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1600 beneficiaries moving into work each week? When a lot is not a lot

by Michael Fletcher

In recent weeks the Prime Minister and other Government Ministers have been fond of claiming that 1,600 beneficiaries are leaving the benefit and going into jobs every week (see for example National’s election policy statement). It’s an impressive sounding claim. So impressive that it has led some to question its veracity. Even the usually reliable Radio New Zealand reporter Brent Edwards chalked it up as a porky on his ‘Fact or Fiction’ page covering election campaign claims.

The truth is the Prime Minister’s number probably is correct but, far from being an impressive statistic, it suggests that after all the turmoil of his welfare reforms, Work and Income New Zealand has got worse rather than better at helping people find jobs.

First, let’s clarify what the 1,600 figure is. The claim Government is making is that 1,600 people are moving off benefit each week with an ‘exit destination’ recorded as going into employment. Multiply by 52 and that is 83,200 people. But as Brent Edwards points out:

“The number of people on benefits did not fall by that amount. In June 2013, 309,782 people received main benefits. By June this year that had dropped to 293,586, a decline of 16,196. On a weekly basis that is 311 people moving off benefits, not 1600.”

The mistake Edwards - and others - have made is to confuse what economists call ‘stocks’ and ‘flows’. Over the year the total number of people on benefit (the stock) has fallen by 16,196. But labour markets are highly dynamic things and there’s a great deal of churning on and off benefit. The total number of people who left a benefit to take up work (the flow into employment) could well be 83,200. Indeed I have no reason to doubt the Government’s claim to this effect.

So should we be impressed by the Prime Minister’s 1,600 per week statistic? Not at all. It’s actually slightly worse than the equivalent figure his Welfare Working Group gave in its 2010 Issues report where it set out what it saw as the problems that needed fixing in our welfare system.

That report showed that between June 1999 and June 2005 the average number of people leaving one of the four main benefits to go into employment was 1,690 per week. The figures come from Table 3.2 on page 11 (the Issues report is available here). Comparisons at different points in time can be tricky, but this one is a reasonable approximation – both relate to periods of strong labour demand, and the total number of people on benefits is roughly the same then and now.

The ‘1,600 per week’ figure has two worrying implications. First, it is evidence that the welfare reforms have done little or nothing to improve Work and Income’s performance at helping people into work.  So far we have had scant evidence of the impact of the reforms. This figure is the first suggestive information that they may in fact be failing at one of their fundamental objectives – that is, to significantly increase the number of beneficiaries moving off benefit and into a job.

Second, it raises the concern that the reduction in the ‘future liability’ of the welfare system, which Minister Bennett announced so proudly a while back, is the result of preventing access to benefits and encouraging non-work exits, not promoting access to work.

Roughly speaking, the ‘future liability’ is an estimate of likely life-long future benefit costs of those currently on welfare. Government wants it to be the key performance indicator for Work and Income, even though the measure provides no information about people’s lives or employment circumstances once off the benefit.

Work and Income can get the future liability figure down in two ways – getting people off benefit, or reducing enrolments. The 1,600 per week figure can’t prove the point but it is another piece of evidence suggesting the Government’s focus is more on preventing access to welfare and on discouraging benefit receipt than it is on finding jobs for beneficiaries.

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