Louise Upston and Christopher Luxon speak to media about National's plan for Jobseeker beneficiaries. Photo / Michael Craig
Modelling obtained by the Herald reveals that expected time on Jobseeker and other main benefits has risen sharply in the past four years, Alex Spence reports.
Government estimates of the time beneficiaries will spend on income support have risen sharply, with recipients of the main Jobseeker payment now expected to spend an average of 13 years on a benefit, according to modelling obtained by the Herald.
The estimated time that work-ready Jobseeker recipients will spend on income support until they reach retirement age has jumped by 23 per cent since 2019, amid a “worrying” slowdown of the benefits system that could strain government finances and trap thousands of people in poverty.
Long-term estimates for people on youth benefits and sole-parent support have increased even more starkly. Hundreds of disadvantaged teens are now expected to spend virtually their entire working lives on a main benefit, at a cost of nearly $1 million each in future payments, according to modelling by actuaries Taylor Fry for the Ministry of Social Development.
In total, Taylor Fry estimated that 626,000 New Zealanders who received a benefit in the last year will collectively spend another 6.43 million years on income support.
The Herald obtained the actuaries’ reports for the past five years, which have not been published until now, under the Official Information Act. They reveal that estimates of time on benefits were increasing before the Covid-19 pandemic – mainly because the rate at which people exit the system has slowed significantly – and are expected to worsen as unemployment rises.
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.”
The reports also said:
Taylor Fry’s social outcomes estimates are not official statistics but provide the Government with a view of what may happen to the benefit and public housing systems if current policy and social conditions persist.
MSD said the modelling is “useful” and “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”.
Taylor Fry was first hired by MSD in 2011 when Sir John Key’s National Government was in power. For several years, Taylor Fry reports were published annually on MSD’s website and occasionally cited by ministers as evidence in support of welfare reforms.
After Labour took over in late 2017, the modelling continued to be produced annually but the reports were no longer published on MSD’s website and largely disappeared from public discussion. Carmel Sepuloni, the Labour minister responsible for MSD between October 2017 and November 2023, said she did not recall being briefed on the research by officials while she was in government.
The research resurfaced in Wellington policy circles in December when Steven Youngblood, a former adviser to MSD’s chief actuary and who is now a policy consultant, posted snippets from the latest modelling on LinkedIn. The Herald then obtained the full reports for the years 2019 to 2023 from MSD.
According to the reports, since 2019 there has been a “material” change in the benefits system that is independent of the sudden influx of claimants brought about by the Covid-19 pandemic. The change is primarily because people are not coming off benefits as quickly as they used to, though there has also been an increase in former beneficiaries returning to the system.
By the end of 2019, “exit rates” for the main Jobseeker benefit had fallen to a level not seen since the peak of the Global Financial Crisis, Taylor Fry said, even though unemployment was relatively low.
Covid-19 had temporary effects on movements in and out of the system but these have passed, and the system returned to pre-pandemic trends. Exit rates are expected to continue falling as the labour market contracts.
“The exact reasons for these changes are unclear,” Taylor Fry said, but the implications of its modelling are less ambiguous. For the Government, supporting people on benefits longer will mean additional fiscal costs, while for beneficiaries and their families, longer stays on welfare are likely to have profound impacts on future earnings and wellbeing.
Taylor Fry’s analysis suggests people on benefits tend to have lower incomes, worse life satisfaction and more contact with police and mental health services than they otherwise would. Many have precarious family, living and financial situations that could be compounded by longer periods out of the workforce and on public assistance.
Youngblood said he is most concerned about the teens who are expected to be locked in to the system for decades. In many cases, those youths have endured difficult circumstances on the route to adulthood and have limited support and opportunities to independently improve their situation. And they may now be supporting children of their own.
“The modelling illustrates in stark terms how some of our most vulnerable young people struggle to escape poverty,” Youngblood said. “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.”
Fleur McLaren, group general manager insights at MSD, said the department is “concerned by any projected increases in time on benefit” and is working with the new coalition Government to “implement the Minister’s priorities in relation to supporting clients into employment”.
Upston, the Social Development Minister, said the modelling will help the department deliver better interventions earlier to people who need it most. Since returning to government, National has revived the “social investment” approach that it adopted when it was last in government in the 2010s.
Social investment promises to improve public services through prudent spending based on rigorous data analysis, although critics say it puts too much emphasis on fiscal outcomes and could be a pretext for cuts to public services and privatisation.
“I believe we need a different approach to reducing benefit dependency in this country,” Upston said, “particularly for young people who have been failed by the previous Government’s approach.
“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.”
Sepuloni, Labour’s social development spokeswoman, said: “What these trends show are an absolute need to create and maintain sustainable pathways to employment … National have talked a big game in opposition and now they need to show us their plan to get people into work.”
Alex Spence is an investigative reporter and feature writer who tends to focus on social issues such as health and mental health. He joined the Herald in 2020 after 17 years in London where he worked for The Times, Politico, and BuzzFeed News. He can be reached at alex.spence@nzme.co.nz or by text or secure Signal messaging on 0272358834.
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