The number that should worry employers
As of July 2026, 194,157 New Zealanders are on a sickness or disability payment, roughly 5% of the working population, up from 4% a decade ago. The most recent Ministry of Social Development data shows 96,852 on Jobseeker Support with a health condition or disability, up 4.8% year-on-year, and 108,498 on the Supported Living Payment, up 3.6%. Both are still climbing.
Step back and the picture sharpens. At the end of March 2026, 409,575 people were on a main benefit, or 12.7% of the working-age population. That is roughly one in eight working-age New Zealanders outside the labour market through the benefit system. The political fight is over who signs the medical certificates. The real story for business is the workforce that isn’t there.
A shrinking pool, not just a rising bill
The fiscal side is real enough. The sickness and disability bill has grown to between $5 billion and $6 billion a year, with another $837 million spent annually on back-to-work schemes. But the more consequential number for employers is participation. The MBIE labour market snapshot for March 2026 put the labour force participation rate at 70.4%, down 0.3 points on the year, with underutilisation up 0.5 points to 12.9%. The effective labour supply is tightening at the same time firms complain about skills gaps and lean on migrant labour to fill them.
Nowhere is the waste clearer than among disabled workers. Whaikaha data for the June 2025 quarter showed a labour force participation rate of just 44.4% for disabled people aged 15 to 64, against 82.8% for everyone else, a gap of 38.4 points. Among 15 to 24 year olds, 45.9% of disabled young people were not in employment, education or training, more than four times the rate for their non-disabled peers. NZIER modelling published in February 2026 estimated that closing the disability unemployment gap alone would add $578 million to GDP. That is productive capacity the current system leaves on the table.
What is actually driving it
Mental health is the biggest single factor. Ministry of Health data cited by Stuff shows 23% of young New Zealanders now meet clinical criteria for high or very high psychological distress, up from 11% before the pandemic. In January 2025, Newsroom reported that psychological and psychiatric conditions were the single largest benefit category, with 46,920 people claiming for depression and anxiety, and that the 18 to 24 cohort had the largest five-year proportional increase at 58%.
There is also a recession echo. MSD’s own research finds that in a downturn, workers with borderline health conditions are the first to lose jobs, their conditions worsen, and they migrate onto health benefits. That matters because it means the trend is partly a lagging effect of the recent slump, not simply a welfare administration failure that a tougher process can switch off.
The certificate fight misses the point
ACT has made this its issue. On 29 June 2026 the party announced it would require all health and disability applicants to be assessed by MSD-appointed doctors rather than their own GP, with existing recipients reassessed in phases. ACT leader David Seymour framed the GP incentive bluntly, telling Stuff that a busy doctor facing a full waiting room is more likely to sign a certificate than send someone back to work.
The medical profession’s answer is more measured. Royal NZ College of GPs president Dr Luke Bradford accepted that some patients would benefit from independent review but noted that the majority of sickness claims are accurate and necessary, driven by cancers, operations and genuine incapacity. Whoever signs the form, the flow-through effect means a weak labour market keeps pushing marginal cases onto benefits.
The government, meanwhile, is losing the numbers game. RNZ reported on 17 June 2026 that it is projected to be 44% over its Jobseeker target, having aimed to cut numbers to 140,000 by 2030 only to watch them rise.
The bill employers already pay
Absence is the other end of the same problem. The Southern Cross and BusinessNZ Workplace Wellness study released in November 2025 found workers averaged 6.7 sick days in 2024, up more than 20% from 5.5 in 2022, at a cost of $4.17 billion a year. Not all of that is dead weight. As The Spinoff noted in November 2025, economists including Infometrics’ Gareth Kiernan questioned whether higher absence genuinely harms productivity when it keeps contagious, ineffective staff at home.
The honest conclusion is that reassessment tinkers at the margins. The structural drivers, an ageing workforce, strained mental health services, primary care under pressure and a labour market still climbing out of recession, are not fixed by who countersigns a claim. The NZIER prescription of accessible workplaces, flexible hours and assistive technology puts part of the solution squarely on employers. With the labour pool shrinking, the firms that figure out how to bring sidelined workers back will have an edge over those still waiting for the recovery to deliver them staff.
Sources
- More Kiwis are too sick to work. What can be done? (2026-07-06)
- Benefit Fact Sheets Snapshot – March 2026 Quarter (2026-04)
- Labour market statistics for disabled people – June 2025 quarter (2025-08-13)
- Valuing access to work: The 2025 update – NZIER (2026-02-17)
- Cardiac and mental illnesses fuel surging benefits bill (2025-01-29)
- ACT announces policy to make benefits a hand-up not a way of life (2026-06-29)
- Government projected to be 44 percent over Jobseeker Support benefit target (2026-06-17)
- Study Shows Kiwis Taking More Sick Leave, Costing Economy $4.17 Billion A Year (2025-11)
- New Zealanders are taking more sick days than ever. Is that a problem? (2025-11-06)