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Elevate Magazine
August 19, 2024

New Zealand’s Benefit Sanctions: A Necessary Measure? Or a Step Too Far?

traffic light

Last week, the government introduced significant changes to the social welfare system, sparking a heated debate about the balance between encouraging job-seeking behaviour and supporting vulnerable populations. With the implementation of a new “traffic light” system and stricter sanctions, the government aims to reduce welfare dependency. However, critics argue that these measures may exacerbate poverty and further marginalise those in need.

The New Era of “Traffic Light” Welfare Sanctions

At the heart of the government’s reforms is the introduction of a traffic light system designed to monitor and enforce compliance among beneficiaries. This system categorises individuals receiving Jobseeker Support and other related benefits into three colour-coded tiers based on their adherence to job-seeking obligations:

  • Green: Beneficiaries who meet all their obligations remain in this category, with no changes to their benefit.
  • Orange: A first or second failure to meet obligations places individuals in the orange category, where they are given five days to resolve the issue. Failure to do so escalates their status to red.
  • Red: At this level, beneficiaries face significant sanctions, including benefit reductions, suspension, mandatory money management, and enforced community work experience.

Starting in 2025, additional sanctions will be introduced, including a money management system that channels half of a recipient’s benefit onto a card restricted to essential purchases, and a community work experience requirement. These measures are intended to provide alternatives to direct financial penalties, particularly for first-time offenders and those with dependent children.

The Government’s Justification for Stricter Sanctions

Luxon’s Social Development and Employment Minister, Louise Upston, defends these reforms as necessary to prevent long-term dependency on welfare. Upston has emphasised that the welfare system should not be a “drag net” that traps individuals in perpetual dependence but rather a safety net that temporarily supports those in need while encouraging them to re-enter the workforce.

According to the coalition government, these new measures will clarify the consequences for non-compliance and ensure that beneficiaries are actively seeking employment. Upston has pointed to the increasing number of beneficiaries on Jobseeker Support—up by 70,000 under the previous government—as evidence of the need for stricter enforcement. She argues that “almost two-thirds of the people receiving this benefit have been for over a year” without taking sufficient steps to find work, thus justifying the need for tougher sanctions.

Criticism and Opposition

The reforms have necessarily faced significant opposition from opposition parties, advocacy groups, and social welfare experts. Labour has condemned the changes as punitive and counterproductive, arguing that they will only serve to keep people on benefits for longer and push more children – those whose parents will be affected by the sanctions – into poverty. Hipkins has criticised the government for focusing on sanctions rather than job creation, stating that there are currently around 18,000 fewer jobs available than when the coalition took office. He described the sanctions as showing the government’s “willingness to kick people while they’re down” rather than confer any meaningful positive impact.

The Green Party’s social development spokesperson, Ricardo Menéndez March, went further, accusing the government of “waging a war on the poor.” He argues that compulsory money management and community work sanctions are ineffective and degrading. “Louise Upston’s making a huge range of assumptions on people’s lives and circumstances,” he said, “and the work-for-dole type schemes are a reheated, failed approach that didn’t work in the ’90s and won’t work now. ”Menéndez March has also highlighted the lack of evidence supporting the effectiveness of such sanctions, citing research that shows they do not significantly improve employment outcomes and instead contribute to increased hardship for low-income families.

Advocacy groups such as Auckland Action Against Poverty have echoed these concerns, warning that the new sanctions will exacerbate stress and financial insecurity among already vulnerable populations. Brooke Pao Stanley, the group’s coordinator, has called for a more compassionate approach, advocating for a “high trust model” at Work and Income and livable incomes for all individuals, rather than punitive measures that “[continue] to punish communities that are already being punished.”

The Controversial Payment Card and Community Work Sanctions

One of the most contentious aspects of the new sanctions is the introduction of a money management system that limits how beneficiaries can spend their payments. Under this system, 50% of a recipient’s benefit will be loaded onto a card that can only be used at approved stores for essential items such as food, clothing, and household goods. Critics argue that this approach undermines beneficiaries’ autonomy and dignity, effectively treating them like children who cannot be trusted to manage their finances.

The community work sanction, which requires beneficiaries to complete work experience at a community organisation, has also been met with scepticism. Opponents argue that this requirement is a “reheated” version of the work-for-dole schemes that were widely criticised in the past for failing to lead to meaningful employment. They contend that such programs often place additional burdens on beneficiaries without providing them with the skills or opportunities needed to secure long-term jobs.

What Lessons Can We Learn From Other Jurisdictions?

New Zealand is not the first country to implement such sanctions-based welfare reforms, and the outcomes from other jurisdictions offer a mixed picture. In the United Kingdom, the introduction of the Universal Credit system aimed to simplify benefits and encourage job-seeking, but it has been criticised for pushing many into poverty and exacerbating mental health issues. Similarly, in Australia, a similar cashless debit card program was scrapped after it was found to be ineffective in meeting its objectives.

These international experiences raise questions about the potential consequences of New Zealand’s new welfare sanctions. While the government argues that these measures will lead to more people finding work, critics warn that they may instead increase poverty and social exclusion, particularly for those already struggling to make ends meet.

The Future of New Zealand’s Welfare System

As New Zealand prepares to implement these sweeping welfare reforms, the debate over their effectiveness and fairness is likely to intensify. The government remains steadfast in its belief that stricter sanctions are necessary to reduce welfare dependency and encourage job-seeking. However, the strong opposition from political parties, advocacy groups, and social welfare experts suggests that the path forward will be fraught with challenges.

Such heated debate over the new welfare sanctions has raised the question of what exactly is the core function of the jobseeker benefit? Is it there to address the underlying causes of poverty and economic hardship in New Zealand? Or is it there merely as a safety net to provide for people that can’t work, but are striving to regain their financial autonomy? And subsequently, with regard to the payment card system, to what extent should someone on welfare cede their right to financial autonomy while they are on welfare?

If we take the stance that the goal of the jobseeker to benefit is, ultimately, to provide a temporary safety net for those who can’t work, with the view to enabling those people to regain their financial freedom as soon as possible, then Luxon’s government might well have a strong case for these sanctions. New Zealand undoubtedly faces huge concerns for the number of people facing economic hardship, but is it the benefit’s job to address those concerns? Or should we focus more effort on addressing the root causes of poverty in New Zealand and let the benefit simply provide a safety net while we do so?

For now, the success of these reforms will depend on their ability to balance the dual goals of encouraging compliance with welfare obligations while ensuring that vulnerable individuals and families are not further marginalised. As the traffic light system and new sanctions come into effect, all eyes will be on the outcomes to see whether they deliver on the government’s promises or whether they simply create new obstacles for those most in need of support.