1 Sep 2020

Unprecedented increase in beneficiaries - MSD report

8:08 am on 1 September 2020

The number of beneficiaries rose by 12 percent in April this year, the highest increase ever in the past 24 years, and nearly double the next biggest increase.

People; population generic

Photo: RNZ / Richard Tindiller

A report, compiled by the Ministry of Social Development, has assessed the impact of Covid-19 on welfare recipients, and compared it with other recent economic downturns.

It found that, if Treasury projections are correct, and the percentage of the working population on benefits reaches 16.2 percent, it would be the highest number ever - far eclipsing the rate of beneficiaries during the Global Financial Crisis (GFC), when it was at 12.4 percent.

It would see the country return to a rate similar during the economic recessions of the late 80s and early 90s.

"That took us a decade and a half to get over, in terms of the labour market, and it scarred a whole generation of people," said Dr Michael Fletcher, a senior research fellow at Victoria University's Institute of Governance and Policy Studies.

"That was massive. To my mind, that means what government does and the shape of recovery is going to be really, really important."

The report also found Covid-19 brought about the single largest increase in the number of people accessing welfare in one month, than any other month over the past 24 years, with the increase mostly due to people out of work who applied for Jobseeker Support.

"That reflects the absolute suddenness of the Covid-19 impact and the lockdown," Fletcher said. "[That's] not withstanding the fact that the government had introduced the wage subsidy programme to try and keep people in work."

Michael Fletcher, Senior Lecturer, AUT

Michael Fletcher Photo: RNZ / Rebekah Parsons-King

Increase in numbers being felt by community workers

Those helping families and individuals apply for benefits are reporting big increases in the number of people they're servicing.

Serenah Nicholson, the manager of Lower Hutt-based The Learning Centre and Whānau Family Support - which provides wrap-around services to vulnerable people in the area - said they became busier midway through alert level 4.

"We've seen a lot more of those whānau clients that are coming to us for building financial capability support, have lost their jobs because of Covid level 4.

"Even today at level 2, we still have clients that are trying to get onto the benefit properly."

People are turning to welfare for a variety of reasons, she said, whether it's because they've lost their job; they can't survive on the wage subsidy; or they never went back to work.

She said she knows of one family of six which is currently trying to access benefits, because the $585 per week from the wage subsidy doesn't go far enough.

"People's spirits are broken," Nicholson said. "People are not sure what to do, so what we try to do is provide all that support for them through great negotiating with Work and Income."

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Photo: 123rf

From the recession of the early 90s, to the Asian Crisis at the end of the millennium, to the Global Financial Crash 10 years ago, the economic impact of Covid-19 has been rapid.

"It's very different in the speed and severity of it," economist Shamubeel Eaqub said.

"We lost as many jobs in the space of the first four weeks of this crisis, that we would normally expect over the course of a half of a recession.

"To give you some context, in the entire GFC, we lost around 80,000 jobs over 18 months. This time around, we've lost more than 60,000 jobs in the space of six months."

How will the figures be used?

Nicholson said they were expecting things to get worse before they get better, with more people expected to apply for welfare.

"Someone has to look after these families. These are families that had jobs before, and if they didn't have any savings there's nowhere else for them to go, but get on a benefit."

With those numbers expected to grow, there are fears about the capability of the current systems in place to be able to cope.

"My concern is that as the numbers grow, making contact with services to see a case manager, or by their 0800 number, then things are going to fall apart," said Graham Howell, an advocate at the Benefit Rights Service.

There is some uncertainty around the veracity of some of the figures used in the report, with some of the numbers taken from the Treasury forecasts assembled back in May.

It's also important to note that welfare comparisons over time are difficult, based on accessibility and the type of benefit available.

Economist Shamubeel Eaqub during the Epidemic Response Committee meeting on 1 April.

Shamubeel Eaqub. Photo: Screengrab / Facebook

That's not to say the report should be thrown out the window.

"Historical comparisons are useful because we rely on past experience to frame our thinking and our decisions," Eaqub said.

"If we know how to view the current recession [and] of what the impact is, it gives a sense of urgency and scale, of what the response must be."

While the government has introduced measures which have been used in the past - most notable the wage subsidy which was also used following the Christchurch earthquake - Howell said there needed to be more fundamental reform of the welfare system.

"Long-term there needs to be a genuine re-alignment of the rates of the main benefits. The Welfare Expert Advisory Group recommendations need to be properly addressed [but] I know that's on the to-do list."

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