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Reducing long-term welfare dependence

One of the Government’s priority results for Better Public Services is to reduce long-term welfare dependence. The Chief Executive of the Ministry of Social Development is leading work on this result with the support of the Social Sector Board cross-agency group. In February 2015, the Government set the target for this Result area to:

  • By June 2018, a 25 per cent reduction (from 295,000 people in June 2014) in the total number of people receiving main benefits, and an accumulated actuarial release of $13 billion in the long-term cost of benefit dependence.

This target replaces the target set in July 2012 of reducing the number of people continuously receiving Jobseeker Support for more than 12 months by 30 per cent, from 78,000 in April 2012 to 55,000 by June 2017.

People receiving main benefits includes all working age recipients aged 18-64. It includes those receiving: Jobseeker Support – Work Ready; Jobseeker Support – Health Condition and Disability; Sole Parent Support; Supported Living Payment – Health Condition and Disability; Other working age benefit recipients (excluding those receiving Jobseeker Support – Student Hardship).

What we have achieved so far

Since the Better Public Services targets were set in 2012 (and refreshed for Result 1 in December 2014) we have made good progress in reducing welfare dependence. It is important to consider the reduction in welfare dependence not purely as a total number but also as a percentage of the total population, as it shows any reductions in the wider context of New Zealand, and is less subject to skewing due to population changes.

Currently the proportion of the working-age population dependent on welfare is the lowest since 2007 and the number of beneficiaries is at the lowest level it has been since December 2008.

The greatest reduction in welfare dependence has been by sole parents (receiving Sole Parent Support). Initial reductions have been linked to the welfare reforms introduced progressively from 2012, the introduction of more intensive case management, and greater access to employment and training-related supports.

In late 2014, the target for Better Public Services Result 1 was expanded to include a target relating to reduction of the long-term cost of benefit dependence: to achieve an accumulated actuarial release of $13 billion by June 2018.

The accumulated actuarial release for the period from 30 June 2014 to March 2017 is $4.7 billion. Welfare reform policy and operational changes have made significant progress towards the Better Public Services Result 1, with the number of beneficiaries falling to the lowest level in eight years. Furthermore, the welfare system’s estimated future cost has reduced by $12 billion since the Better Public Services targets were introduced in 2012.

The beneficiary count and actuarial release forecasts are sensitive to economic conditions, population and demographic changes, and Ministry of Social Development’s performance in supporting clients into sustainable employment.

Why this result is important

We have made good progress, with the number of beneficiaries now at its lowest level since 2007. Sole parents and registered jobseekers have had the greatest success in entering the workforce.

However, we still have work to do. This is why we have set a target to reduce the number of working-age people on benefits by 25% and achieve an accumulated actuarial release of $13 billion by June 2018.

Over $7 billion a year is spent on benefits for working-age people, and more than 112,000 New Zealanders have spent at least five of the last 10 years on a benefit. Being out of paid work and on a benefit long-term can lead to poverty, social isolation and deteriorating overall health.

Children growing up in benefit dependent homes are more likely to experience negative outcomes, such as poorer educational achievement and ending up on a benefit themselves. This is why a large focus for us is on tackling intergenerational welfare dependency.

What we are doing to reduce long-term welfare dependence

We have three overarching strategies for supporting people off benefits and into paid work to reduce long-term welfare dependence:

  • We will invest in known effective employment interventions for high-liability clients
  • We will trial new interventions where there are no known effective interventions
  • We will continue to improve business-as-usual activities.