Last week I got quite a response to my post on crime and access to welfare, so I thought I would write a little more about why many beneficiaries can’t get ahead financially without breaking the law, however hard they may try.
I’ve had a look at what happens to a single sickness beneficiary aged over 25 when he or she engages in part time employment. I’m using this example because it has the simplest benefit abatement regime, and because many sickness beneficiaries will never find themselves able to work full time and go off benefit completely.
So here is the graph of “in the hand” total income from both benefit and earnings sources against gross income earned on top of the benefit:
Up to $80 a week earnings on top of the benefit, the beneficiary sees a genuine improvement in the money he or she has in the hand each week. But once he or she gets past $80 a week, he or she is left with less than 15 cents out of each additional dollar earned. And this continues until the benefit is reduced to zero, which in this case happens at an income of $362 a week. In many cases it is probably not enough to pay for the additional costs, such as transport and lunches, incurred by taking on more work.
It is a poverty trap (the flattish part of the graph I’ve put the big red ring around), and for a sickness beneficiary who cannot work full time there is no way out of it that is lawful. The same applies to domestic purposes and invalid’s beneficiaries whose circumstances mean they cannot work full time, although the abatement rates and cut-in points are different.
So much for John Key’s and Paula Bennett’s “relentless focus on paid work” as being the route out of poverty for beneficiaries.
Unless the benefit abatement regime is reformed, it will result only in the harassment of many beneficiaries into trying to find jobs that are not there. It will not improve at all the lives of the few who can find a suitable job, and it will continue to act as an incentive for them to engage in illegal activities, such as dealing drugs or working but not declaring their income, in order to make ends meet.