Benefit dependency high but reducing

A Stuff article Future welfare bill ‘cut by $7.5b focusses on reductions in spending but it includes some sobering statistics on inter-generational welfare dependency.

Among some of the most startling statistics, are figures which show the effect of inter-generational welfare dependence.

New methods of data collection have allowed the ministry to track trends of young beneficiary recipients whose parents have also collected welfare.

The limited history of the data means only welfare recipients up to the age of 25 could be tracked.

Notable statistics:

  • 75% of the liability is attributable to clients that first entered benefits under the age of 20.
  • 74% of all beneficiaries up to the age of 25 had a parent on the benefit while they were a child
  • 35% had a parent on benefit throughout their teenage years
  • 88% of Youth Benefit clients came from families where one or more parent was also on a benefit
  • More than half of those had an “intensive beneficiary” as a parent – one who was on a benefit for more than 80 per cent of the time their child was aged 13-18
  • a client whose parent was intensively in the system during ages 13-18 was then 48% more likely to remain on JS-WR (job seeker – work ready) after a year compared to those clients matched to a non-beneficiary parent. Their exits were also less sustainable; on leaving the system, they were 11% more likely to be back on benefits within two years.

However these figures are dropping, with Jobseekers down by 8% overall since new initiatives were implemented in 2012 (and the economy improved).

Reforms have helped slash the forecast cost of New Zealand’s total welfare bill by $7.5 billion within the past year, a report says.

The estimated liability of the welfare system is now $69b, down from $76.5b in 2013, according to the latest valuation of the future costs faced by the Ministry of Social Development.

Based on New Zealand’s current situation – which includes rates of employment, inflation and trends of decreasing welfare dependence – that is forecast to drop a further $5.3b by 2019, according to independent consultants Taylor Fry.

From the Key Findings:

Welfare Reforms and Future Focus Impacts included in the Valuation

  • Impact from Welfare Reform changes that occurred from July 2013 onwards, including:
    – Simplification of the benefit structure in July 2013
  • Continuing Impact from Welfare Reform changes that occurred from July/August 2012 onwards, including:
    – implementation of the Youth Service in August 2012
    – introduction of Job Streams in July 2012
    – Bill 1 changes to work expectations for sole parents, partners of main beneficiaries, widows, and women alone effective October 2012
    – A new service delivery model, with the level of case management tailored to clients’ likelihood of long-term benefit receipt
  • Continuing impact from Future Focus changes from September 2010 onwards:
    – a new requirement for Unemployment Benefit (UB) recipients to reapply for the benefit and complete a comprehensive work assessment interview every 52 weeks;
    – introduction of part-time work obligations for parents with youngest child 6 or older
    – new budgeting obligations for clients who repeatedly apply for hardship assistance
  • Additional Future Focus changes from May 2011 to:
    – require Sickness Benefit (SB) recipients to attend a reassessment interview with a case manager after 52 weeks
    – require new SB recipients to undergo additional medical assessment after 8 weeks

Stuff reports that about 30% of the reduction is due to Government/Ministry initiatives:

Of the $7.5 billion reduction, $2.2 billion was directly attributed to reforms within the ministry – both legislative and policy changes, as well as operational changes.

The rest was down to factors outside the ministry’s control, which included the falling rate of unemployment that accounted for a further $2.2b drop. It was forecast that more people would come off benefits and there would be less people applying for them.