Fact 6: Making life hell on a benefit does not reduce poverty

  • Most people are on benefits only for a short time
  • There is no evidence that cutting benefits reduces dependency
  • An argument for back-to-work policies is that it is good for children to see their parents working but research has shown negative outcomes for older children when parents are pushed back to work
  • It is poverty, not dependency, that is the problem
  • In New Zealand we can afford to look after our own

Most people are on benefits only for a short time

Figures from the Ministry of Social Development for the quarter ending June 2013 showed that most (77%) of the people on the unemployment benefit and almost half of people receiving the sickness benefit receive it for less than one year. Relatively few people receive these benefits for more than four years (3% and 20% respectively).

People on the DPB and invalids benefit tend to receive it for longer periods, but this reflects the ongoing nature of certain disabilities, and childcare responsibilities, and isn’t evidence of benefit dependency.

In total, over all the main income-tested benefits:

  • More than a third receive a benefit for less than one year
  • Just under a third receive a benefit for 1-4 years
  • Only one eighth receive a benefit for 10 years or more. Many of these people would have significant long-term health issues.

There is no evidence that cutting benefits reduces dependency

Sometimes people think that higher benefits encourage people to become dependent on welfare and therefore the way to cut the number of people on benefits is to reduce the level of help available. However, there is little evidence for this, and in fact, a Norwegian study of families on welfare showed that the shortest stays on welfare are found in the most generous welfare systems. The evidence in New Zealand of the impacts of current benefit sanctions  on children and families is disturbing.

There is no factual foundation for the highly contradictory attitudes that say wealthy people need to be given more money through tax cuts to motivate them while people in poverty (such as those on benefits) need less money to motivate them by taking it away through lowering benefits.

Back-to-work policies aren’t necessarily good for children of beneficiaries

One reason often given for favouring back-to-work policies is the positive effect they are believed to have on children. However, there is no unequivocal evidence that pushing parents into work is good for children. For older children and teenagers, back-to work policies have consistently shown negative effects including low school activity, lack of participation in extra-curricular activities, emotional and behavioural problems, and poor health.

It is poverty, not dependency that is the problem

Poverty is a often a vicious circle: people in poverty (whether they are on low wages or on benefits) have fewer opportunities and resources, which in turn translates into less education, fewer job skills and an increased chance of needing benefits as adults. This poverty trap is frequently called “welfare dependency”. Welfare dependency is an ill-defined concept that is often referred to without any attempt to explain what it means. It implies that welfare benefits are some kind of “drug” that people in poverty are addicted to and the only cure is withdrawal! This attitude is based on moral judgments about the poor that say that somehow it is a person’s own fault that they become unemployed, sick, disabled, widowed or responsible on their own for the care of children.

What serious research that has been done has not been able to establish a causal link between poverty and welfare over time. The Childrens’ Commission has investigated the causes of child poverty in New Zealand in detail.  Most people receiving a benefit do not stay on a benefit their whole lives nor do their children. There is some research showing that children raised in families relying on benefits are more likely to rely on benefits as adults. But looking across a number of countries it cannot be proved that dependency creates poverty. There is plenty of evidence from around the world that shows increasing incomes for poorer families helps improve outcomes for children. In other words, the real problem is lack of income – low benefits and low wages.

In New Zealand we can afford to look after our own

Social development expenditure is a significant component of the Government’s annual budget.  Working-age benefits (Job Seeker Support, Sole Parent Support and Supporting Living Payment) account for at around $4.6 billion in 2013 or about 6.5% of total government spending. This compares to around $14 billion for health and $12.5 billion for education.

Yet, when you put this in context, it is around 2% of the total New Zealand economy as measured by Gross Domestic Product (GDP) and is projected to continue to fall in relation to total GDP over future decades (see Welfare Justice report, p.142).  New Zealand is also a considerably wealthier country than we were in the late-1930s at the end of the Great Depression when the universal social security system was established.

We can afford the current welfare system. A failure to ensure people have the resources they need to live with dignity promotes exclusion and hinders personal development and is likely to cost New Zealand even more in the long term.