This article was first published in Touchstone in May 2021.
There is great activity going on outside my office window and has been for a few months now. The Christchurch Methodist Mission demolished an older house that needed much renovation and is building four one bedroom accessible units. These new units will grow the number of existing units at Wesley Village.
Perhaps my love and fascination with building projects is because my father was a joiner and built our family home. Or perhaps it is because the housing crisis is still with us in 2021 and I know that older people that rent, especially older women are very vulnerable. Or perhaps it is knowing that there are increasing numbers of older people who are dependent on temporary support payments to supplement their pension to pay the rent?[1]
Many people who live in rental accommodation struggle to make ends meet financially when they retire because Government Superannuation is not enough to cover their living costs. A single person and living alone receives $437 a week on NZ Superannuation which is $22,721 per annum.[2]
Housing costs have risen dramatically recently which makes survival particularly challenging for people trying to live on a benefit. I attended a Housing Forum in Christchurch recently where Dr Rosemary Goodyear presented Stats NZ Housing in Aotearoa 2020 report[3] which was fascinating. The report noted that the housing and housing related costs have increased above the inflation rates. Insurance costs have tripled in the past decade – up 217%; rates have increased 63%; and electricity costs have increased 32%. This is compared with the inflation rate over the past decade which was 18%.
As a result many people cannot afford to heat their homes. This means that one in five of us are living in a cold home and 33% of these cold homes are at temperatures lower than 18-22°C - which is the recommended temperature for a healthy lounge.
House prices have risen faster than wages, especially in Auckland and Wellington. Auckland is the most unaffordable city to live in and sole parents fare the worst. The report stated that one in ten children living in rental accommodation did not have access to a fridge.[4] This is often because the whānau/family does not have the funds to pay for the costs of moving so therefore large items like refrigerators and beds have to be left behind, which negatively impacts on their health and wellbeing.
The effects of the housing crisis disproportionately affect whānau in our communities that live in poverty. If you live on a benefit you are usually really good at making sure every dollar stretches. The trouble is there are just not enough dollars.
The Methodist Alliance Working Group that is campaigning to increase benefit and abatement rates meets monthly. They are joining with others working on this issue and pooling resources, energy and passion.
Since 1986, a wide range of universal benefits became more targeted and now have higher thresholds for access. Housing availability and costs have escalated in response to reduced state investment in social housing and increased demand for housing, in part because of immigration driven population increases. As a result, benefits no longer provide for the most basic needs of recipients - accommodation, food, and power. This leaves many people dependent on emergency grants, food banks and high cost debt just to survive.
The current benefit system keeps people in a poverty trap and does not support them to gain sustainable employment to increase their incomes, safety, and wellbeing. Benefit levels have steadily declined in relation to average wages and purchasing power since 1986. For example, the adult unemployment/job seeker benefit is down from 45% to just 24% of the average wage.[5] This means if the adult Job Seeker benefit, which is currently $258.50 per week, was restored to the 1986 level of 45% of the average wage it would be $411 per week, similar to the Covid-19 support of $485 per week.
The abatement threshold is the amount a person can earn before the abatement tax rate of 70% kicks in. This was established in 1986 and based on 15 hours work per week at the minimum wage which at the time was $80 per week.
On April 1 2021, the abatement threshold[6] increased to $160 per week which is equivalent to eight hours per week at the current minimum wage of $20 per hour. Fifteen hours at today’s minimum wage would mean an abatement threshold of $300. Allowing people to work for 15 hours before their earnings reach the abatement threshold provides an incentive to enter the workforce and an opportunity to start with meaningful part-time employment. Part-time employment is often a critical step in helping people surviving on a benefit to contribute to Aotearoa New Zealand’s economy.
The low abatement threshold is a major factor that keeps people in the poverty trap. For many people the additional costs of transport, childcare, and employment related expenses for suitable clothing and training etc. means that the abatement rate acts as a barrier to employment. There are recent articles on this topic if you want further reading.[7]
I look forward to living in a just and inclusive society where the benefit and abatement rates mean people can live with dignity and participate fully in their communities. I also look forward to having new neighbours over the office fence.
Carol Barron, National Coordinator of the Methodist Alliance
[1] https://www.stuff.co.nz/life-style/homed/housing-affordability/300236562/pensioner-reliant-on-temporary-support-to-make-rent-as-housing-market-shuts-out-retirees
[2] https://sorted.org.nz/guides/retirement/this-years-nz-super-rates/
[3] https://www.stats.govt.nz/reports/housing-in-aotearoa-2020
[4] Ibid
[5] Stats NZ average wage of $1,197 per week in 2020
[6] The abatement threshold is the point at which each additional dollar is taxed at 70c plus the individual’s tax rate.
[7] https://thespinoff.co.nz/politics/06-04-2021/how-the-housing-package-leaves-renters-and-beneficiaries-behind/
https://www.interest.co.nz/opinion/109868/girol-karacaoglu
https://www.nzherald.co.nz/nz/bernie-smith-budget-a-chance-to-address-insufficient-income-support/VHYTXK6W6XIPNS4CQCWKDZMZHE/
https://www.stuff.co.nz/environment/climate-news/124759587/a-just-transition-is-more-than-just-retraining-workers