Welfare in New Zealand

Social welfare has long been an important part of New Zealand society and a significant political issue. It is concerned with the provision by the state of benefits and services. Together with fiscal welfare and occupational welfare, it makes up the social policy of New Zealand.

Social welfare is mostly funded through general taxation. Since the 1980s welfare has been provided on the basis of need; the exception is universal superannuation.

State housing

The government provides State housing to those in need. The number of houses owned by the State has varied over the years and between different governments. Currently the level of rent paid in state housing is related to the level of income of the people living in the house (income-related rents) so that those on low incomes pay below market rents. Where a household's income is relatively high the rents are set at the market rate.

In addition to the provision of State housing the government also provides an Accommodation Supplement. This is payable as a contribution to rent, board or mortgage payments for qualifying people. The Accommodation Supplement is not paid to those paying income-related rents in a State house.

In some instances a person may also qualify for a rates rebate to help with the cost of local government rates.

Social security

Social security benefits are administered by Work and Income. As of July 2013, they include:

Unemployment Benefit (Jobseeker Support)

Unemployment Act 1930

In 1930, while Prime Minister George Forbes was in London for the 1930 Imperial Conference, the United Government passed the Unemployment Act, promising relief payments to those who registered as unemployed. Upon his return to New Zealand in January 1931, Forbes announced there would be no payments made without work, meaning those registered would have to participate in government 'make work' schemes such as building roads and working on farms or in forestry projects. When the register was opened in February, 23,000 people put their names down; by June the number of registered unemployed had risen to 51,000 as the Great Depression worsened. The register did not include women, Māori, or boys under 16. In 1933 (by which time the number of unemployed had reached 80,000), MP Gordon Coates introduced the Small Farms (Relief of Unemployment) Bill to help turn unemployed workers into small farmers.[1]

Social Security Act 1938

After winning the 1935 election the newly elected Labour government immediately issued a Christmas bonus to the unemployed.[1] However, a regular unemployment benefit was not introduced until the passing of the Social Security Act in 1938; that benefit was "payable to a person 16 years of age and over who has been in New Zealand for at least 12 months and is unemployed, is capable of and willing to undertake suitable work, and has taken reasonable steps to secure employment".[2]

Today

The criteria for receiving an unemployment benefit remain similar to the original 1938 legislation. At 1 December 2011, a person could get Unemployment Benefit if they were:

They might still qualify if they were a full-time trainee on an approved work related course (usually less than 12 weeks) and looking for work.

The Unemployment Benefit gross rate at 1 April 2011 ranged between $150.01 and $375.04 a week depending on the applicant's age and living situation.[3]

From September 2007 there has been a number of changes to the delivery of unemployment benefits, the changes focus mainly on youth with a goal of having all 15- to 19-year-olds engaged in employment, training, or education. People applying for the unemployment benefit will be required to undertake work or training-related activities in the period between their first contact with Work and Income and their benefit commencing. They will also be required to look for and accept any offer of suitable work during that time.[4] Similar new measures will also apply to people on Sickness Benefit and Invalid's Benefit, and the Domestic Purposes Benefit. Beneficiaries could have their benefits cut by up to 50% if they fail to comply. These new measures have been criticised by the DPA (formerly Disabled Persons Assembly) a spokesperson told the New Zealand Herald "Disabled people have been telling Social Welfare for years that we want to work, but we want the appropriate kind of work".[5]

In July 2013, the Unemployment Benefit was renamed "Jobseeker Support", and also incorporated those on the Sickness Benefit and Domestic Purposes Benefit - Women Alone, and those on the Domestic Purposes Benefit - Sole Parent and Widow's Benefit where their youngest child is aged 14 and over.

Domestic Purposes Benefit (Sole Parent Support)

The Domestic Purposes Benefit (DPB) was introduced in 1974 following the Report of the Royal Commission of Inquiry into Social Security. It provides State financial support primarily for single parents, irrespective of whether the other parent is contributing to maintenance payments (a feature of earlier legislation) and irrespective of fault. While there is a Widow's Benefit for women with children whose partner has died, this is not available to men.

Until July 2013, there are three forms of Domestic Purposes Benefit:

The rate of payment of a DPB is greater than the rate paid for the Unemployment Benefit and the Sickness Benefit. The rate of payment for the DPB: Care for the Sick or Infirm is the same as for the Invalid's Benefit.

People receiving DPB – Sole Parent are encouraged to name the other partner and to seek child support payments. There is a financial penalty for Sole Parents (section 70A of the Social Security Act 1964) who do not seek child support without sufficient reason. Any child support payments are generally used to offset the State cost of the DPB payment, with any excess going to the sole parent.

At the end of December 2012, 109,118 people were receiving DPB – Sole Parent, of which around 12% were male.[6]

In July 2013, the DPB Women Alone and DPB Care for the Sick or Infirm were removed, with those on them moving to the unemployment benefit (Jobseeker Support) and the new Supported Living Payment respectively. The DPB Sole Parent was renamed "Sole Parent Support" at the same time.

Health benefits (Sickness Benefit and Invalid's Benefit)

Social Security Act 1938

Two types of health benefits were introduced with the 1938 legislation, the Invalid's Benefit and the Sickness Benefit.

The Invalid's Benefit is paid to those permanently incapacitated or totally blind (excluding those already receiving an age benefit). An applicant must have been at least 16 years of age and residentially qualified. The applicant was residentially qualified when their incapacity arose in New Zealand or they were resident in New Zealand on 4 September 1936 and had lived in New Zealand for at least 10 years immediately before applying for the benefit. In 2007 the residence requirement was set at two years.

The Sickness Benefit is payable to those who are temporarily incapacitated from working through sickness or accident, excluding the first seven days of incapacity. To qualify, an applicant must have suffered a loss of salary, wages, or other earnings, and have resided in New Zealand for at least 12 months. The rate of benefit at the time it was introduced could not exceed the loss of earnings through incapacity. The rate now is currently the same as the Unemployment Benefit. As with other benefits introduced in 1938, the applicant had to be over 16 years of age.[2]

Controversies

In recent years the government has been accused of exaggerating drops in unemployment by transferring people to Sickness Benefits,[7] welfare commentator Lindsay Mitchell wrote in an October 2006 press release "There is a constant flow between benefits. Taking this into account the net gain from the unemployment benefit to the sickness benefit over the five years to April 2005 was 20,870. Over the same period the net gain from the Sickness Benefit to Invalid's Benefit was 26,302, bearing in mind the same beneficiary may have been transferred more than once."[8]

Ruth Dyson, Minister for Social Development and Employment, reported, "...the main reason for people leaving the unemployment benefit is to enter paid work. In the last 8 years, 8.8 percent of all unemployment benefit cancellations were the result of a transfer to the sickness benefit, and less than one-third of 1 percent of all unemployment benefit cancellations were the result of a transfer to the invalids benefit. Those figures should finally put to rest the accusation that the Opposition spokesperson on social welfare consistently makes that these outstanding figures for the reduction in those on the unemployment benefit are as a result of a transfer to another benefit. That is not true; they are the result of people moving into paid work."[9]

On 26 October 2006 the government announced a number of changes to the welfare system. Then Minister for Social Development and Employment David Benson-Pope later stated that, when implemented, the reforms will move between 3,000 and 6,000 people off the Sickness Benefit.[10]

Supplementary benefits

In addition to main benefits such as Unemployment Benefit, Superannuation, Sickness Benefit and Invalid's Benefit, a person may be entitled to other assistance depending on their circumstances. Examples of other assistance available at 1 December 2011 are:

A full list of benefits is available on the Work and Income website.[11]

Pensions

Superannuation

A means-tested old age pension for those 65 years and older was introduced in 1898.[12] This established some key features of public pensions in New Zealand, such as the use of general government spending rather than individual contributions, and a "pay as you go" rather than actuarial approach to funding.[13]

The 1938 Social Security Act lowered the age for the means-tested pension to 60, and introduced a universal (not means-tested) superannuation from age 65.[12] The universal pension catered to a strong demand for universal payments, while the lowered age for the means-tested pension provided for the likes of manual workers who were worn out and still poor at the age of 60.[13]

The third Labour government introduced a compulsory superannuation scheme in 1975 where employees and employers each contributed at least 4 per cent of gross earnings.[12] Rob Muldoon's third National government abolished the Labour scheme the following year, and in 1977 created a universal (not means-tested) scheme called National Superannuation that paid 80% of the average wage to married people over 60.[1][12] The age of eligibility was lifted to 61 in 1992, then gradually raised to 65 between 1993 and 2001.[12][14]

The design of a compulsory retirement savings scheme was drawn up as part of the coalition agreement between the National Party and New Zealand First following the 1996 general election. The proposed scheme was put to a referendum in 1997 and rejected by 92 per cent of votes, with only 8 per cent in favour.[13] A move to a partially pre-funded or "smoothed pay-as-you-go" system was made with the creation of the New Zealand Superannuation Fund under the leadership of Labour Minister of Finance Michael Cullen in 2001.

KiwiSaver was introduced by the Fifth Labour Government in July 2007 as a voluntary retirement savings scheme on top of New Zealand Superannuation. Employees choose to contribute 3%, 4% or 8% of their gross earnings, with employers contributing 3%, and the government contributing a $1000 "kick-start" upon joining KiwiSaver as well as 50c per dollar on the first $1043 contributed by the employee each year. The savings are privately managed in a scheme of the person's choosing (if they don't choose a scheme, the government assigns them one), with the government's role limited to regulation, and the collecting and passing on of contributions via the PAYE tax system. An added incentive for younger people is the ability to make a one-off withdrawal from their KiwiSaver fund to help buy their first home.[15] While completely voluntary, 2.15 million New Zealanders are active KiwiSaver members as of June 2013, equal to 56 percent of the country's population under 65.[16][17]

At 1 December 2011, a person may be able to get New Zealand Superannuation if they:

They must also have lived in New Zealand for at least 10 years since they turned 20 with five of those years being since they turned 50. Time spent overseas in certain countries and for certain reasons may be counted for New Zealand Superannuation.[18]

New Zealand Superannuation is taxed, the rate of which depends on their other income.[19] The amount of Superannuation paid depends on the person's household situation. For a married couple the net of tax amount is set by legislation to be no less than 65% of the net average wage, although the Fifth Labour Government increased payments to ensure it is no less than 66% of net average wage. Rates are also payable for people living alone and for single people in shared accommodation.

New Zealand is one of only four countries that have flat-rate universal superannuation, the others being Canada, Denmark and Russia. One quarter of the state's core operating expenditure goes on superannuation.[19]

War pensions

People who have served in any war or other emergency in which New Zealand forces have served, and have a disability, may be able to get a Veteran's Pension instead of Superannuation. Veteran's Pension is paid at the same rate as New Zealand Superannuation but unlike Superannuation, payments are not reduced should a veteran require long term hospital care.[20][21]

Disabled veterans may also be able to get a War Disablement Pension. Surviving partners of veterans may be able to get a Surviving Spouses Pension.[20][21]

Veteran's Affairs New Zealand administers these and other entitlements for veterans and their families covered under the War Pensions Act 1954.[21]

Family benefits and tax credits

The 1911 Widow's pension provided to some extent for families without other means of support, but it was subject to means testing. A family allowance was introduced in 1926, payable at two shillings a week for each child over two years old, but still subject to means testing. The Social Security Act of 1938 extended and modified existing pension arrangements, and added a social security tax to pay for them.[22]

“ A woman with two children received the equivalent of at least a full day's pay for a labourer as benefits, unlike wages, were not taxed. Most women received more as the average number of children born to mothers in the 1950s was 3.4. ”
— Ann Beaglehole, Benefiting Women: Income Support for Women, 1893–1993, p 10

On 1 April 1946, the family benefit was increased to 10 shillings a week and the means test was dropped. The social security tax was raised but this was compensated for by the dropping of the national security (war) tax. This increased family benefit was payable for all children up to the age of sixteen, or up to the end of the year when the child turned eighteen if they were in full-time education or unable to earn a living due to incapacitation.[23]

Since the benefit was normally paid to the mother, many women gained their first ever independent source of household income.[24] The family benefit was increased to 15 shillings per week per child in 1958–59, and was able to be capitalised up to a maximum of £1000 when buying, altering, or paying off a home from 1959–60.[25]

Universal payment of the Family Benefit was abolished to target families most in need[26] and Family Benefit capitalisation limits for first-home seekers were increased (1985).[26] A new family support benefit (introduced as the family care benefit in 1984) raised the incomes of some poor families.[27] In 1986 the guaranteed minimum family benefit was introduced. This fixed an income floor above the statutory minimum wage for persons with dependant children in full-time employment.[28] Known as the Guaranteed Minimum Family Income, it guaranteed working families roughly 80% of the average post-tax wage, although its impact on participation rates was limited by rising unemployment and high effective marginal tax rates.[29]

Family benefits were abolished on 1 April 1991.[30] In effect, they were partly replaced by more targeted allowances for low-income families.

Working for Families

In 2004 the Labour-led coalition government introduced the Working for Families package as part of the 2004 Budget. It was progressively implemented between October 2004 and April 2007.

The package, which commenced operating on 1 April 2005, has three primary aims: to make work pay; to ensure income adequacy; and to support people into work. It replaced the system known as Family Support as well as the child components of the main social welfare benefits. The Guaranteed Minimum Family Income was renamed the Minimum Family Tax Credit and the level of support was changed to encourage working families to leave the benefit system.

The Working for Families package includes several components:

Because parts of the package use tax credits it is also delivered by the Inland Revenue Department.

The package is thought to cover approximately 75% of all families with dependent children.

Minimum wage

The minimum wage is in two forms – the standard wage for all workers (considered adults) over the age of 18, and new entrants wage for young people aged 16 and 17.

The minimum wage rates are reviewed every year and are gross amounts before tax.. As of 1 April 2016, the adult minimum wage rate that applies to employees aged 18 or over is $15.25 per hour. The new entrants minimum rate is $12.20 per hour, and this applies to 16 and 17 year olds for the first three months of employment, after which they become eligible for the adult minimum wage rate.[31]

History of changes

Liberal Government reforms

Among the early forms of social welfare in New Zealand was the old age pension, introduced by the Liberal Government in 1898. The scheme was introduced to avoid what MP William Pember Reeves described as the "worst social evils and miseries" referring to the British workhouses where the elderly lived in spartan institutional circumstances. The pension scheme was non-contributory and was available only to the "deserving poor"; men and women who had become destitute through no fault of their own. The prime responsibility for protecting individuals from the hazards of sickness and unemployment lay with individuals themselves, their families and various charity organisations.[32]

A decade later a widows' pension was introduced for women with children who had lost their husbands. The Liberals also passed the Workers Dwellings Act in 1905 allowing the government to buy land, build houses, and rent them to workers and their families. The small-scale scheme that resulted from this legislation can be seen as a precursor to the much larger state housing introduced by the first Labour government in the 1930s.[1]

First Labour Government

The 1935 election was won by the first Labour government. A regular unemployment benefit was introduced with the passing of the Social Security Act in 1938. Under the Act the Government introduced a raft of social welfare benefits, mostly means tested, that were more generous and covered more people than before. The welfare state they created was a male wage-earners welfare state. Alongside policies to create full employment were policies to set fair wages sufficient for a man to provide for a family.[32]

Change in approach in the 1980s

By 1984 the political culture changed, with social welfare targeted according to need, not distributed universally according to citizenship. The fourth Labour government did not overtly change the main welfare system, however, real expenditure per benefit recipient fell. Some benefits were removed such as the unemployment benefit for under 18-year olds and funding for state housing was cut back.[32] These changes were somewhat ad hoc in nature.

Cutbacks of the 1990s

In the early 1990s the fourth National government embarked on a free market programme aimed at reducing state spending and 'dependence on the state'. Welfare benefits were drastically cut, and 'user-pays' charges were introduced for many formerly free public services. These policies were widely known as "Ruthanasia" after Finance Minister Ruth Richardson, although the welfare portfolio was managed by Social Welfare Minister Jenny Shipley.

The impact of these changes was particularly pronounced as the unemployment rate was high due to the 1987 stockmarket crash and the cost-cutting programmes of the previous fourth Labour government, which had reduced the staff of many state services. The cutbacks have been partially reversed by the fifth Labour government, but inflation means that in real terms benefits are still lower than before the cuts.

By this time the Government had moved away from a policy of full employment and universal welfare to a more targeted system. The programme of reforms had a bias in favour of families, in particular working families and were intended to make it more attractive for beneficiaries to move into the workforce.[32]

Work focused support in the 21st century

Announced in October 2006 the Working New Zealand reform includes changes to the service delivery of Work and Income and changes to the Social Security Act 1964. Amending legislation was passed by the Parliament of New Zealand in June 2007 including introducing a 'Purpose and Principles' section.

The government says[33] the changes will introduce an intensive employment support to every New Zealander who is receiving a benefit and is able to work.

Working New Zealand involved:

From September 2007 there have been a number of changes to the delivery of welfare benefits, the changes focus mainly on youth with a goal of having all 15-year-olds to 19-year-olds engaged in employment, training or education. People applying for the Unemployment Benefit will be required to undertake work or training-related activities in the period between their first contact with Work and Income and their benefit commencing. They will also be required to look for and accept any offer of suitable work during that time.[4] Similar new measures will also apply to people on Sickness and Invalid Benefits, and the Domestic Purposes Benefit. Beneficiaries could have their benefits cut by up to 50% if they fail to comply.

Criticisms

These new measures have been criticised by the DPA (formerly Disabled Persons Assembly) a spokesperson told the New Zealand Herald "Disabled people have been telling Social Welfare for years that we want to work, but we want the appropriate kind of work".[5]

Susan St John and Louise Humpage have also commented that the changes "wipes away any notion that our social security system is about ensuring everyone can participate as citizens. Instead, it makes getting people into a job, any job, the fundamental duty of citizenship."[34]

Further changes were expected, including further welfare benefit simplification in 2008. However, this did not eventuate before the November 2008 general election. After the election, the newly elected National Government proposed and implemented alternative reforms under the title "Future Focus" and established a Welfare Working Group to report on further reforms.

The benefit level for a married couple in relation to earnings in New Zealand (1961–78):[35]

! Year ended Benefit actual Benefit level proportion of after tax average earnings Benefit real value ($1978 prices)
Template:March 1961 17.00 61.8% 57.40
Template:March 1962 17.00 59.9% 56.32
Template:March 1963 17.31 58.8% 56.07
Template:March 1964 17.81 58.0% 56.44
Template:March 1965 18.68 57.4% 54.90
Template:March 1966 19.20 56.4% 56.79
Template:March 1967 20.85 58.9% 56.76
Template:March 1968 21.50 58.8% 58.04
Template:March 1970 23.83 57.8% 58.88
Template:March 1971 26.13 56.6% 59.78
Template:March 1972 28.67 54.2% 59.70
Template:March 1974 38.62 58.6% 69.14
Template:March 1975 44.36 59.6% 71.06
Template:March 1976 51.26 61.2% 70.97
Template:March 1977 59.44 63.8% 70.94
Template:March 1978 68.26 66.9% 71.07

Note 1 by Brian Easton: Average earnings equals surveyed earnings of labour Department (including overtime), with average tax on employees deducted. This is a combination of the male and female rates.

Note 2 by Brian Easton: From Dec 1973 there may be additional supplements including Christmas Bonus (to Dec 1977), Additional Benefit (from 1975) and concessions on some commodities.

See also

Comparisons

also Swedish welfare and Social Security (Sweden)

References

  1. 1 2 3 4 The Penguin History of New Zealand Michael King Penguin Books (NZ) 2005. pp. 269–270, 346–47, 356–59,466
  2. 1 2 "Social Security – Scope of Legislation of 1938". Te Ara Encyclopedia of New Zealand.
  3. ↑ "Unemployment Benefit rate". Work and Income New Zealand.
  4. 1 2 "Social Security Amendment Bill". Hansard. 13 December 2006.
  5. 1 2 "Stings in the tail of beneficiaries bill". The New Zealand Herald. 1 March 2007.
  6. ↑ "Benefit Fact sheets:". Ministry of Social Development New Zealand. Retrieved 12 February 2013.
  7. ↑ "Unemployment on the drop, labour shortage a downside". Gisborne Herald. 29 November 2006.
  8. ↑ "Growth in Sickness And Invalid Benefits". Scoop.co.nz. 29 October 2006.
  9. ↑ "Unemployment Benefit—Reports". Hansard. 16 April 2008.
  10. ↑ "Questions & Answers Tuesday, 7 November 2006". Scoop.co.nz. 8 November 2006.
  11. ↑ " A-Z benefits", Work and Income.
  12. 1 2 3 4 5 Gaynor, Brian (5 November 2011). "NZ badly behind times with age pensions". The New Zealand Herald. Retrieved 6 November 2011.
  13. 1 2 3 Preston, David A. (November 1997). "The compulsory retirement savings scheme referendum of 1997". Social Policy Journal of New Zealand (9). Retrieved 3 December 2011.
  14. ↑ "New Zealand Superannuation". MSD. Retrieved 29 Sep 2014.
  15. ↑ "KiwiSaver - Sorted". Commission of Financial Literacy and Retirement Income. Retrieved 5 June 2014.
  16. ↑ "KiwiSaver annual statistics". Inland Revenue (New Zealand). Retrieved 31 May 2014.
  17. ↑ "Estimated Resident Population by Age and Sex (1991+) (Annual-Jun)". Statistics New Zealand. Retrieved 5 June 2014.
  18. ↑ "New Zealand Superannuation overview". workandincome.govt.nz. 1 December 2011.
  19. 1 2 Fallow, Brian (10 May 2012). "Super a fiscal bomb waiting to explode". The New Zealand Herald. Retrieved 10 May 2012.
  20. 1 2 "War Pensions". Veteran's Affairs New Zealand. 16 December 2011.
  21. 1 2 3 "War Pensions Act 1954". New Zealand Legislation. 1 April 2011.
  22. ↑ "History of Monetary Benefits".
  23. ↑ "Social Services".
  24. ↑ "Universal Family Benefit".
  25. ↑ "War Economy – New and Increased Social Security Benefits".
  26. 1 2 http://www.spear.govt.nz/documents/publications/significant-policy-events-report.pdf
  27. ↑ The commercialisation of New Zealand By B. H. Easton
  28. ↑ French welfare state reform: idealism versus Swedish, New Zealand and Dutch Pragmatism by James Angresano
  29. ↑ Welfare and Work in the Open Economy, Volume 2: Diverse Responses to Common Challenges, edited by Fritz W. Scharpf and Vivian A. Schmidt
  30. ↑ "Family Financial Assistance 1986–2002" (pdf).
  31. ↑ "The minimum wage". Department of Labour (New Zealand). Retrieved 7 May 2016.
  32. 1 2 3 4 New Zealand Politics in Transition edited by Raymond Miller Oxford University Press (NZ) 1997. p. 256-267
  33. ↑ "Government press release Working New Zealand". Ministry of Social Development.
  34. ↑ "A bill the poor will pay for". The New Zealand Herald. 11 June 2007.
  35. ↑ Social Policy and the Welfare State in New Zealand by Brian Easton


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