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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).

An ‘actuarial release’ is an estimate of the change in long-term liability of the benefit system resulting from changes in the number of beneficiaries and their likelihood of long-term benefit receipt. The measure attempts to isolate the impact of collective Government activity on beneficiary numbers. Adjustments are made in the estimate to remove the impact of interest and inflation rate changes on the liability and other factors beyond the control of Government activity. This measure will be first provided in 2016 following the release of the annual Taylor Fry valuation of the benefit system for the 2014/15 financial year.

Snapshot: December 2015

Main benefit numbers continued to decrease in the 12 months to December 2015

  • The number of main benefits recipients decreased by 6,175, or 2.1 per cent from 295,136 to 288,961. This decrease was largely driven by decreases in Sole Parent Support and Jobseeker Support.
  • We have released $2.5 billion of the $13 billion future liability. Reductions in the Sole Parent cohort contributed the most to the release.

Why this result is important

Reducing long-term welfare dependence is about supporting people to better their lives, managing the future cost of the benefit system, and supporting our economy by ensuring we have a skilled and productive workforce.

Most people who receive a benefit, do so for only a short period. However, there are other people who are missing out on the opportunity to better their lives, and those of their families, through work.

Being out of paid work and on a benefit for extended periods increases the risk of poverty, social dislocation and deteriorating overall health. It can also have negative effects on the children of people on a benefit long-term.

The lifetime costs of paying benefits to people on benefits at the end of June 2014 was around $69 billion. This cost is concerning and it is only a portion of the entire economic and social price New Zealand pays as a result of lost productivity and negative social impacts.

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:

  • working more closely with a wider range of clients to break the pattern of welfare dependence
  • investing our resources smarter to get the best results
  • improving our model of service delivery.