These images come to mind when I look at one of the ministers in New Zealand’s current government: Louise Upston.
There are probably few people with a soft spot for any minister of welfare (or “social development” as we call it in New Zealand). These ministers, after all, have only enemies, almost by definition. If they are reforming ministers, the right will say they are too slow and lenient whatever they do, while the left will call them heartless ideologues. If they are bleeding-heart ministers, they get the same criticism but in reverse.
I do have a soft spot for Louise Upston, though. I have known her for a long time. I know she cares. I know she wants to do the right things. And I know she prepared meticulously for this job over long and tough years in opposition.
Which makes it hard to watch now as she struggles, Sisyphus-like, to bring New Zealand’s welfare problem under control.
I first met Upston when she was a minister in Bill English’s government. Over the years, particularly during her time in opposition from 2017 to 2023, we talked often about welfare policy and reform. She was never one of those opposition politicians simply biding time until the electoral wheel turned. She was preparing. She read voraciously. She studied international models. I remember her asking sharp questions about what worked and what did not.
When the National-led coalition returned to office in late 2023 and Upston became Minister for Social Development and Employment, I felt genuine optimism. Here was someone who had done the homework, who understood the evidence and who genuinely cared about moving people from welfare dependency into fulfilling work.
Almost two years later, the numbers tell a sobering story. The total of working-age New Zealanders on main benefits reached 406,000 by mid-2025, up more than 25,000 from the year before.
Yet this is not a tale of ministerial incompetence. It is something more troubling: a demonstration of how quickly a welfare system can be structurally re-engineered to foster dependency, and how extraordinarily difficult that damage is to reverse once entrenched.
For Australia, New Zealand’s predicament offers a stark cautionary tale. But before that, just a quick note for Australian readers: New Zealand’s main benefits include Jobseeker Support (for those seeking work or with temporary health issues), Supported Living Payment (for those with or caring for someone with long-term conditions that severely limit work) and Sole Parent Support. (There are similarly named programmes in Australia, but there are differences in their precise design, so do not rush to direct comparisons.)
When Labour took office in late 2017, approximately 280,000 working-age New Zealanders received main benefits. Six years later, that figure stood above 351,000. That represents a 25 per cent increase.
The COVID-19 pandemic accelerated the trend, certainly. But what made it structural rather than merely cyclical was a deliberate policy programme guided by the 2019 Welfare Expert Advisory Group, which set out to transform the system from one focused on work activation to one prioritising “dignity” and “adequacy”.
The mechanics of this transformation deserve close attention. The intention was, to its supporters at least, laudable: to lift incomes and reduce hardship. Labour implemented the largest increases to base benefit rates in a generation.
But the truly consequential change was legislative: in 2020, benefits were indexed to annual wage growth rather than inflation. This structural shift meant the real value of benefits rose over time, systematically narrowing the financial gap between welfare and low-wage work. Being on a benefit became relatively more attractive than being in employment. (The current government has since reversed this, returning to linking benefits to inflation again.)
The Ardern government also removed many of the conditions for receiving welfare. Financial sanctions for failing to meet work obligations fell 58% between 2017 and 2023. This was not an organic decline but the result of explicit ministerial direction to use sanctions “sparingly” – a directive Upston has cited in Parliament. The message to beneficiaries and frontline staff was unmistakable: mutual obligation was no longer a priority.
The administrative culture shifted accordingly. Case managers’ time, already burdened by soaring demand for hardship assistance due to New Zealand’s acute housing crisis, was diverted from employment-focused work to crisis management.
By 2019, before the pandemic even arrived, employment-focused engagement with clients had fallen to roughly one-third of the rate five years earlier.
The results were predictable, if dispiriting. Most telling was the decoupling of benefit numbers from the official unemployment rate. During 2021 and 2022, as the economy recovered strongly and unemployment fell to a record low of 3.2%, benefit numbers remained stubbornly elevated. In a labour market crying out for workers, with businesses reporting acute shortages across sectors, hundreds of thousands remained on welfare support.
This was not a story of insufficient jobs. It was evidence of a system that had become “sticky”, easier to enter and significantly less urgent to leave.
The long-term fiscal implications became clear through actuarial modelling. By 2023, the estimated average future time a person would spend on a benefit had risen to 13.4 years. For young people aged 16 to 24, the projection was 20.4 years.
These were not temporary safety net users. These were individuals facing the prospect of spending large portions of their working lives dependent on state support.
These shambles were Louise Upston’s inheritance.
Her response, upon becoming the responsible minister, has been textbook activation policy with its focus on requirements and incentives to move recipients into work. The centrepiece is “Welfare that Works”, anchored by a target to reduce Jobseeker Support recipients by 50,000 by 2030.
A “traffic light” system now tracks compliance with work obligations. Beneficiaries must reapply every six months rather than annually. Financial sanctions have been reinstated with vigour, more than doubling in late 2024. New non-financial penalties, including mandatory community work and restricted payment cards, provide alternatives to simply cutting payments.
These are rational, evidence-informed policies. International experience indeed demonstrates that well-designed activation measures can reduce welfare dependency.
And yet the numbers continue to climb.
Here lies the cruel irony. Upston’s policies are having measurable behavioural effects. Sanctions are up 126% (July–December 2024 compared with a year earlier). Exits to work have risen 22% over the same period. By any intermediate metric, the reforms are working.
But these exits are being overwhelmed by new claimants. In the March 2025 quarter, while 23,268 people left benefits for work, there were 39,618 new grants of Jobseeker Support. The minister is overseeing a churn of beneficiaries, pushing people off benefits more quickly, but she cannot reduce the stock. The influx is simply too large.
She thus faces a double bind. The first constraint is cyclical and deeply unfortunate in its timing. New Zealand’s economy entered a protracted downturn in 2023. Per capita GDP has fallen 4.6% since mid-2022. Unemployment has climbed from 4.0% to 5.2%, with Treasury forecasting it may peak around 5.4%.
Upston is applying pro-cyclical policy (increasing pressure on beneficiaries to find work) during a counter-cyclical moment (when jobs are scarce and competition is intensifying). This is not a recipe for immediate success, however sound the underlying framework.
The second constraint is structural and even more intractable. The composition of the caseload has fundamentally changed. The number receiving the Supported Living Payment – New Zealand’s equivalent of Australia’s Disability Support Pension – has grown relentlessly. The total rose from about 93,000 in 2018 to over 105,000 by mid-2025. Those receiving SLP because of their own health condition or disability (rather than as carers) grew from about 84,000 to over 96,000.
Worse, the number on Jobseeker Support specifically because of health conditions has surged. By June 2025, there were 95,178 people in this subcategory (JS-HCD), up 15.4% year on year. These individuals exist in a policy netherworld; they possess medical certificates stating they cannot work, yet do not meet the stringent criteria for the Supported Living Payment, leaving them subject to work obligations they may genuinely be unable to meet.
This represents a slow-moving public health crisis manifesting as a welfare problem. The causes are multiple: an ageing population, rising mental health diagnoses and the accumulation of complex chronic illness. But activation tools designed for work-ready jobseekers are increasingly being applied to a caseload with severe barriers to employment.
Upston’s work-first approach is struggling to address this structural shift. She can sanction non-compliance and mandate job search activities. But if a growing proportion of recipients are genuinely incapable of work, no amount of administrative pressure will move them into sustainable employment.
Could alternative approaches fare better? International evidence suggests promising avenues. Individual Placement and Support programmes, successfully implemented in Britain and Australia, integrate employment services with mental health treatment, achieving employment rates double or triple those of traditional approaches. Partial capacity frameworks, such as the Netherlands uses, move beyond binary “fit” or “unfit” determinations to calculate remaining earning capacity and tailor obligations accordingly.
But these sophisticated interventions require significant upfront investment, institutional capacity and time to build skilled workforces. And they would face the same hostile economic environment and structural caseload challenges.
Even the most brilliant, imported innovation cannot conjure jobs in a recession or restore work capacity to those with genuine long-term health conditions.
This is the essence of Upston’s predicament. She is unquestionably capable, armed with evidence-based policies and working with diligence and clear intent. Yet her success or failure is not primarily within her control. She is hostage to the economic cycle, to the legacy of policies that made welfare more attractive and less conditional and to public health trends gradually shifting the nature of the caseload itself.
The tragedy, in the classical sense, is that doing the right things at the wrong time and in the wrong circumstances yields disappointing results.
For Australian policymakers, the lesson from across the Tasman is sobering. Once a welfare system’s core logic shifts away from work and towards unconditional accommodation, the damage compounds quickly. The financial incentives change. The administrative culture adapts. The caseload grows – not just in size but in duration and complexity.
And when a subsequent government then attempts to restore mutual obligation and work focus, it discovers that reversal is exponentially harder than the original liberalisation.
Prevention, it turns out, is much easier than cure. A government that weakens the link between welfare and work, reduces enforcement of mutual obligation, and indexes benefits to grow faster than inflation may reduce hardship and increase incomes in the immediate term. But it leaves successors facing the near-impossible task of re-establishing work incentives in a system structurally recalibrated against those goals.
Louise Upston may yet succeed if economic conditions improve. A strong recovery, falling unemployment and renewed employer demand would create the favourable environment her policies need to demonstrate their full effect. But the fact that her success depends so heavily on forces beyond policy control is, in itself, the cautionary tale.
I think back to those conversations during her opposition years. Her hunger to make a difference was palpable. Her preparation was meticulous. She wanted to move people from dependency to self-sufficiency, to break cycles of intergenerational welfare receipt and to prove that activation policies grounded in mutual obligation could transform lives.
I am sure she still believes all of this. And she is still right to believe it.
But what New Zealand now demonstrates is not that welfare reform is impossible. It is that the window for relatively straightforward reform can close quickly. Wait too long, allow dependency to become entrenched, permit the erosion of work focus and the task facing future reformers becomes not difficult but Sisyphean.
This tragedy is not personal failure. It is the demonstration that even capability, preparation and sound policy can struggle against the gravitational pull of structural reality.
And that reality, once established, proves remarkably resistant to change, however much we might wish otherwise. Just ask Sisyphus.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
I do have a soft spot for Louise Upston, though. I have known her for a long time. I know she cares. I know she wants to do the right things. And I know she prepared meticulously for this job over long and tough years in opposition.
Which makes it hard to watch now as she struggles, Sisyphus-like, to bring New Zealand’s welfare problem under control.
I first met Upston when she was a minister in Bill English’s government. Over the years, particularly during her time in opposition from 2017 to 2023, we talked often about welfare policy and reform. She was never one of those opposition politicians simply biding time until the electoral wheel turned. She was preparing. She read voraciously. She studied international models. I remember her asking sharp questions about what worked and what did not.
When the National-led coalition returned to office in late 2023 and Upston became Minister for Social Development and Employment, I felt genuine optimism. Here was someone who had done the homework, who understood the evidence and who genuinely cared about moving people from welfare dependency into fulfilling work.
Almost two years later, the numbers tell a sobering story. The total of working-age New Zealanders on main benefits reached 406,000 by mid-2025, up more than 25,000 from the year before.
Yet this is not a tale of ministerial incompetence. It is something more troubling: a demonstration of how quickly a welfare system can be structurally re-engineered to foster dependency, and how extraordinarily difficult that damage is to reverse once entrenched.
For Australia, New Zealand’s predicament offers a stark cautionary tale. But before that, just a quick note for Australian readers: New Zealand’s main benefits include Jobseeker Support (for those seeking work or with temporary health issues), Supported Living Payment (for those with or caring for someone with long-term conditions that severely limit work) and Sole Parent Support. (There are similarly named programmes in Australia, but there are differences in their precise design, so do not rush to direct comparisons.)
When Labour took office in late 2017, approximately 280,000 working-age New Zealanders received main benefits. Six years later, that figure stood above 351,000. That represents a 25 per cent increase.
The COVID-19 pandemic accelerated the trend, certainly. But what made it structural rather than merely cyclical was a deliberate policy programme guided by the 2019 Welfare Expert Advisory Group, which set out to transform the system from one focused on work activation to one prioritising “dignity” and “adequacy”.
The mechanics of this transformation deserve close attention. The intention was, to its supporters at least, laudable: to lift incomes and reduce hardship. Labour implemented the largest increases to base benefit rates in a generation.
But the truly consequential change was legislative: in 2020, benefits were indexed to annual wage growth rather than inflation. This structural shift meant the real value of benefits rose over time, systematically narrowing the financial gap between welfare and low-wage work. Being on a benefit became relatively more attractive than being in employment. (The current government has since reversed this, returning to linking benefits to inflation again.)
The Ardern government also removed many of the conditions for receiving welfare. Financial sanctions for failing to meet work obligations fell 58% between 2017 and 2023. This was not an organic decline but the result of explicit ministerial direction to use sanctions “sparingly” – a directive Upston has cited in Parliament. The message to beneficiaries and frontline staff was unmistakable: mutual obligation was no longer a priority.
The administrative culture shifted accordingly. Case managers’ time, already burdened by soaring demand for hardship assistance due to New Zealand’s acute housing crisis, was diverted from employment-focused work to crisis management.
By 2019, before the pandemic even arrived, employment-focused engagement with clients had fallen to roughly one-third of the rate five years earlier.
The results were predictable, if dispiriting. Most telling was the decoupling of benefit numbers from the official unemployment rate. During 2021 and 2022, as the economy recovered strongly and unemployment fell to a record low of 3.2%, benefit numbers remained stubbornly elevated. In a labour market crying out for workers, with businesses reporting acute shortages across sectors, hundreds of thousands remained on welfare support.
This was not a story of insufficient jobs. It was evidence of a system that had become “sticky”, easier to enter and significantly less urgent to leave.
The long-term fiscal implications became clear through actuarial modelling. By 2023, the estimated average future time a person would spend on a benefit had risen to 13.4 years. For young people aged 16 to 24, the projection was 20.4 years.
These were not temporary safety net users. These were individuals facing the prospect of spending large portions of their working lives dependent on state support.
These shambles were Louise Upston’s inheritance.
Her response, upon becoming the responsible minister, has been textbook activation policy with its focus on requirements and incentives to move recipients into work. The centrepiece is “Welfare that Works”, anchored by a target to reduce Jobseeker Support recipients by 50,000 by 2030.
A “traffic light” system now tracks compliance with work obligations. Beneficiaries must reapply every six months rather than annually. Financial sanctions have been reinstated with vigour, more than doubling in late 2024. New non-financial penalties, including mandatory community work and restricted payment cards, provide alternatives to simply cutting payments.
These are rational, evidence-informed policies. International experience indeed demonstrates that well-designed activation measures can reduce welfare dependency.
And yet the numbers continue to climb.
Here lies the cruel irony. Upston’s policies are having measurable behavioural effects. Sanctions are up 126% (July–December 2024 compared with a year earlier). Exits to work have risen 22% over the same period. By any intermediate metric, the reforms are working.
But these exits are being overwhelmed by new claimants. In the March 2025 quarter, while 23,268 people left benefits for work, there were 39,618 new grants of Jobseeker Support. The minister is overseeing a churn of beneficiaries, pushing people off benefits more quickly, but she cannot reduce the stock. The influx is simply too large.
She thus faces a double bind. The first constraint is cyclical and deeply unfortunate in its timing. New Zealand’s economy entered a protracted downturn in 2023. Per capita GDP has fallen 4.6% since mid-2022. Unemployment has climbed from 4.0% to 5.2%, with Treasury forecasting it may peak around 5.4%.
Upston is applying pro-cyclical policy (increasing pressure on beneficiaries to find work) during a counter-cyclical moment (when jobs are scarce and competition is intensifying). This is not a recipe for immediate success, however sound the underlying framework.
The second constraint is structural and even more intractable. The composition of the caseload has fundamentally changed. The number receiving the Supported Living Payment – New Zealand’s equivalent of Australia’s Disability Support Pension – has grown relentlessly. The total rose from about 93,000 in 2018 to over 105,000 by mid-2025. Those receiving SLP because of their own health condition or disability (rather than as carers) grew from about 84,000 to over 96,000.
Worse, the number on Jobseeker Support specifically because of health conditions has surged. By June 2025, there were 95,178 people in this subcategory (JS-HCD), up 15.4% year on year. These individuals exist in a policy netherworld; they possess medical certificates stating they cannot work, yet do not meet the stringent criteria for the Supported Living Payment, leaving them subject to work obligations they may genuinely be unable to meet.
This represents a slow-moving public health crisis manifesting as a welfare problem. The causes are multiple: an ageing population, rising mental health diagnoses and the accumulation of complex chronic illness. But activation tools designed for work-ready jobseekers are increasingly being applied to a caseload with severe barriers to employment.
Upston’s work-first approach is struggling to address this structural shift. She can sanction non-compliance and mandate job search activities. But if a growing proportion of recipients are genuinely incapable of work, no amount of administrative pressure will move them into sustainable employment.
Could alternative approaches fare better? International evidence suggests promising avenues. Individual Placement and Support programmes, successfully implemented in Britain and Australia, integrate employment services with mental health treatment, achieving employment rates double or triple those of traditional approaches. Partial capacity frameworks, such as the Netherlands uses, move beyond binary “fit” or “unfit” determinations to calculate remaining earning capacity and tailor obligations accordingly.
But these sophisticated interventions require significant upfront investment, institutional capacity and time to build skilled workforces. And they would face the same hostile economic environment and structural caseload challenges.
Even the most brilliant, imported innovation cannot conjure jobs in a recession or restore work capacity to those with genuine long-term health conditions.
This is the essence of Upston’s predicament. She is unquestionably capable, armed with evidence-based policies and working with diligence and clear intent. Yet her success or failure is not primarily within her control. She is hostage to the economic cycle, to the legacy of policies that made welfare more attractive and less conditional and to public health trends gradually shifting the nature of the caseload itself.
The tragedy, in the classical sense, is that doing the right things at the wrong time and in the wrong circumstances yields disappointing results.
For Australian policymakers, the lesson from across the Tasman is sobering. Once a welfare system’s core logic shifts away from work and towards unconditional accommodation, the damage compounds quickly. The financial incentives change. The administrative culture adapts. The caseload grows – not just in size but in duration and complexity.
And when a subsequent government then attempts to restore mutual obligation and work focus, it discovers that reversal is exponentially harder than the original liberalisation.
Prevention, it turns out, is much easier than cure. A government that weakens the link between welfare and work, reduces enforcement of mutual obligation, and indexes benefits to grow faster than inflation may reduce hardship and increase incomes in the immediate term. But it leaves successors facing the near-impossible task of re-establishing work incentives in a system structurally recalibrated against those goals.
Louise Upston may yet succeed if economic conditions improve. A strong recovery, falling unemployment and renewed employer demand would create the favourable environment her policies need to demonstrate their full effect. But the fact that her success depends so heavily on forces beyond policy control is, in itself, the cautionary tale.
I think back to those conversations during her opposition years. Her hunger to make a difference was palpable. Her preparation was meticulous. She wanted to move people from dependency to self-sufficiency, to break cycles of intergenerational welfare receipt and to prove that activation policies grounded in mutual obligation could transform lives.
I am sure she still believes all of this. And she is still right to believe it.
But what New Zealand now demonstrates is not that welfare reform is impossible. It is that the window for relatively straightforward reform can close quickly. Wait too long, allow dependency to become entrenched, permit the erosion of work focus and the task facing future reformers becomes not difficult but Sisyphean.
This tragedy is not personal failure. It is the demonstration that even capability, preparation and sound policy can struggle against the gravitational pull of structural reality.
And that reality, once established, proves remarkably resistant to change, however much we might wish otherwise. Just ask Sisyphus.
Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative think tank. This article was first published HERE.
2 comments:
Ms Upston 's efforts are admirable. For the public, inter-generational entitlement to welfare is a particular problem.... directly related to endless appeasement policies by cowardly politicians.
How to do welfare reform in NZ has nothing to do with what Oligarch's Lobbyist and NewsTalk ZB and Platform's mate, The NZ Initiative, pretends is the problem. In fact, it has been that lobbying outfit which has blocked the only welfare reform of real importance that would make all NZers better off. Namely moving to employer funded super savings accounts for all, with contributions set at 12 per cent. Aussies have over $4 trillion in those accounts, 40 times our by comparison pathetic Kiwisaver sized funds.
Why? Born again NZ Initiative-style libertarians hate the idea. Ironic when a savings-not-taxation welfare reform actually grants folks more liberty. Can't-do-Finance Minister Willis has trashed the stagnant Kiwi economy by not having the smarts, when she can't do economics herself, to get proper economic advice from smart people.
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