New Zealanders Staying on Government Benefits for 13 Years on Average: Modelling

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Young people who are unemployed today could spend their whole lives living on a government benefit, actuary predicts.

Unemployed people in New Zealand who are given a government benefit usually remain on it for an average of 13 years, startling new modelling has revealed.

It comes as the level of unemployment reaches four percent. The number (seasonally adjusted) of unemployed people rose to 122,000, up 3,000 from the previous quarter.

Underutilisation, a broad measure of spare capacity in the labour market, also increased to 10.7 percent in the December quarter.

Called “Jobseeker,” the benefit is touted as primarily a short-term support for people between jobs.

But new government modelling suggests recipients of the main Jobseeker payment are now expected to spend an average of 13 years on state support—a jump 23 percent since 2019. Actuarial firm Taylor Fry prepared the estimates for the Ministry of Social Development (MSD).

The outlook for people on youth benefits and sole-parent support is even worse. Hundreds of young people are now expected to spend virtually their entire working lives on a benefit, at a cost of nearly $1 million per person in future payments.

Rate Has Been Increasing for Some Time

And blame can’t be laid at the feet of COVID-19, as estimates of the likely time people would spend on benefits were increasing before the pandemic, mainly because the rate at which they exit the system has slowed significantly, and there has also been an increase in former beneficiaries returning to the system.

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In total, the 626,000 New Zealanders who received a benefit in the last year will collectively spend another 6.43 million years on income support.

Social Development and Employment Minister Louise Upston said: “The trends in these reports are worrying. They confirm the fears I raised in opposition that the previous Government took the foot off the accelerator when it came to shifting people off welfare and into work.

“We know the longer a young person remains on welfare, the lower their chances are of finding employment and the more likely they are to suffer both financially and socially.”

Employers Warn Worse is Yet to Come

But employers are predicting that unemployment will continue to rise, meaning even fewer jobs become available.

Employers and Manufacturers Association Advocacy head, Alan McDonald, said many members had called the association about restructuring and redundancies in late 2023. “That hasn’t probably worked its way into those numbers yet, and that’s what I think we’ll see when the next quarter numbers come out for the start of this year,” he said.

MSD described the modelling as “part of a range of research that we draw on to inform our employment strategies, to target investment and to understand the characteristics of people receiving income and housing support.”

Steven Youngblood, a former adviser to MSD’s chief actuary who is now a policy consultant said: “The modelling illustrates in stark terms how some of our most vulnerable young people struggle to escape poverty. If we want young people to thrive in our communities and go on to live happy and productive lives, we need to ensure our systems aren’t working against them.”

Nor are the unemployment figures good news for those with a mortgage. Analysts say that because the Reserve Bank of New Zealand was predicting 4.2 percent in its November forecast, it’s unlikely to opt for an early interest rate cut.

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