Saturday, August 17, 2013

Lindsay Mitchell: To work or not to work - what is the government trying to incentivise?

This is intriguing. Below are the rates for the Youth Parent Payment:

Category Net Gross
Sole parent, 16 to 17 years, living with or supported by parents who earn less than the Family Tax Credit threshold $137.47 $153.60
Married, civil union or de facto couple (with children) Total $343.68 $384.00
Each $171.84 $192.00
Sole parent $295.37 $335.18
Hospital rate $42.64 $47.64

$295.37 is exactly the same as Sole Parent Support.

Regarding the YPP, the Minister asked for an abatement free threshold of $203.15 per week (before tax) here. That was implemented according to the Youth Service website.

But someone on the Sole Parent Support benefit has an abatement free threshold of only $100. According to WINZ:
 You can get up to $5,200 a year (before tax) in additional money (for example from working) before your benefit payment is affected, and $20 more a week if you have childcare costs.

This puts the YPP beneficiary at a distinct financial advantage and I am trying to understand the thinking behind it. Back to the cabinet paper:

I'm just not getting this.

The party you want to work less you allow to earn more and vice versa?

The more I learn about this new benefit, the more it baffles me. The Minister has aligned the abatement threshold with the student allowance. But the threshold applies whether or not the recipient is a student. With only a small in-hand allowance the parent is going to be incentivised to earn. That's good. Let's face it. A lot of these young people aren't interested in tertiary education.

But what happens when they turn 19 or 20? They start losing their benefit. Back to the old problem of 'it's not worth working.' Most will still have children young enough that they won't have to either.

Wouldn't you love to be a fly on the wall during some of the discussions surrounding these reforms?

Once governments begin intervening there is no end to it. And the more they intervene, the more contradictions and inconsistencies abound.

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