faced serious disadvantages in childhood with negative experiences at home, school and with their health. They have been taken into care, or had concerns raised about their safety at home.

The seven risk factors are:

• was discharged from a public hospital after requiring acute or unplanned care in the last three years.

• was proceeded (i.e., taken legal action) against by police in the last three years.

• had interacted with the Youth Justice system (i.e., had a report of concern, family group conference or whānau agreement, or youth justice placement).

• when they were 13-18 years old, they had a parent or guardian who was receiving a benefit.

• had interacted with Oranga Tamariki (i.e., had a report of concern, care and protection investigation, family group conference or whānau agreement, or a care and protection placement).

• has not achieved a qualification equivalent to the National Certificate of Educational Achievement (NCEA) Level 2 or higher; or

• was stood down or suspended while at school.

The bottom two education risk indicators exclude people still at school.

There were 1000 young people with these seven risk factors, as at September 2021, according to the Ministry.

This report also found young people were doing better overall, but there was a group of youth with complex needs who needed more support.

Who said what

Upston’s approach to beneficiaries has sparked a series of tense debates in the House between the political left and right, with the left arguing the number of people on benefits is largely down to the state of the economy.

They say making it harder for people to stay on a benefit may force them to take on work that is not suitable for them, and means they could just bounce between a benefit and low-paying work for years .

“They should be dealing with the economic situation, and ensuring that people can get into jobs rather than punishing beneficiaries,” Carmel Sepuloni, Labour’s social development spokesperson said.

Sepuloni said people spending years on a benefit weren’t doing anything “wrong”. The Labour government also used benefit sanctions.

Ricardo Menendez March, the Green Party spokesperson for social development, argued Upston had taken the figure vastly out of context to justify more harsher treatment of all beneficiaries.

But Upston is arguing the Ministry of Social Development needs to be more active, pointing out only 60,000 of the roughly 189,000 on a benefit were being case managed.

She outlined a target to reduce the number of people on a benefit by 50,000 over the next six years. The target includes all those on a jobseeker, including people with a health condition or disability who are temporarily unable to work.

She believes more severe welfare policies are the best way to get people off a benefit and into a job.

What the evidence says

There is no empirical evidence to suggest benefit sanctions work in New Zealand, however research from overseas makes a mixed assessment.

According to the Ministry, however, few studies look beyond case load and employment effects to consider intended and unintended impacts on broader outcomes, such as poverty and mental health.

Reviews of the small number of (mainly European) studies found sanctions do get people off benefits and into work, but they also estimate they reduce person’s earnings, hours of work and job stability - as well as push some people to unknown destinations or out of the labour force.

What’s next

The Ministry has already increased its use of sanctions, boosting them by 20% in the first three months of this year when compared to 2023. We can expect the use of sanctions to increase further.

However time will tell whether Upston’s push to sanction more benefit claimants is effective in getting them to take a job or work more hours, and whether there are other negative and unintended consequences.