Better Public Services: Reducing long-term welfare dependence
Why is this important for New Zealand?
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 cost of paying benefits to working-age people is now over $8 billion a year, with much higher lifetime costs. The cost alone is concerning, but 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.
Reducing long-term welfare dependence is about supporting people to better their lives, managing the Government's future financial liability and supporting our economy by ensuring we have a skilled and productive workforce.
How will we know we are achieving this result?
The Government's target for this result is to:
- reduce working age client numbers by 25% to 220,000 from 295,000 as at June 2014, and an accumulated actuarial release of $13 billion by June 2018.
Note: 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.
The old target of reducing long term Jobseeker Support numbers to 55,000 by June 2017 is replaced by the new target.
Figure 1 shows the number of working age people (18-64-year-olds) receiving a main benefit (excluding Jobseeker Support - Student Hardship) from December 2013.
MSD estimate that $2.5 billion of the $13 billion actuarial release target has been achieved. The result illustrates the liability saving of working with clients at risk of welfare dependency and matching them with sustainable employment. The figure below shows the estimated actuarial release to date. The actual figure will be confirmed by Taylor Fry in 2016.
You can see the datasets at data.govt.nz.
What the data tells us
At the end of September 2015 286,939 working age people were receiving a main benefit. This was largely driven by decreases in Sole Parent Support and Jobseeker Support numbers.
MSD estimate that $2.4 billion of the $13 billion actuarial release target has been achieved. The result illustrates the liability saving of working with clients at risk of welfare dependency and matching them with sustainable employment.
What are we doing to achieve this result?
As part of Welfare Reform, the Government will actively promote participation in paid employment and give people the support they need to take on paid employment.
In addition to a stronger work-focus for more people, achieving this result will require an integrated cross-agency approach that addresses the causes of long-term welfare dependence.
We have three overarching strategies for reducing long-term welfare dependence:
- we will work with a wider range of clients to break the pattern of welfare dependence
- we will invest our resources smarter to get the best results
- we will improve the model of service delivery.
Read the Reducing Long-term Welfare Dependence Result Action Plan at www.msd.govt.nz/about-msd-and-our-work/work-programmes/better-public-services/long-term-welfare-dependence/index.html