The government introduced a traffic light system alongside financial and non-financial sanctions for beneficiaries who did not meet their obligations. Photo: RNZ / Quin Tauetau
Benefit sanctions have not worked - probably largely because there are not enough jobs for beneficiaries to move into, one economist says.
Rob Heyes, principal consultant at Infometrics, has looked at the experience of benefit sanctions introduced in 2024.
The government introduced a traffic light system alongside financial and non-financial sanctions for beneficiaries who did not meet their obligations.
It affects people on JobSeeker Support or Sole Parent Support who have work obligations, like being prepared for work, and taking part in Work and Income assessments, or social obligations such as caring for children.
If beneficiaries do not meet their obligations without good reason, they are moved to "orange" in the system. If they do not then get back on track within five days, they are shifted to "red", at which point their benefit can be stopped or reduced.
Non-financial sanctions include such things as going on a course, keeping a record of job searches, having some of their benefit put on a payment card or being sent on community work experience.
"The new, tougher policy towards beneficiaries has certainly increased the number of benefit sanctions. In the September 2024 quarter, just over 14,400 sanctions were imposed on beneficiaries compared with just under 10,400 in the June quarter and just 7500 in the March quarter. Bear in mind that the traffic light system was introduced in August 2024 - halfway through the September quarter," Heyes said.
The number had since declined to 12,900 in the September quarter last year. That was still double the number of sanctions over the three years before the new system was introduced.
But Heyes said only 1 percent of total beneficiaries were in the red zone, and another 1 percent at orange. That had been consistent, he said.
"If you look at the proportion of beneficiaries that are either orange or red, it's tiny and that's not a measure of the effectiveness of the policy … it's a relatively small number of people who are under sanctions. So, the effectiveness of sanctions in getting people into work is always going to be small."
He said in the 15 months to 25 September, about two-thirds of sanctions were because people had not attended Work and Income appointments or appointments with another service provider, or because they were not preparing for work. A relatively small number were for people not participating in work, he said.
Three-quarters of those sanctioned had their benefit reduced.
But people aged 15 to 24 were over-represented, making up 46 percent of all sanctions despite being only 19 percent of beneficiaries.
Men were also more likely to be sanctioned, at 68 percent of sanctions and 45 percent of beneficiaries. Māori and Pacific people were also more frequently sanctioned.
"Young people, Māori, and Pacific people are already over-represented in beneficiary statistics, which alone makes them more likely to receive sanctions. Being over-represented in sanctions statistics is a double whammy," Heyes said.
"I wouldn't want to suggest Work and Income are targeting men and young people more than other groups… working through all of this, the conclusion I came to was that I do hope that certainly before the policy was implemented and maybe afterwards as well, that ministers or officials are sitting down and having conversations with Work and Income staff.
"If I was the minister, I'd be wanting to talk to people who are the other side of the glass in Work and Income, talking to beneficiaries and have that on the ground understanding of how it works and how these sanctions work. The quantitative analysis is all well and good, but talking about people's lived experience and you need that kind of information, I think, to really understand the nuance of that policy."
He said the government expected the sanctions to push people into work but jobs were scarce and there were concerns people could end up pushed into poor-quality work or out of the system and into worse poverty.
He said the Ministry of Social Development could not give data about people coming off sanctions and finding work because it could not link the sanction and the job.
"If it is difficult to track someone who enters work, it will be even harder to track other outcomes. If people sink further into poverty and more vulnerable circumstances, they are more likely to fall through the cracks and therefore not show up in any datasets."
He said it was not the best time to have implemented this sort of policy.
"There simply aren't a great deal of jobs for people to go into.
"When jobs start to appear, then it might be more effective. But as I say, the numbers that have been sanctioned are so small you probably wouldn't see a big difference."
The government set a target of 50,000 fewer people on JobSeeker Support by 2030, Heyes noted.
"Using the December 2023 quarter as its base, that's a fall from 190,000 to 140,000. When the traffic light policy was introduced in the September 2024 quarter, the number of Jobseeker Support recipients had risen to just under 205,000 and by the September 2025 quarter, the number had risen again to 218,000."
He said it could be argued that JobSeeker numbers would be even higher without sanctions "but that's a hard sell when job vacancies are so scarce. I think it works best when the labour market is creating lots of jobs. You've got to strike a balance between pushing people too hard and not pushing them hard enough".
"I think that JobSeekers do have obligations, they're effectively earning a wage from the taxpayers. There are obligations and there's not a sanction at the moment in New Zealand for not getting into work. It's about looking for work. I'm reasonably comfortable with it."
But he said it was worth considering whether financial sanctions were necessary when non-financial sanctions were available.
"You've got major charities like the Salvation Army saying people are coming to us who've had their benefits cut ... that's not really helping anyone."
Social Development Minister Louise Upston has been approached for comment.
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