Welfare abatement: they want to keep you down

file0001431778413One of the biggest contradictions within our current welfare system is its insistence that beneficiaries find paid work, while simultaneously enforcing policy that disincentivises the supplementation of welfare payments with part-time employment. Although beneficiaries are allowed to earn money while on a benefit, additional income affects their supplementary assistance and the amount of their benefit is reduced or “abated” by a certain amount. For those receiving Sole Parent Support, part-time work is often the only feasible option when combined with the responsibility of parenting alone. Yet not only do the current abatement levels significantly impact on any gains offered by part-time employment, incorrectly navigating Work and Income’s complex processes can result in financial penalties being incurred. This is difficult to manage for anyone on a benefit – for those also supporting children it can often be a disaster.

The Work and Income website states; “Sole Parent Support helps single parents and caregivers of dependent children get ready for future work, supports them to find part-time work and provides financial help through a weekly payment”.  Yet in practice, policy designed to meet this aim  – policy labelled by Auckland University Associate Professor of Economics Susan St John as “unfair and defective” – is far from supportive and appears instead to act as a deterrent to paid employment.

Stories of struggling to understand income thresholds and abatement levels abound amongst beneficiaries. Many of the women who took part in my research told of incurring debt from Work and Income as they tried to negotiate a complicated and often confusing process. This debt could be incurred through misunderstandings or misinformation from Work and Income about income thresholds. At times it was incurred as a result of a Work and Income error. To risk stating the obvious, debt is incredibly challenging for those who fight simply to meet their basic daily needs. In an earlier post I shared Kirsten’s story in which she said:

I do part-time work when I can and … it just keeps pushing me over the threshold. I’ve been penalised so much working … Often you are [better off on a benefit]. The second that it looks like you might even [a] tiny bit be getting ahead, getting yourself sorted, you get these massive bills with WINZ. I accrued a $700 debt with WINZ because I just got the threshold wrong and I didn’t know what was happening. I didn’t know what I was eligible for. I didn’t know when I earned it how it was gonna slam me. It was so stressful.

This theme was repeated throughout the focus groups I ran. The women repeatedly told stories of inadvertently losing entitlements and/ or incurring debt with Work and Income:

Theoretically you’re supposed to just say ‘my income has changed for this week. I’ve done this many hours for this amount of money’. The benefit should be adjusted for the following week and you should be able to get on with your life. But it just didn’t work like that and it affected my childcare subsidy and I’ve created a debt, and just being able to sort that both times was so… I felt so stressed out …. And ringing and ringing to try and get things sorted out. For weeks. I just didn’t understand why that was so hard, and the amount of time I spent trying to rectify what had gone wrong, it just wasn’t worth it.

Ana went on to describe turning down work because of the difficulties she experienced in managing short-term contracts within Work and Income processes. Usha spoke of “one of the most tragic times I had [when] they stopped my DPB once when I was working part-time… I was without any [money] for two weeks and I had to just live on whatever I had”.

Another participant, Josie,  complained of the abatement level which meant she could only keep a small proportion of her earnings:

I’m just starting part-time work two days. One [kid is ] at day care, that’s two days, 19 hours all up and then there’s morning and afternoon care [for the school child] and I have to drop the kids off at 6.45 in the morning to go to school and then I get the benefit which gets cut down, I get secondary tax on the job that I’m doing. Then I have to pay for child care so in the end I’m probably getting $280 a week for 19 hours or something and I’m gonna get $100 of that … So is it worth it?

Beneficiaries receiving Sole Parent Support are allowed to earn $100 per week (before tax) before their benefit is affected. Work and Income also have the discretion to ignore $20 per week for childcare. Earning between $100 – $200 reduces the benefit by 30 cents in the dollar. For anything above this the abatement rate increases to 70 cents in the dollar. Beneficiaries pay tax on all income earned, and accommodation supplements and childcare assistance may also be reduced. As Josie notes there are also considerable in-work costs such as childcare or transport that need to be taken into consideration. Auckland University Associate Professor Mike O’Brien proposes that “the combination of reduced benefit payment (or reduced tax credits) loss of assistance such as childcare and accommodation supplement and taxation can mean that beneficiaries gain very little from taking up paid work”.

The abatement level means there is scant opportunity for those on Sole Parent Support to use paid work as a way of moving themselves and their children out of poverty. In addition the current system does not take into account the reality of work in 2016. Hours can change weekly under casual work and/ or short-term contracts yet the complexity of the Work and Income system means this is incredibly difficult to manage, and it leads to many seeing cuts to benefit payments that they can ill afford. Beneficiaries rely on their benefits: they do not have funds to fall back on if their income is reduced in any way. As the accounts above show, many simply give up trying to work. In Kirsten’s words “I don’t feel like there’s any type of scenario that [Work and Income are] helping me help myself. I think it’s controlling, I think they want to keep you down”. In listening to beneficiaries’ stories of trying to navigate the complexity of the welfare system in order to supplement their benefit with paid work – I can’t help but think she is right.

10 Comments

  1. This needs to be reported to Fair Go at the least.what winz are doing is a suttle form of abuse. My grandson just got himself out of debt while on the benefit. Now he works as casual oart time he has a huge debt of over $700.00 because of wirk and income incompetence. NOT a fair go.

  2. yep I understand I was bringing up 6 six kids alone ,I had jobs of and on but it seem the kids got sick more often than when I was home ,then there was travel ,and long story short it didn’t work out and I ended up with a huge debt which im still paying of at 63 and on invalids benefit so I get $188 a week afta they take what I owe out,so theres a lot of nites without food and power its a shocking scary situation to be in making health issues worse than they need to be choosing what medication you can afford and what you cant .

  3. i work 1 day a week as a hairdresser at a local rest home.. i am allowed to earn 100 dollars a week and,they take 70 cents out of every dolllar i earn after that itsnot worth earning more, although i could

    • I could deal with a $700 debit try a $4000 debit I’ve apparently enuresis over a 2 year period from just over 2 years ago. I declared my weekly income and now get hit with this bullshit.

  4. My problem with this system is how they apply the same dollar to every benefit and supplement you get. You use to loose $20 straight away off your accommodation supplement. They take $ for $ off Special or Tas which I think is wrong because they should really be recalculating those supplements. But no just take $ for $. How can you lose $ for $ off those supplements then another 20/30 or 70 cents in the same $. That’s where it falls down. It should abate one at a time and each time a benefit is abated the amount earned should reduce. These people have no clue about maths. And using the unabated amounts in calculating Special and Tas is also wrong. Seems to me they spend most of their working day looking for ways to screw people over.

  5. I think you should be able to earn upto $150 a week and not pay tac if you have more than one children. You shouldn’t have to pay tax on any thing apart from your mean benefit every thing else no tax. They want pple of benefits but they don’t give pple a intensive to work more and get off the benefit at all. The more you make the more you loss as your work taxes is secondary tax . How can you pay rent , etc on what you get and if you work it out when you get over $100 bedore tax you loss .30cents in the dollar and over $200 is .70cent in the dollar and your still paying secondary tax on your job wages. SUXS big time.

  6. If you read page 2 paragraph 6 it states the Cabinet wanted the issue of abatement looked at but it seems the MSD don’t want to. I wonder why that is.
    http://www.msd.govt.nz/documents/about-msd-and-our-work/publications-resources/regulatory-impact-statements/policy-changes-proposed-as-part-of-the-rewrite-of-social-security-act-1964.pdf

  7. Regarding mis-information from Winz.

    Widow jailed for benefit fraud.

    This is what the judge said

    He questioned Ministry of Social Development prosecutor Richard Williams about how Prasad had been given bad advice by an official to transfer from the domestic purposes benefit to a widow’s benefit, and this had affected the way her ACC income was assessed.

    This poor woman went to jail. Sickening.

    http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10425452

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