Monday, February 1, 2016

Lindsay Mitchell: " incentive to work."

A Blenheim single mother of three (aged 10,15 and 17) has found she is only $34 better off working.
"When you weigh it up, is it worth going to work? The Government is trying to get everyone off the benefit but there is no incentive to work."
This line bugs me. The incentive to work lies in being self-supporting, in joining the community that provides the productivity and taxes to run the benefit system. In being a giver instead of a taker - especially after having been a taker for an unspecified time.

But then she hits on the real incentive to work herself:
"I love my job. It makes me feel rewarded."
So what is the point of this piece?

It's headed up "Blenheim mother of three struggling to survive after coming off the benefit."

Her main problem is that 57% of her income is going on a mortgage. Lucky her. She 'owns' her own home. Most people are moaning because they can't get on the first rung of the property ladder. But perhaps she could reduce the repayments?
"We struggle but we survive. In Marlborough the gap between the low income and the high income is horrendous. The rich get richer and the poor get poorer."
The journalist tries to give this some supporting data.
According to the 2013 census data the median income in Marlborough was $27,900, compared with $28,500 for all of New Zealand.
Nearly 23 per cent of Marlburians aged 15 years and over had an annual income of more than $50,000, while 36 per cent earned $20,000 or less.
Proving what? In among the 36 percent are dependent children, students and a disproportionate number of elderly. It's Marlborough. But a comparison to earlier census would be needed to prove a growing gap.

And the struggling mother of three is actually earning over the median income. (It's a possibility she is intentionally limiting her hours to keep her student loan under the threshold for repayment.)
Ministry of Social Development figures showed those on main benefits in Marlborough had gone up slightly from 2237 in December 2014 to 2265 in December 2015.
But down 14% from 2,638 in December 2011. That's inconvenient.

I am not without sympathy for the family. It is tough on kids having very little disposable income. But they live in a great part of the country, they eat well, have housing security and most importantly, prospects. That doesn't happen when you stay on a benefit.
"There is that stigma attached to being on the benefit and many believe that you are just a bludger," she said
Only if you can work and won't.

Time for a reality check. Because of the accommodation supplement and family tax credits, the gap between benefit income and income from work is very small (and will get smaller from April this year when parents with dependent children get a $25 benefit rise).

Moving into work may provide little financial gain initially. But the individual's sense of well-being and future prospects are improved, as acknowledged by the ex-beneficiary in this news report.

As I said I don't get why this is newsworthy. It's just more resentment fuel for the inequality insurgents.


Anonymous said...

Presumably the marginal rate of reduction of benefits/ increase of taxes in the example is in the order of 80 – 90%.
This must be contrasted the top marginal rate of income tax rate in New Zealand of 33% with the argument that if the rate went much higher than that the incentive to work would be reduced.
So the conclusion must be that people coming off social welfare benefit have so many non-financial advantages from taking a job that they are not dis-incentivised by this marginal rate.

Anonymous said...

At least now she has a job there is the opportunity to move up, either where she is not in another similar job to obtain better pay. You can not expect to start at the top if you have been out of work for many years.

Unknown said...

If I were in her position I'd be thinking differently. I would regard the extra $34 (I'm assuming this is after tax) as a stepping stone into the future, the beginning of a newer more satisfying life. I would be saving the $34 and after the first year you would have around $1830. But I would also be incentivised to do better, perhaps showing my worth at work by working harder, going the extra mile,convincing the employer that I am worth more. It's all about how you view life. From my experience successful people have self confidence and a daily will to improve their position.