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Benefit Sanctions: Help-but-hassle welfare reduces child poverty

A new report from the New Zealand Taxpayers’ Union shows the success of benefit sanctions, explains why efforts to make life on a benefit easier simply encourage a culture of welfare dependency and fraud, and exposes that more than one third of unemployment and single parent beneficiaries admit to failing on their obligation to seek employment.

Report cover

The release of the report, Benefit Sanctions, coincides with a Green Party campaign to remove sanctions for beneficiaries who don’t comply with associated obligations. The report also works as a submission to the Government’s working group tasked with providing recommendations to overhaul the welfare system.

Beneficiary advocates have good intentions, but their prescriptions – removing requirements to seek work and removing sanctions – are a social and moral failure. The Green Party’s policy to make life on a benefit will simply encourage a culture of welfare dependency and fraud.

Rates of welfare fraud are many times higher than most New Zealanders would expect or find acceptable under the current system. The report canvasses the evidence that easing up on sanctions and obligations for beneficiaries would dramatically increase fraud and dependency. That means driving up the cost of the welfare system for taxpayers and leaving less room in the Budget for other forms of social spending.

If the Government wants to reduce child poverty, it should encourage the unemployed and single parents back into work and off welfare.

Our report advocates a help-but-hassle approach that nudges beneficiaries back into work, leaving more to spare for those in genuine need.

If the Government took this approach, it could afford to be more generous, within existing budgets. The difference is that the money would be more targeted to those who most need it.

Benefit Sanctions is available at www.taxpayers.org.nz/benefit_sanctions and was written by Taxpayers’ Union research fellow Jim Rose.

Benefit Sanctions: Key Findings

  • The Green Party wants to remove sanctions on beneficiaries despite extensive evidence from data matching by MBIE of benefit fraud under the current system.
    • More than one third of unemployment and single parent beneficiaries admit to failing on their obligation to seek employment;
    • ten percent of single parent beneficiaries acknowledge living as man and wife; and
    • ten percent of unemployment beneficiaries work full-time.
  • Ministers, the Welfare Expert Advisory Group, and even the Ministry of Social Development are unaware of the extent of this fraud because MBIE failed to publish the 2012 report containing this data. The report was begrudgingly released three years later under the Official Information Act after an appeal to the Ombudsman.

  • The Government’s plan to remove sanctions for refusing to name the father will encourage many more single mothers on the benefit to not identify the father and make under-the-table arrangements.
    • Nearly 20 percent of single parent beneficiaries currently refuse to name the father and face sanctions.
    • About $186 million is currently deducted from benefits because the father is named and successfully chased for support.

  • Benefits conditional on seeking work are highly effective in moving parents into jobs that bring their children out of poverty with the support of Working for Families. A credible sanction for not looking for work increases job finding rates by 25 percent or more.

  • For the sake of taxpayers, any reforms must guard against abuse – especially in an ageing society where already-stretched budgets will only get tighter over time. No social safety net can successfully increase benefits and loosen eligibility if it fails to run a tight ship against abuse.

  • Marriage booms in Sweden, Canada and the US after sole parent benefit and widows pension reforms suggest a major fiscal risk from adopting Green Party-style relationship definition, which requires marriage, or two years living together.

  • The Greens’ fiscally-neutral costing of their policy is untenable: if the overseas experience is any guide, the number of sole parent beneficiaries will likely double under the Greens’ proposals, costing $1.1 billion.

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