The rapidly declining New Zealand economy is pushing more people onto welfare.
New Zealand’s economy—beset by falling GDP, government austerity, and a near-recession caused by the Reserve Bank’s efforts to tame inflation—has seen the number of people receiving benefits exceed Budget forecasts.
At the same time, a new report from the Ministry of Social Development says young people could remain unemployed for as long as 20 years.
The number of years all beneficiaries are expected to remain dependent on the state remains well above historical levels. The Ministry estimates that people will, on average, spend 13.4 years receiving a benefit, 26 percent higher than in 2017.
While that represents a slight decrease from the 13.6-year projection in 2022, the report concedes it is partly due to “a slight increase in the proportion of people earning at or above the equivalent of working 20 hours per week at the minimum wage.” Thus, new jobs are mainly part-time and low-paid, but they are just enough to keep some people from eligibility for government assistance.
The report estimated that people under 25 would spend an average of 20 years on a benefit, which is 39 percent longer than estimated in 2017.
While Social Development and Employment Minister Louise Upston says the government is fixing the problem by introducing harsh penalties for jobseekers who do not meet their obligations, such as attending meetings with case managers, the report identifies significant barriers to young people finding work.The report notes that young people are more susceptible to economic shocks due to their lower skill levels, casual employment arrangements, and higher levels of employment in sectors like the service industry, which are more exposed to the effects of economic downturns.
“The increase in the number of young clients receiving Jobseeker Support reflects the current weakening economic conditions,” the report states.
More than half have experienced four or more “risk factors” such as accessing mental health or acute hospital care in the previous three years, interaction with the youth justice system, or having grown up in state care.
Across all ages, half have experienced two or more such factors.
Pacific Island people are the worst hit by the declining economy, with a rise of 15 percent receiving a benefit this year as compared to 2023, but all ethnicities have seen increases.
“These findings show how much of a problem welfare dependency has become in recent years and highlight the urgent need for the government’s Welfare that Works reforms to get more people into jobs,” Upston said.
“Our benefit system should be a safety net, not a dragnet that keeps people down.
“It must be a genuine pathway to employment for those who can work. This government has greater aspirations for tens of thousands of young New Zealanders than spending roughly half their working-age lives on welfare.”
The New Zealand Treasury forecasts further challenges for the government from 2030, when health and superannuation costs start to rise rapidly thanks to an ageing population and longer lifespans from advanced medical technologies.