Benefit to deter job search?

Press, 6 September 1989, Page 8

Benefit to deter job search?

in Wellington

By

PATTRICK SMELLIE

Moves to standardise social welfare benefits could end up discouraging some beneficiaries from finding work, the Treasury told the Finance and Expenditure Select Committee. The answers to questions from the committee were made public yesterday. “If, as part of the establishment of the universal benefit, some rates were to be adjusted upwards, that could be argued to have a detrimental effect on incentives,” the Treasury said, in answer to a question by the Opposition spokeswoman on finance, Miss Ruth Richardson. “This is a real warning that if we get this change wrong, the incentives to be on a benefit rather than working will increase,” Miss Richardson said. She criticised the Government for announcing

the change to a universal benefit system when large chunks of detail had yet to be worked out. “A number of the details of the new universal benefit are still being developed and these could affect the incentives to participate in the labour market,” the Treasury said. But it emphasised that “an important feature of the new system will be the emphasis placed on the general expectation that long-term prospects of beneficiaries are best served through participation in the paid workforce.” The effect over time of indexing benefits within set proportions of the average weekly wage would act as a spur to seek work. “As real wage rates increase, the replacement ratio between wages and benefits can be expected to drop, improving the incentive to seek paid work.