Lindsay Mitchell: Welfare state today - the good and the bad

Not widely reported in the MSM so cut and paste from the Minister:

Social Development Minister Anne Tolley has introduced a bill extending the Youth Service to 19 year old parents and other 18 and 19 year olds at risk of long term welfare dependence. 

Youth Service provides intensive wrap around support for young people, getting them help with paying bills, budgeting and parenting, and supporting them into education. 

“The Youth Service has been very successful, with 86.5 per cent of clients engaged in education, training or work-based learning at the end of March 2015,” Mrs Tolley says. 

The Bill extends the extensive wrap around support provided by the Youth Service to at risk 18 and 19 year olds and 19 year old teen parents. 

“Extending the Youth Service means more of our at-risk young people will be supported into education, training or work and be less likely to remain on a benefit long term,” Mrs Tolley says. 

“The welfare reforms have already reduced the expected future time on a benefit by an average of 2.8 years for youth beneficiaries and just over half of those who left the Youth Service remained independent from benefits three months later.” 

Eighteen and 19 year-olds without dependent children will be assessed when they apply for a benefit and those at risk of long term welfare dependence will receive Youth Service support. 

All clients referred to the Youth Service will have a youth coach, budgeting obligations and be money managed. They may also receive incentive payments when they meet certain obligations. 

Teen Parents referred to the Youth Service also have an obligation to attend a parenting course, enrol their children with a Primary Health Organisation, complete Well Child checks and ensure children attend Early Childhood Education.  

The extension of the Youth Service was part of the Government’s 2014 election manifesto.

The DomPost has a brief snippet on page two which says the extension will mean an extra 5,700 teens will be covered. Essentially the service is moving up the age scale. In practice I think that'll mean keeping those already in the youth service from exiting to a full benefit as early, and allowing an increase in young newcomers. Remember that those connected to a youth service provider have far tighter financial controls on them through the payment card:

If you’re receiving Youth Payment or Young Parent Payment your provider will give you a payment card.  

Some of your weekly benefit payment will be loaded onto your payment card for you to use for things like food, groceries, basic clothing and household items, healthcare items, public transport passes, and things you need for your education or training. 

Your payment card is like an debit card, but it can only be used at certain places – such as supermarkets. Items like tobacco or alcohol cannot be purchased with the payment card.

So good move but the payment card regime needs to be rolled out further and faster.

Now for the bad. First here is snippet from the NCPA today:

Despite claims that the economy has come roaring back, Gross Domestic Product growth remains anemic. The number of people receiving Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps, alone has doubled since 2008, to 74.7 million; in troubled cities like Baltimore, more than one-third of the residents receive them. 

Called the "welfare cliff" by policy wonks, this growing trend is little more than people responding to incentives. For example, eligibility for food stamps ends when annual income exceeds 130 percent of the poverty line, or a little more than $15,000 a year, for an individual. When the minimum wage increases above this level, as it has recently in many cities and states, employees reduce their hours to keep their benefits. As a result, people forgo opportunity for safety.

There is evidence that when the Wellington City Council introduced the living wage for its employees that's exactly what happened. They took the opportunity to work less rather than lose their Working For Families payments.

So what has the council done? Extended the living wage to its contractors. The living wage will also be inflation-proofed. How is it paying for this? With a 4.5 percent average annual rate rise over the next three years. Well above inflation.

That'll just push up rents and the costs of goods and services, and make the likelihood of filling all the empty retail space even more remote.

Instead of accelerating the redistribution whirlpool the council must slow it down. If people need more money in their pockets tax them less, and cut your cloth.