The Child Poverty Action Group today warmly welcomed the Labour Party’s policies to reinstate the Training Incentive Allowance (TIA) for sole parents undertaking tertiary level study and to make part-time paid work more worthwhile for families on benefits – but warned that Labour’s pledges would not help many of the children in entrenched poverty.
“For years, CPAG has been calling for this policy on the TIA and for abatement thresholds to be raised significantly and then indexed to wages,” says CPAG economist Susan St John. “So it’s good to see these vital and sensible policies announced today.”
Parents are best-placed to make decisions for their own families, and CPAG believes the policies are likely to empower and increase the agency of those parents who are in a position to consider training or part-time work.
“But there should be no delay. The policies need to be implemented immediately as a response to the deepening recession,” says St John. “Sometimes Labour announces social welfare policy nearly a year before it’s brought in. This cannot happen in this case; these employment-support measures must be brought in promptly, as was done with the wage subsidy and the COVID-19 Income Relief Payment.”
OPINION: Last week the Reserve Bank printed $1.4 billion. That’s the equivalent of 116 Green Schools at the prevailing rate. This was a typical week.
No one cared. There were no headlines. No one asked for Adrian Orr to resign.
$1.4b is the equivalent of $280 for every New Zealander. In a single week.
Did you see any of that money? Probably not. So you may wonder, where is all of this cash going?
Orr hinted at the effect of this spend-up at a speech to the Victoria University School of Government last week.
“We acknowledge that lower interest rates inflate asset prices, which is a transmission mechanism that monetary policy works through. Higher house prices, for example, make people feel wealthier, more inclined to spend, which supports the economy.”
Orr’s money-printing programme is making the rich richer in the hope that they will spend some of this cash on frivolities like restaurant meals and herbal supplements, thus benefiting those minions who provide such services who are able to retain their jobs.
This is trickle-down economics.
By printing cash, Orr is allowing Wellington to spend money without the irritating detail of taxing or borrowing it. $1.4b on an annualised basis is $72b, about 80 per cent of pre-Covid government spending.
Incomes are scheduled to be cut by up to $63 a week for many of New Zealand’s lowest-income households in less than a month, but Child Poverty Action Group (CPAG) and Auckland Action Against Poverty (AAAP) are both urging the Government to immediately raise family incomes instead, as an ongoing crisis-response measure.
This is a “high-income nation”: No one should be worrying about how to afford the essentials.
High income nations like ours can afford a decent life for all, where every whānau can thrive, not just survive. But here, for many, it’s not currently being realised. Too many young people live in households where they feel hopeless.
Read our full document below for key messages, and for questions to challenge political candidates with this election.
White New Zealanders are much more likely to get a new, more generous welfare payment introduced in response to Covid-19.
The Government was warned that it was creating a “two-tier” welfare system which could potentially worsen racial inequality when it introduced the higher, tax-free, more accessible benefit in May.
The Covid Income Relief Payment (CIRP) of $490 a week was worth nearly twice as much as a single person’s unemployment benefit. Unlike most existing benefits, it was also available to people whose partners were earning – as long as that partner was making no more than $2000 a week.
When introduced, the Government said it was to “cushion the blow” for people who had an unexpected, sharp drop in income – but denied it was middle class welfare.
Welfare advocates said the policy gave the impression that long-term beneficiaries were less deserving than middle-class people who had just lost their jobs during the pandemic.
Maori households are over-represented in the long-term beneficiary category, and the National Party said that making the new benefit permanent could worsen racial inequality in the welfare system.
Ministry of Social Development (MSD) data released last week gives a snapshot of who has received the Covid Income Relief Payment so far. European New Zealanders (43 per cent) were claiming it at nearly three times the rate of Maori (16 per cent).
That contrasts with the less generous unemployment benefit. In the period since Covid arrived in New Zealand, Maori and European New Zealanders have received Jobseeker Support at a similar rate (35 per cent).
Auckland Action Against Poverty advocate Kathleen Paraha said beneficiaries she worked with all felt they were being “ripped off” when the Covid relief payment came in.
“It’s just not fair – it’s a two-tier thing,” she said
Paraha, who is herself on the Supported Living Payment, said beneficiaries constantly battled to get grants for food and other costs because core benefits did not pay enough.
Her organisation had applied for food grants for 16 people on Friday alone – all were declined.
Mangere East Family Services CEO Peter Sykes said it was particularly frustrating for long-term beneficiaries who were competing in the same job market as newly jobless.
“The core poor remain poor and remain quite distrustful of the system,” he said. “Now, all of a sudden, people can just send an email and get a payment. Most of our community doesn’t believe it.”
Many of the people in his suburb were casual workers in hospitality and home care and did not qualify for the Covid payment when they lost their jobs. The payment has a minimum hours requirement.
Social Development Minister Carmel Sepuloni stressed that the Covid payment was a short-term measure for an unprecedented crisis. Furthermore, many people found they were better off on a benefit than the temporary payment because of additional support they could be eligible for.
“People take a number of factors into account when applying for support,” Sepuloni said.
“For example their ability to work part time, termination pay, or they may consider the stability of an established payment like a benefit, instead of going on to a temporary payment like CIRP.”
Another rationale for the Covid payment is that those who have lost their jobs because of the pandemic are more likely to be mortgage-holders. If a large number of people defaulted on their mortgages it could significantly increase the economic impact of the pandemic.
Max Rashbrooke, a researcher who specialises in economic inequality, said there could be a potential upside to the new Covid payment. In countries where people were paid more in benefits if they earned more, there tended to be more support for the broader welfare system.
“Increased payments for middle-class households can lead to more political room to increase payments to genuinely poor households,” Rashbrooke said.
“It’s plausible that if they feel like they’re getting more out of the welfare state, they are then more likely to feel some sense of ownership over the system and feel more kinship with other people who are receiving welfare payments. That’s the optimistic take, from an inequality point of view”.
The Government lifted core benefits by $25 a week (13 per cent) in response to Covid, though that was at the bottom end of the 12-47 per cent increase recommended by a Welfare Expert Advisory Group last year.
The expert group found that core benefits were between $100 and $300 a week lower than recipients needed to pay their bills and live with dignity.
How to sell the message that income and wealth inequality in Aotearoa needs to be reduced
The focus must be on the key message ie the problem, inequality. Inequality is the gap between the rich and the poor. The increase in inequality in NZ over the last 35 years has happened because our politicians built an economy that delivered the bulk of its rewards to those who already had plenty and delivered an unfair proportion to those at the bottom ie the low waged and beneficiaries.
CPAG urges an immediate policy extension to allow all low-income families to have the full Working for Families support (i.e. making the In Work Tax Credit available to all families including recipients of benefits)
It would deliver at least another $72.50 a week to the very worst-off children in low-income families to help parents keep their children safe and well. The cost (around $450m) is about what could be saved from requiring superannuitants to opt-in to the winter energy payment. It would also accord with the principle of valuing the activities of caregiving and volunteering as work, greatly simplify child payments, and importantly reduce the worst child poverty in a highly cost-effective way