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RNZ News
2 days ago
- Business
- RNZ News
The people working for $10 - and less
Even with living wage employment opportunities, some only earn between $8.78 and $10.65 an hour for additional hours worked. Photo: RNZ / Rebekah Parsons-King New Zealand needs to rethink how the welfare system interacts with tax - and how we approach "punishing" people who are on the benefit, a prominent economist says. Ganesh Ahirao said the marginal tax rates that people were earning when they shifted off income support, or took on more work at middle incomes, were much higher than those paid by higher-income people. He looked at a number of household scenarios to illustrate the point and said even with living wage employment opportunities available, people were only earning between $8.78 and $10.65 an hour for additional hours worked. Someone on a minimum wage would earn even less. The Living Wage is currently set at $27.80 per hour. In one case, a single person whom he referred to as Manaia, with no children, no student loan and paying rent of $415 a week for a one-bedroom flat in Wellington would receive the Jobseeker Support (JS) payment alongside Winter Energy Payment (WEP) and Accommodation Supplement (ASUP) totalling in the hand $592 per week. Six hours' work at the living wage would take income to just over $700 with those supports. "But thereafter, the reduction of JobSeeker - at the gut-punching rate of 70 cents for every extra dollar earned - slows in-the-hand increases to a snail's pace. Consequently, the effective marginal tax rate (EMTR) faced by Manaia soars into 80 percent-plus stratospheric territory," Ahirao said. In another case, a sole parent of two children paying $600 a week would receive the Sole Parent (SP) payment alongside WEP, the Family Tax Credit (FTC) component of Working for Families, and ASUP totalling $1047 per week. With six hours work at the living wage, the person's income would rise to nearly $1200. "But then the reductions in support payments brutally cut in. Firstly, the SP declines by 30 cents for every extra dollar earned and then after 10 hours per week by 70 cents per extra dollar earned. The resulting EMTR of 89.2 percent is pushed to 93.3 percent (after 14 hours per week) as FTC payments begin to decline at 27 cents for every dollar of other income. Another hit (at 24 hours per week) pushes the EMTR to 95 percent, as the ASUP also begins to decline (25 cents for every dollar of other income)," Ahirao said. If the person worked 40 hours a week they would receive $352 more than if they did not work at all. Ahirao said the tax and welfare systems needed to work together. "MSD does benefits and IRD does Working for Families and student loans… they have this separation there that needs opt brought together. "Abatement rates in the welfare system are not seen by the tax system. That's one element. "We also need to think seriously about our perspective on penalising people. It's a punitive-first approach welfare system. There is a belief out there that everyone should work, should be able to go to work and should take up work whenever they can. To a degree that's ok but then it goes to those who don't work are somehow at fault and should be penalised. That is the perspective to get past." He said many people out of work were not jobless by choice. There was little encouragement to work when the benefit was clawed back so quickly, he said. "You take away 70c in the dollar - there's a perspective that if we add on to their part-time income with jobseeker they're going to get too much, it's going to be too generous so we've got to claw it back… do we want to encourage people into the workforce or penalise people for not being in the workforce? "That's the mindset we need to get over before setting any other policies. That's a big shift in our thinking across the whole political spectrum." A universal basic income could be part of the conversation, he said. "I'm comfortable saying you have aright to an adequate income and that involves an obligation to contribute in society, make yourself available for work. You don't go from there to we're going to bash you with a whole lot of sanctions. You tweak the settings to make it as attractive as possible to contribute. A carrot rather than a stick approach." Ministry of Social Development general manager of welfare system and income support Fiona Carter-Giddings said the ministry's priority was getting people into work. "Between June 2024 and June 2025, 86,000 benefits were cancelled because the person found a job. "We're pleased New Zealanders continue to move off benefit and into work, despite challenging economic circumstances. When people are employed they have a higher income and more opportunities to improve their quality of life. "Government financial assistance generally reduces as other income increases, because New Zealand's welfare system targets support to people who need it the most. This is a long-standing principle of social security. "The ideal rate at which support should reduce involves trade-offs between income adequacy, incentives to work, and maintaining appropriate costs to the taxpayer. The welfare system is designed to balance these objectives, and it is an area of ongoing debate." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
The Spinoff
30-07-2025
- Business
- The Spinoff
What the latest jobs data is (and isn't) telling us
June's employment indicators suggest New Zealand's labour market is weakening – but topline numbers don't show the full extent of the struggle, writes Catherine McGregor in today's extract from The Bulletin. A disappointing curtain-raiser jobs report New figures from Stats NZ show New Zealand had 27,850 fewer filled jobs in June 2025 than a year earlier, with construction accounting for nearly half that drop. Yet on a monthly basis, jobs rose slightly – a 0.1% increase – though economists warn the figures, drawn from IRD payroll data, are often revised down. Known as the Monthly Employment Indicators (MEI), this dataset gives a useful early signal about labour market trends but is less comprehensive than the official unemployment rate, due out next week. That figure currently sits at 5.1%, up from 4.0% at the start of 2024. Despite the technicalities, the trend is clear: job growth is stalling, especially outside the booming primary sector. David Hargreaves at says the Reserve Bank's already-muted optimism for employment growth may have been misplaced. 'The RBNZ has forecast the unemployment number will rise to 5.2%. It's looking possible we may in fact see 5.3%.' Underemployment hides in plain sight If the stats are merely average, why does the job market feel so bleak? Writing in the Herald (Premium paywalled), Liam Dann points to types of jobseekers who often aren't captured in the figures: New Zealanders opting out of the labour force altogether by leaving for Australia, people giving up and returning to study, and those who are underemployed. While part-time roles are growing, that's often not by choice. As RNZ's Evie Richardson reports, an increasing number of people are cobbling together multiple part-time jobs, not out of preference but necessity. As CTU economist Craig Renney puts it: 'These are people who might well want to work full-time, can't find full-time work but will happily take any job just to keep an income coming into their household.' Writing on his own blog, Renney explains a phenomenon called wage scarring – 'where people take any job to pay the bills, but it traps them in lower paid work which affects their earnings for a significant period of time'. MBIE found that 'New Zealand workers tend to bear more significant income and employment 'scars' than workers in other OECD countries'. Writes Renney: 'The high-level data suggests that we are likely setting up another round of wage scarring right now.' Young, eager and locked out No group is feeling the downturn more than young people. Nationwide, 16% of 15 to 24-year-olds are now unemployed, and there has been a 41% increase in Jobseeker Support claims for 18-24 year olds over the past two years. 'If you're a young person out there who can't find a job: it's not you, it's them,' Infometrics economist Brad Olsen tells The Press's Elsie Williams (paywalled). He says the problem is structural: fewer roles, more competition, and employers demanding experience young workers don't yet have. Olsen says it's not just about short-term fixes – the government must help young people gain the skills that industries actually need. Without that, a generation risks being left behind. Fixing a system that fails both sides Writing in The Spinoff this morning, Max Rashbrooke argues it's not just the job market that's broken – the welfare-to-work system is too. Drawing from a new report for the Institute for Democratic and Economic Analysis (Idea), a thinktank he co-founded, Rashbrooke outlines how Work and Income fails to serve either jobseekers or employers. Because beneficiaries aren't screened for job suitability, businesses waste time interviewing unfit candidates while jobseekers end up in roles wildly misaligned with their skills. As Rashbrooke notes, up to half of the workforce may be in roles that don't match their capabilities, a drag on productivity and morale alike. His solutions include tailored job plans based on a deep understanding of each jobseeker's background and a major uplift in investment in vocational education and mid-career retraining. In a market where work is harder to find, he says, the system should be doing far more to help people make the most of their potential – not less.
NZ Herald
28-07-2025
- Business
- NZ Herald
Unemployment: Job data show construction down more than 12,000 in year, more youth out of work
In 2022, many employers were desperate to find staff. But borders reopened, migrants arrived and the economy's post-Covid rebound slowed down. Gordon said young people were also often in the firing line for layoffs. He said recent data also indicated more people were staying unemployed for longer. 'Once you're out, it is hard to get back in ... What we've been seeing in recent surveys is the six- to 12-month group has risen quite substantially.' Job numbers for people aged 20 to 34 dropped by thousands compared with a year ago. But the cohort aged 35 to 39 filled 2% more jobs than a year earlier, according to Stats NZ. Economist and former Child Poverty Action Group spokeswoman Susan St John said support and benefits for some unemployed people were still miserly. St John said that wasn't always a problem if unemployment lasted a few weeks, but in a prolonged recession, it could be disastrous. 'It's why we continue wallowing around in this ugly recession. Our fiscal cushions are not well-designed.' GDP grew by 0.8% in the first quarter of this year but since 2022, Stats NZ has recorded four quarters of GDP decline, one flat and eight of growth, not adjusted for population. Last year, annual real gross national disposable income fell 0.3% and annual real gross national disposable income per capita fell 2.0%. St John, an associate professor at the University of Auckland Business School, said the country had major gaps in the safety net for some people in relationships. An unemployed central Auckland man aged 25 with cash assets of $1000, paying $300 a week in rent, with a partner working fulltime at the minimum wage, would qualify for only $74 a week before tax on Jobseeker Support. If single, the same man would qualify for Jobseeker Support of between $356 and $361 a week before tax, and a weekly accommodation supplement of between $70 and $147. St John said lack of demand in the economy, which she blamed on restrictive Government fiscal policy, was behind the decline in young adults filling jobs. Compared to June 2024, filled jobs in construction were down 6%, or 12,169 jobs. Manufacturing was down 2.5% or 5850 jobs year-on-year in the latest Stats NZ data. But across all industries, there was a 0.1% increase in filled jobs last month compared with the previous month. 'Construction is a quite cyclical and quite interest-rate-sensitive part of the economy,' Gordon said. He said the country recorded a surge in building consents for a couple of years after Covid. 'There tends to be quite a long pipeline from consent to completion. 'We have seen housing consents stabilise over the past year.' For that reason, the medium-term outlook for construction was not abysmal but recovery in construction jobs was still likely a few months away, Gordon said. He said employment was down in the North Island, but steadier in the South Island. 'The strong performance of the agri-sector is a big part of that.' Gordon said feedback from customers and colleagues often illustrated stark regional contrasts. 'In the North Island, there'll be a litany of woes. In the South Island, it's '$10 milk price, everything's all right'.' Seek's June employment report was also released today. It showed job ads were down 3% on May and 3% down on a year earlier. But Gisborne, Marlborough and Southland bucked the trend, with job ads in those regions up from the month before. Seek NZ country manager Rob Clark said job ad levels had been broadly flat for the past year. 'While the volume remains below pre-Covid levels, there are pockets of growth, which should be cause for some optimism.' John Weekes is a business journalist mostly covering aviation and court. He has previously covered consumer affairs, crime, politics and court.
Scoop
20-07-2025
- General
- Scoop
Families Below The Income Floor Face Growing Crisis
Many low income households across Aotearoa are now living below the income floor, with increasingly fewer households able to cover the bare essentials, according to new research released today by Child Poverty Action Group (CPAG). The research builds on modelling by the Welfare Expert Advisory Group (WEAG) and extends it to cover varying levels of income and expenses across 39 different household types over eight years, revealing that the vast majority remain in persistent and growing deficits. These deficits mean incomes are failing to meet both core living costs and the costs needed to meaningfully participate in society, placing thousands of children at risk of entrenched hardship. "This modelling shows that our society is seriously failing children who live in low-income households. Families continue to be locked in poverty and unable to break through the constraints of the income floor", said CPAG Research and Programmes Officer Dr Harry Yu Shi. The project tracked single adults, couples and sole parents on income support or in low-wage work from 2018 to 2026. Despite periodic increases to benefits and wages, the research finds that income support and the minimum wage have not kept pace with rising living costs. Key findings include: Minimum wage no longer guarantees adequacy: Couples with two children working 40 hours on minimum wage are already in deficit in 2025. By 2026, even a combined total of 60 hours of work will not be enough to lift them above the income floor. Sole parents facing severe shortfalls: Sole parents with three children in private rentals are $170 short each week of meeting basic costs, leaving them far below the income floor regardless of whether they receive Best Start support or not. Rising hardship over time: While incomes improved modestly between 2021 and 2024, the research shows the households we modelled are now universally worse off from 2025 onwards. Housing costs pushing families deeper into deficit: Couples on Jobseeker Support with two children and average rental costs are more than $300 per week short. Single adults not spared: Those on Jobseeker or Supported Living Payment are nearly $100 per week below the income floor needed for basic necessities. "The evidence is clear: even working full time or combining wages with benefits is no longer enough to enable families to break free of the constraints of poverty," said Dr Harry Yu Shi. "The income floor is rising and families are being pushed under it by increasing rents, food costs and stagnant supports. Without urgent action, more children will grow up locked out of the opportunities every New Zealander deserves." The research also highlights that improvements achieved following the 2021 Wellbeing Budget have been reversed. All 39 households modelled are on a trajectory of worsening deficits by 2026, regardless of income type or household size. CPAG is calling for immediate increases to core benefit rates, stronger indexing to living costs and policies to lift working incomes. "We cannot accept a system where our children are unable to flourish because the powerful currents of our economy force families to live below the income floor," said CPAG Research and Programmes Officer Dr Harry Yu Shi. The next stage of this research projects aims to use Integrated Data Infrastructure (IDI) to establish how many real households fit into each category, and therefore, the true scale of this issue. Notes: - Based on the Welfare Expert Advisory Group's 2019 principles, the income floor refers to the minimum level of income needed for individuals and families to meet their basic needs and participate meaningfully in their communities. This level must also be maintained over time to keep pace with rising costs. - Child Poverty Action Group (CPAG) is launching a campaign to raise awareness of the 'income floor' - the minimum income needed to live and belong - and how many households in Aotearoa are now falling below it.
RNZ News
17-07-2025
- Business
- RNZ News
Number of benefit sanctions increase, over 80k people find work, new figures show
Social Development and Employment Minister Louise Upston. Photo: RNZ / Samuel Rillstone The number of benefit sanctions has increased by 27 percent compared to last year, the latest figures from Minister of Social Development (MSD) show . The figures, released on Thursday, show the number of people receiving a main benefit is up 6.6 percent compared to the previous year. It brings the proportion of the working-age population receiving a main benefit up to 12.5 percent, just over 400,000 people. Jobseeker Support numbers are also up 10 percent to 216,000 people. The number of working-age people receiving a Jobseeker Support increased across all regions, with Northland having the highest at 11.3 percent. Main benefit cancellations had increased by 6.9 percent to just over 49,000, while 19,596 people exited into work, an increase of 8.1 percent. Benefit sanctions increased 27.1 percent to 13,200. The Ministry's snapshot said the main reasons for unfulfilled work obligation sanctions were clients not attending appointments, like seminar appointments, or failing to prepare for work. In the June 2025 Quarter, 52,698 main benefits were granted, an increase of 2.7 percent, while the number of Jobseeker benefits was 41,091, up 4.7 percent. Social Development and Employment Minister Louise Upston said it meant more than 80,700 people moved off a main benefit and into work in the last financial year. "Despite challenging economic conditions, the government has been relentlessly focused on getting New Zealanders into work. It's encouraging that 80,000 Kiwis were able to kick start new roles over the past 12 months and there will be more to come," she said. Upston said over the last three years, MSD have seen a trend of more people coming onto benefit in the March to June period, because of less seasonal work available during the winter months. "MSD is continuing to provide great support to job seekers on the frontline. Our Government has increased the number of people in case management at any one time from 60,000 to 70,000 people. 10,000 of those are getting help through a new phone-based case management service. That's more people getting more support," Upston said. "People now also have to reapply for their benefit every six months, instead of just once a year. This gives MSD an extra opportunity to support them into a job." Green Party Social Development spokesperson Ricardo Menéndez March said the figures showed the government was pushing people into unemployment while punishing them for being out of work. "It's no wonder people are fleeing the country in droves with this Government punishing people for being unemployed at a time when there are little to no jobs," Menéndez March said. "This is blatant cruelty dressed up as policy. People deserve to live in dignity and to be supported in times of need, not punished." He said sanctions had doubled since the government took office. "Sanctions strip people of the basics they need to live, with no proof that they help anyone find paid work. The Government increasing sanctions on the unemployed when there are little to no jobs is beyond cruel," Menéndez March said. "Right now, Student Job Search data shows graduates are vying for a shrinking number of vacancies, leaving people stranded and increasingly without hope. Despite fewer job listings being available for a growing number of people on the benefit, the Government is hellbent on punishing the unemployed." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
