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  • Dan Moskovitz

Benefit sanctions to jump after Coalition welfare reform


The government last week announced a reset of the welfare system, with the number of beneficiaries sanctioned expected to spike dramatically. 

Sanctions are usually issued for jobseekers failing to meet their commitments, such as attending job interviews. They can be financial, and can result in the beneficiary's stipend being cut, suspended, or cancelled.

National is introducing a traffic light system for beneficiaries: a green level for beneficiaries meeting obligations, followed by an orange level for first and second breaches, which will result in “targeted support, such as more regular check-ins and/or attendance at job workshops.” Finally a third breach will see the beneficiary move to the red level: potential sanctions include benefit reductions, suspensions, and compulsory community work. 

“If job seekers fail to attend job interviews, to complete their pre-employment tasks, or to take work that is available, then there needs to be consequences,” said Social Development minister Louise Upston in her press release announcing the reforms. The reforms will not apply to those with permanent disabilities. 

“Penalising people who are struggling does nothing to create decent jobs,” said Green Party Social Development spokesperson, Ricardo Menéndez March in a statement. “We can prevent the further entrenchment of poverty across Aotearoa by lifting income support, adequately supporting families who transition into employment and ensuring disabled people are treated with respect and dignity.” Prior government reports on the efficacy of benefit sanctions have been damning on their lack of effectiveness. 

A 2018 report commissioned by the government stated “a very harsh sanctions regime can have important adverse effects that drive people away from, rather than closer to, employment, and might worsen rather than improve the long-term chances of children in the families affected.”

In 2019, the Welfare Advisory Group found sanctions were costly, ineffective, and compounded social harm. The report went on to state “we do not support the continued use of a financial sanctioning regime.” 2021 research from the Beneficiary Advisory Service suggested many sanctions occurred because the beneficiary in question did not understand their obligations. 

98% of disputed sanctions were overturned, implying most were applied incorrectly. 

VUW Professor of Taxation, Lisa Marriott, who studies social justice and inequality, concurs with the literature.  “We have this phrase called beneficiary bashing, and that’s exactly what this policy is,” said Marriott.  “There are relatively few groups who advocate for beneficiaries, and they’re less well represented than other groups. I think it makes them an easy target.”

A 2022 literature review from Scotland did conclude sanctions are effective in moving people into work. However, the same review also concluded sanctions are ineffective at keeping people working long-term, and could increase both health issues and sanctioned beneficiaries’ ability to financially survive.  What this results in, as Marriott explains, is beneficiaries ending up elsewhere in the system and a higher total cost than if their benefit had never been cut in the first place. 

“On average, someone without stable housing is spending 100 nights a year in hospital. The cost of doing so is enormous. When you move people into stable housing, that drops to an average of eight nights a year.

“It’s the same story with the justice system - sanctions push people into what’s called survival crime because they don’t have any way to support themselves.

“By taking away people’s minor safety nets, you’re setting them up to pop up elsewhere in the system, which is likely to cost more in the long term.” 


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