Benefits have been indexed to inflation rather than wages for good reason – to ensure there is a big enough gap between the two to make work more attractive than a benefit.
Lindsay Mitchell points out that the previous government understood the danger of this:
“…it is desirable to create a margin between being dependent on a benefit and being in employment….
The Labour Party isn’t the party that says living on a benefit is a preferred lifestyle. Its position has always been that the benefit system is a safety net for those who are unavoidably unable to participate in employment. From its history, the Labour Party has always been about people in employment.”
Michael Cullen, 2008
This is supposed to be a government of kindness but linking benefit increases to wage rises is false kindness, cruelly disincentivising work and trapping more people in poverty.
The Taxpayers’ Union points out that beneficiaries are getting something denied to the people who pay the taxes that fund the benefits:
The indexation of benefits to wages means that taxpayers are treated less fairly than ever, says the New Zealand Taxpayers’ Union.
Taxpayers’ Union spokesman Louis Houlbrooke says, “The Government says it’s fair to index benefits to wages because we already do this with superannuation. So about tax brackets? These aren’t indexed to inflation, let alone wages. The result is that each year, taxpayers keep less, while beneficiaries get more.”
“Politicians often say we cover the costs of super and benefits by increasing productivity. But under this Government’s policies, increases in productivity will automatically trigger hikes to benefits and super, meaning we can never dig ourselves out of this spending hole.”
Mike Hosking also raises the issue of productivity:
Most who got a three per cent wage rise did so because they did something productive. They made more, produced more, worked more – that’s the productive side of the economy. That’s how you incentivise people: there is reward for work
Beneficiaries got the same rise, that’s the non-productive side of the economy. Nothing more was produced, but more was put into it. And that is why the money is gone and we are borrowing.
Economies grow because of productivity, not because of non-productive spending. You need one to fund the other, and one must be stronger than the other. That’s how you move forward, run surpluses, and afford to cover difficult days.
A level of redistribution, the likes of which we are currently experiencing, leads nowhere sound fiscally. It makes us increasingly vulnerable to global shocks, and we are too small to be running that risk.
The spread of coronavirus (COVID-19) is bringing a global shock ever closer, threatening jobs and increasing the likelihood of more people on benefits.
It is neither kind nor sensible to be doing anything that will discourage work and add to the burden placed on taxpayers.