New Zealand Unemployment Rate Reaches 4 Percent with People Remaining on Benefits for an Average of 13 Years – Modelli

New data indicates that the average duration for individuals in New Zealand to remain on government benefits is 13 years. This information surfaces as unemployment rates escalate to four percent—the number of unemployed people rising to 122,000 in the December quarter. Underutilization also increased to 10.7 percent.

The “Jobseeker” benefit, originally intended to provide short-term support for those between jobs, has turned into a long-term commitment. Recipients are now likely to spend an average of 13 years on state support, an increase of 23 percent since 2019. The Ministry of Social Development (MSD) commissioned actuarial firm Taylor Fry to prepare this new estimate.

Moreover, young individuals and sole-parent support beneficiaries face a bleak outlook, with hundreds at risk of spending their entire working lives on government benefits at a future cost of nearly $1 million per person.

Rate Has Been Increasing for Some Time

Surprisingly, these estimates were climbing even before the COVID-19 pandemic took effect. The slowing rate at which individuals exit the benefit system, along with a rise in former beneficiaries returning to the system, have contributed to these concerning numbers.

Based on these stats, the 626,000 New Zealanders receiving benefits last year are projected to collectively spend an additional 6.43 million years on income support.

Louise Upston, the Social Development and Employment Minister, expressed concern over these reports. She attributes the trend to the previous government’s failure to prioritize transitioning people from welfare into work, leading to the prolonged dependence on benefits.

Employers Warn Worse is Yet to Come

Employers anticipate higher unemployment rates in the future, indicating fewer job opportunities. Alan McDonald, Advocacy head for the Employers and Manufacturers Association, mentioned that members had been inquiring about restructuring and redundancies towards the end of 2023, which are anticipated to contribute to the ongoing rise in unemployment. The Ministry of Social Development (MSD) stated that this model is part of their ongoing research to inform employment strategies and target investment, recognizing the need to comprehend income and housing support demographics.

Steven Youngblood, a former adviser to MSD’s chief actuary, emphasized the high susceptibility of struggling young people to long-term poverty. Concerns rose as financial and social implications were pointed out for those who remain on welfare. The analysts noted that the unemployment data did not bode well for mortgage holders either, as the Reserve Bank of New Zealand’s indication of a 4.2 percent unemployment rate in its November forecast likely means interest rate cuts would not occur soon.