Ele Ludemann: The benefit burden

The superannuation burden as the aging population grows gets far more attention than the benefit burden.

The alternative to aging is death and some people receive benefits because of disability or illness which prevent them from working.

Reducing the benefit burden requires tackling the large number of people who could work and don’t, and not just now when the economy is sluggish.

The government is attempting to address this with the policy Social Welfare Minister Louise Upston announced to reduce the number of young people who go from school to unemployment:

. . . “Going on welfare when you’re young is a trap, with recent modelling suggesting that people under the age of 25 on Jobseeker Support will spend an average of 18 or more years on a benefit over their lifetimes.

“Currently 15,045* 18–19-year-olds are on the Jobseeker benefit, and I have far greater hopes and aspirations for those young Kiwis than a life on welfare.

That’s more teenagers who aren’t in education, training or work than the total population of Oamaru .

“Today I can confirm that we are bringing our Budget initiative forward for implementation to November 2026. From then, all young people aged 18 and 19 without dependent children will have to pass a Parental Assistance Test in order to access Jobseeker Support or the equivalent Emergency Benefit.

“This targets welfare assistance to those who need it the most, as young people will be expected to first be supported by their parents,” Louise Upston says. . .

The Taxpayers’ Union spokesman James Ross points out that the parental income cut off should be tapered:

. . . “Breaking the benefit trap is good for young people and good for taxpayers. School leavers who go straight onto a benefit often end up spending decades out of work.”

“A bit of common sense in the welfare system is long overdue. Parents who can support their kids should do so, and those who genuinely can’t should still have the state’s backing.”

“But setting a hard parental income cut off at $65,000 risks creating a perverse incentive, where parents very quickly become much worse off for earning only slightly more. Support should be tapered off gradually, so families aren’t punished for working harder.”

That is a good point as is requiring parents who can support their offspring to do so.

The benefit burden isn’t just the money unemployed are paid. People on benefits are over represented in negative statistics for crime, education and health which comes at a high financial and social cost.

Requiring parents who can look after their children to do so is a good start but it’s not enough. There are too many older people who could work but don’t contributing to the large number of people who pay no net tax.

Getting more people of all ages into work won’t reduce the number of pensioners but it will reduce the benefit burden and result in more people paying more tax which will help make superannuation less unaffordable.

Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.