The government’s refusal to take up recommendations by the Welfare Advisory Group that would have incentivised people on a benefit in seeking part-time work is bizarre and mean-spirited, writes Moira Lawler of Lifewise
Who would work for $2 an hour?
That’s what vulnerable people returning to work after long periods living on the margins are expected to do under our welfare system’s harsh abatement rate scheme.
And despite the recent announcements, the government’s welfare reform will do little to help them escape the poverty trap. The social development minister Carmel Sepuloni said the coalition will raise the abatement thresholds for earnings from part-time work from $80 to $105 a week by 2023.
This is the amount someone on a benefit can earn through working part-time before affects their benefit.
However the threshold must be set at a level that not only makes it worthwhile to work, but enables people to build up their work over time.
It is nowhere close right now, and the promised increase is window dressing.
Let’s remind ourselves that the welfare system is intended to be a safety net to keep our most vulnerable out of abject poverty. It’s supposed to help people get back on their feet.
For some that will be a rapid return to full time work.
For others childhood trauma, and disadvantage at every turn has led to lives of poverty, insecure employment and unstable housing.
Lifewise works with people who have experienced homelessness, often multiple incidents spanning decades. They have survived for much of their lives outside the formal economy, on the fringes of society. They haven’t been idle however. People experiencing homelessness have to use every skill in their tool kit to maintain relationships, stay safe, live on nothing, and eke out an existence invisible to many.
Once housed people are keen to use their skills to make a contribution to community, to help others, and to increase their income. They are after all surviving on a Job Seeker Benefit of around $218 a week.
The current abatement threshold is holding back people in the welfare system and trapping them in long-term unemployment and poverty.
A single person on a jobseeker allowance can earn up to $80 a week, or around four-and-a-half hours of work at the minimum wage, in addition to their benefit.
An opportunity to work part time is of huge value to people who have been homeless. It helps people learn new skills, and helps prevent isolation, getting people out of their houses and , active in their communities.
It also reduces reliance on hardship grants and emergency payments – a demoralising process for people on benefits and a huge expenditure for government. But if they work any more hours or make any income over $80, their benefit is savagely cut back. Every dollar above $80 a week earned leads to a 70-cent reduction in their benefit.
Shane, a middle-aged man with a history of some manual labour before becoming homeless, who is on jobseeker support of $218.98, gets four and a half hours work at a local company he makes $80 before tax in addition to his benefit.
If he then proves to be a reliable worker and his boss offers to give him two full shifts – 12 hours a week – he will earn around $200 extra before tax. But because of the abatement of his benefit, he will only keep an extra $15 after tax for another seven and a half hours of work: less than $2 an hour.
Every week he has to account to his case manager for his income and hours worked, and any mistake (whether by the client or Work Income) could lead to clawbacks from future benefit payments or even the suspension of his jobseeker support.
Just to work a few hours he has to deal with the same kind of red tape that a small business owner does filing provisional tax and GST, estimating his income ahead of time, all for an extra $15 a week.
For Shane, like many whanau Lifewise works with, it just doesn’t seem worth it. But if he can’t do the extra shifts, his boss may not keep him around just for four hours a week.
The system wasn’t intended to work like this.
The current threshold of $80 was set in 1986. At that time $80 was about 15 hours’ pay at the minimum wage, or two full days of work.
That’s the kind of regular, habit-forming work that can provide a genuine pathway off a benefit and into fulltime jobs. The corresponding level now would be about $260 a week, at the current minimum wage of $17.70.
However, the government will not be adjusting the thresholds so that a person on a benefit can work for two days a week, as was recommended by the Welfare Advisory Group.
Instead, they have announced an increase over the next four years to $105 a week, so that a person on a benefit will still be able to work the current four and a half hours a week, as they can now – despite 33 years of wage and price inflation.
It’s particularly ironic, since Sepuloni has also announced extra Work and Income staff to help people find work. Moving people who can work into work is a laudable the goal, but over the past three decades it has become less and less worthwhile for those same people to increase the amount of part-time work they do as they build towards a full-time job.
This might look like a small issue and it’s easy to get lost in the technicalities.
But to prevent people who have suffered years of disadvantage from clawing their way out of poverty, hour by hour, is just mean spirited. People have a right to useful employment. Instead people wanting to work are being held in poverty against their will.
We’re calling for an immediate lift in the abatement level to $150 a week, as recommended by the Welfare Advisory Group to go some way to addressing this historic anomaly.