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Working toward better support

The "new social investment approach" is targeted to getting people off benefit and into work. But there is no data collected to show whether people are doing any better when they come out of the welfare system; whether they have obtained work that provides well enough for their families or what kind of hours they are having to work just to make ends meet. As evidenced by researcher Alicia Sudden, people may end up suffering the ill-effects of precarious, underpaid employment that negatively impacts upon the lives of their families. Furthermore, some Working for Families (WFF) tax credits are given only for parents who work enough hours to be eligible, meaning a large proportion of families off-benefit but in casualised employment may be missing out on the In-Work Tax Credit (IWTC) worth at least $72.50.

Alicia Sudden makes a compelling case for why better protection for low-income working parents - including job stability, adequate hourly rates, and an inclusive IWTC - is imperative.

You get people that are working 50-hour weeks, still on minimum wage, and having to try and support their family, but they don’t even get to see their family.  That’s really [messed] up… With things like power and petrol going up all the time and no one’s wages budging… There’s obviously a lot of people that are fine, but on the whole it’s a [real] struggle out there.

During my research into life after the benefit I was confronted with the difficulties faced by working families. The quote above comes from a sole mother who after being on the benefit is now working and studying, so she can provide the best life for her kids. In New Zealand, we were raised on this idea that hard work can get you just about anywhere. At the very least, working hard is supposed to mean stability and financial security. But we know this is no longer the case. Of those who are homeless in New Zealand, 52% are either working or studying, and two out of every five children in poverty are living in a household with at least one parent in full-time employment.

This is not a recent problem. In 2005, Working for Families (WFF) was implemented to supplement the income of parents who are working, acknowledging that income alone is not always enough. However, it is becoming clear that these tax credits do not align with the realities of the labour market anymore. In this era of unprecedented technological change, economic shifts and global influences, our local New Zealand labour market has been under considerable pressures. In order to compete in such an environment, policy changes have occurred that have favoured capital and employers, at the expense of the everyday employment conditions and rights of workers.  

We have now seen a considerable rise in job instability and precarious work in the New Zealand job market: 30% of workers are estimated by the New Zealand Council for Trade Unions to be in insecure work. They define this as “any job that denies workers the stability they need for a good life”.

Casual employment is increasingly used by employers to give them flexibility, while workers bear the burden of fluctuating working hours and wages. During my research, those who had gone into casual employment had much more job dissatisfaction than those who were in full-time work – 37.5% of those in casual employment were dissatisfied with their jobs, compared to only 8.1% for full-time employees.

The 90-day trial policy has meant employees have no assurance of employment until three months after they have started a new job. Statistics New Zealand found that in the December quarter of 2012, 36% of all employees had been subject to the 90-day trial. One of the individuals I spoke to during my research had first-hand experience with this and the impacts it can have on employees:

I begged for six months for the job… when I did finally get the job, I had to work split shifts so that I could fit around everyone else... So at the start they had me sign on to the [Work and Income] scheme that subsidises wages... It was supposed to be permanent…But that didn’t turn out. Two weeks before the end of the three months, they started making excuses as to why I shouldn’t stay – that I wasn’t up to scratch because I didn’t meet the standard that someone who had worked there for 12 years had, after two and a half months. They’ve written me a reference that my customer service skills and my knowledge of the job were 110 per cent sort of thing [sic], but I think it was all just a bit of a scam on their part.

Many of the changes we have seen recently that impact upon workers are also rooted in neoliberal reforms that occurred rapidly in New Zealand from 1984 onwards. A turning point for workers’ rights came in 1991, the same year as ‘the mother of all budgets’, when the National Government abandoned the Universal Benefit in favour of a targeted payment only available to certain families who were defined as low-income, and benefit rates were dramatically reduced. During this time of increased poverty and unemployment, the Employment Contracts Act was introduced. This Act irrevocably transformed the labour market in New Zealand, by disempowering the already declining union system and instead promoting individual contracts. The importance of unionisation in the workforce cannot be understated. The disempowerment of workers’ unions was found in a study cited by Wilkinson and Pickett (2010) to be the single greatest factor in contributing to increased inequalities across OECD countries.

In this time of instability and rising inequality, more families than ever need extra help. But it is becoming harder to access due to the failure of both the welfare system and the tax system to keep up with changes in the labour market. Our much needed support systems are no longer compatible with the realities of working life, and both are still based around a norm of stable consistent employment. Those with fluctuating hours must log their hours weekly, and frequently, inadvertently, this tends to result in the build up of significant debt due to government overpayments. I spoke with someone who had experienced this issue with being partly on the benefit while working:

I had a debt because it was so hard and confusing to keep track of what I’d earnt. And, just the way the system worked, I wouldn’t know exactly how much I would be earning. They want you to estimate what you think you will earn per week. But that was impossible for me to do because of the nature of what I was doing. And I think that kind of casual work is so common now, and I have this really strong feeling that the benefit wasn’t keeping up with the reality how most people in lower incomes work, which is casually, and often don’t know from week to week how much they are going to earn next week. That was definitely my situation… It just felt like they were stuck in this old way of looking at how people work, considering that the job landscape has changed…I’m living on quite a meagre amount still. I never seemed to ever quite get ahead, or to earn very much more than what I would be getting from [Work and Income] anyway.

New Zealand also has high rates of underemployment, and a passive acceptance of part-time work. This can have considerable impacts on the financial wellbeing of families, because to be eligible for the In-Work Tax Credit (IWTC) part of WFF, a minimum of 20 hours is required for sole parents. One of the individuals I spoke with had experienced the difficulties caused by this 20 hours requirement as part-time work was the primary type of work available in her field. She spoke of the discordance between the conditions required in order to receive the IWTC, and the work available to her, despite that having fewer working hours meant she needed this additional financial support.  

It was quite frustrating. I wasn’t allowed this extra tax benefit because of the nature of the work that I was doing, rather than whether I deserved it or not. It was just another sign I thought that [they] really didn’t have any flexibility around their rules and how their systems worked.

We are seeing unprecedented levels of inequality, poverty and homelessness across New Zealand. We have the research, data and stories to know the huge impact this has on children throughout their whole lives.

Working for Families was intended to reduce child poverty, and provide much-needed financial support for parents. But in order for these tax credits to continue to work toward these goals, they need to be adapted to the current reality of casualised and precarious work.

About the author: Alicia Sudden has recently completed a Masters in Development Studies which included a thesis that explored the current welfare system in New Zealand and the outcomes of beneficiaries in New Zealand. Her research was strongly focused on ground-up data gathering, drawing on experiences, outcomes and insights from former and current beneficiaries. She is currently working in the political sphere, and is keen to be a part of working towards better social security and reducing poverty in New Zealand.