Working for Families – Q & As
22 April 2008
Working for Families – Q & As
1 What is Working for Families?
Working for Families is a package designed to make it easier to work and raise a family. It is about ensuring family incomes are adequate, that being in work pays, and that our social support system encourages people into work. Its main focus is on reducing poverty and improving labour market participation by low- and middle-income families with children.
The three major
components of Working for Families are:
- Accommodation Supplement which provides help with housing costs
- Childcare Assistance which provides help with childcare costs
- Working for Families Tax Credits which provides help towards the cost of raising a family.
2 What is new
Working for Families has now become business as usual in both the Ministry of Social Development and Inland Revenue. The largest changes have already been implemented, providing additional income support to many families.
To maintain the value of Working for Families Tax Credits, a system of regular adjustments has been put in place.
What is the Working for Families Evaluation?
The Ministry of Social Development and Inland Revenue have a joint evaluation team. It is set up to determine how well Working for Families is meeting its objectives of:
- making work pay
- improving income adequacy
- achieving a social assistance system that supports people to work by making sure people get the assistance to which they are entitled.
There are four phases of work:
- Phase 1: Implementation evaluation and established regular monitoring (2004/2005)
- Phase 2: Communications and take-up evaluation (2005/2006)
- Phase 3: Data linking and longitudinal data collection (2006/2007)
- Phase 4: Time series analysis and external reporting (2007/2009).
Throughout these phases the evaluation contributes to regular reporting on package receipt, and conducts complementary research as needed.
Each phase of the evaluation results in information shared with the Ministry of Social Development and Inland Revenue policy, communications and delivery staff. In this way the evaluation informs their work and helps to ensure that the package is meeting its objectives.
In addition, there are externally released synthesis evaluation reports that bring together key findings from the evaluation and covering the latest tax year in more detail. These reports are annual, and are spaced according to when year-end taxation data becomes available.
4 What is this report about?
report is the second synthesis report on the evaluation. It
covers the tax year ending 31 March 2007, and reports on
administrative data covering that period. It also brings
together other sources of information, such as surveys
conducted in 2006 and 2007. It uses this mix of data to
describe how well Working for Families has been implemented
so far, and where to focus next.
Much of the information contained in this report was newly generated for the purposes of research and evaluation and should not be regarded as official statistics.
5 What are the main findings of this evaluation?
The report findings confirm
the successful delivery of Working for Families changes
which aim to improve income adequacy and make work
Multiple approaches by both agencies to ensure families are receiving the assistance to which they are entitled has been successful with 95-97% of families eligible for Working for Families Tax Credits receiving them.
Working for Families targets low- to middle-income families, with around three-quarters of families receiving Working for Families Tax Credits being those with incomes less than $50,000. Families are most commonly using this money for essentials like food, utility bills, children’s education, clothing and activities.
DETAILED EVALUATION Q&As
6 What is being done to ensure eligible families get their Working for Families entitlements?
Overall take up and coverage are both high. In the tax year ending 31 March 2007 371,300 received Working for Families Tax Credits, there is potential for this number to increase as people continue to apply for their entitlements. This exceeds the estimate of 360,000 families receiving Working for Families Tax Credits for the March 2008 tax year.
The eligible families receiving Working for Families Tax Credits for the tax year ending 31 March 2006, as a proportion of all eligible families, was estimated to be between 95% and 97%. This is high by international standards. This type of estimation is termed “coverage” and involves comparing the estimated eligible population to those actually receiving the package component
Inland Revenue and the
Ministry of Social Development work closely with community
groups, employers, schools and early childhood education
providers at a local and national level. They ensure that
information about eligibility and how to apply is provided
to families who may qualify.
We are ensuring continued take-up by carrying out a range of community engagement activities. For example, Inland Revenue and the Ministry of Social Development staff host Working for Families information stalls at community events and shopping malls where they can talk face to face with families who may be eligible.
Inland Revenue and the Ministry of Social
Development are working closely together to make it as easy
as possible for eligible families to receive their payments.
The following activities support the Working for Families
- an enrolment programme prior to the beginning of each tax year for existing and past recipients of Working for Families Tax Credits
- establishment of an 0800 line with extended hours
- introduction of Childcare Co-ordinators to promote Working for Families components
- proactive phone calling from Contact Centres to check clients are receiving everything they’re entitled to
- better systems introduced, including on line application forms and information sharing to make it easier for people to apply for and receive their correct entitlement.
do some people say they’re not getting Working for
Not everyone who receives Working for Families is aware that they are receiving it. Linking survey information with administrative records has allowed us to compare self-reported receipt with actual receipt. Of those people who received Working for Families Tax Credits, around 85% were aware that they received it.
From this information, it is important to note that measured awareness of Working for Families and even self-reported receipt of the package will not align directly to true receipt. It also highlights that for some people, low awareness or recognition of the package is not a barrier to receipt – they may be receiving payments and not realise it.
Doesn’t the Evaluation Report confirm that Working for
Families is welfare for the middle class, and it’s failing
to reach the people who need it most?
The report shows that Working for Families is successfully delivering assistance to, and making a difference for, low and middle income families. Nearly two thirds of all families receiving Working for Families Tax Credits in 2007 had a family income below $35,000 and over 80% had an income below $59,000.
From the tax year ending 31 March 2004 to the tax year ending 31 March 2007 expenditure on Working for Families Tax Credits increased by $1.2 billion or 118%, due almost entirely to Working for Families. Based on research data, we estimate that:
- $800 million went to families
earning less than $35,000 in 2004 and $1,300 million in
- $900 million went to families earning less than the median family income ($59,000 according to Census 2006) in 2004 and $1,800 million in 2007.
The majority of recipients said that Working for Families helped them meet their family’s needs. Payments are most commonly spent on essentials like food, utility bills, children’s education, clothing and activities.
9 Have beneficiaries missed out
on Working for Families?
Working for Families has significantly increased the average tax credit payments to beneficiaries. The fact that non-beneficiaries tend to benefit even more reflects the objective of making work pay, and there is some indication that this is helping and that beneficiaries (especially sole parents) are leaving benefit for work.
The 1 April 2007 increase of $10 per child per
week to family tax credit will have further improved the
position of beneficiaries since data was analysed for this
report. A process is in place for adjustment of the tax
credits to prevent the value of payments eroding for both
beneficiaries and working families.
10 Have beneficiaries missed out on the Accommodation Supplement part of Working for Families?
Non-beneficiary families in receipt of
Accommodation Supplement have had big improvements in
housing affordability due to Working for Families.
Beneficiary families getting Accommodation Supplement who
have other earnings have also experienced large improvements
in housing affordability.
Beneficiary families who have no other income have not gained as much from the
for Families changes to Accommodation Supplement. This is
- they are likely to live in cheaper accommodation and in cheaper areas
- the changes that target beneficiaries without earnings were to the maximum rates, so beneficiaries with the highest accommodation costs will have benefited significantly, but not all beneficiaries have really high housing costs.
As soon as beneficiaries earn income to supplement their benefit they receive additional gains from Working for Families changes to Accommodation Supplement. If you are on a benefit receiving Accommodation Supplement and earn $80 per week or more, you now get $20 per week more Accommodation Supplement than you did before Working for Families.
The biggest improvements in housing affordability due to Accommodation Supplement changes as part of Working for Families occurred in October 2004 and April 2005. There was a further improvement from 1 April 2007, when family tax credit rates increased.
11 Do all eligible children receive Childcare Assistance?
Not everyone who meets the criteria for this assistance needs or wants to put their children into formal childcare. Many families choose to use informal care, and Childcare Assistance is only available to children who go to a registered childcare provider.
The recent implementation of 20 hours Free Early Childhood Education for three and four year olds has had an effect on the number of families receiving Childcare Assistance. Childcare Subsidy cannot be paid for the same hours that Free Early Childhood Education is claimed.
The efforts of Work and Income staff such as Childcare Co-ordinators have contributed to the large increases in Childcare Assistance uptake. Since August 2004, prior to Working for Families, the total number of families receiving Childcare Assistance has increased by 58%, with the number of non-beneficiary families increasing by more than 250%. Since data was analysed for the report, there were 15,100 more children receiving Childcare Assistance at the end of February 2008 compared with February 2004 before Working for Families was introduced. Working families receiving Childcare Assistance are paid on average $83 per week towards their childcare costs.
12 What difference has Working for Families made to employment and incomes?
Work is currently under way evaluating the effect of Working for Families on employment and incomes. Preliminary results will be available in early 2009.
However we do know that since Working for Families has been implemented, New Zealand has experienced the largest fall in numbers receiving DPB since the benefit was introduced in 1973 – the number of families receiving the DPB has fallen by 12,288. The numbers used in the forecasting series and in the WFF evaluation report are based on monthly averages (from 108,768 at August 2004 to 96,480 at August 2007). At the end of March 2008 there were 95,861 DPB recipients. The numbers quoted here are based on official statistics at month end and so differ slightly from the report (from 109,700 for August 2004 to 97,200 for August 2007).
13 Does Working for Families worsen work incentives and is it bad for businesses and the economy?
Working for Families has made it financially worthwhile for families to move from benefit into work, especially sole parents.
Even so, financial incentives by themselves do not dictate behaviour. Parental work decisions are influenced by a range of financial and non-financial factors. It is difficult to determine the extent to which a change in financial work incentives translates into behavioural change.
However, the evaluation suggests that the Working for Families package and in particular the in-work tax credit is having a positive impact both on family incomes, and on incentives for beneficiaries to leave benefit and enter work.
Between August 2004 and August 2007 there was a reduction
of 12,288 or 11% in the numbers of Domestic Purposes Benefit
recipients. In the year ending December 2006, after the
introduction of the in-work tax credit, there was a 17%
increase over the previous year in the number of sole
parents saying that they were exiting the Domestic Purposes
Benefit to employment. Sole mothers’ employment rates
have increased from 47% in the March 2001 census to 52% in
March 2006. Unemployment benefit numbers have also reached
historically low levels.
14 What will Working for Families do to alleviate poverty?
A significant proportion of the Working for Families spending is going to families on lower incomes.
It is estimated that from 2004 to 2008 the Working for Families package will lift at least 70,000 children out of income poverty, on the measure used for the Social Report.
This means that from 2001 to 2008, an estimated total of 130,000 children are expected to be lifted out of poverty as a result of increasing employment, decreasing unemployment, Working for Families and other government policies – 60,000 up to 2004 prior to Working for Families, and the estimated further 70,000 from 2004 to 2008.
It is estimated that the reductions in
child poverty from the full implementation of the Working
for Families package will have moved New Zealand from its
2001 ranking of 18th out of 25 countries into the top half
of the OECD, using the OECD’s relative poverty
Have increases in costs of essential household items just absorbed all additional money available through Working for Families?
Working for Families has put considerable additional money into the pockets of low and middle income New Zealand families, and this income has helped in meeting families’ needs.
Assistance is targeted to those with lower family incomes or larger families, who generally have a greater need for assistance.
Families are saying that Working for Families is helping them meet their needs.
Changes from 1 April 2007 also mean that for the first time there is a process for adjusting the tax credits for inflation. This process is linked to changes in the Consumer Price Index. Other Working for Families components will be reviewed on a regular basis.
15 How much better off are families as a result of Working for Families?
Working for Families has changed the distribution of payments to support families. The most common amount paid for Working for Families components is $125 to $150 per week compared with $75 to $100 prior to Working for Families.
A working family earning $45,000 per year with two children now receives $317 per fortnight more in tax credits since before the introduction of Working for Families.
A working couple with four children earning $90,000 receives tax credits worth $5,954 per year.
16 Is Working for Families making a difference to people’s standard of living?
A significant proportion of the spending goes to families on lower incomes. An estimated $500 million more assistance is being delivered to families with an income of less than $35,000 per year.
The largest gains have been for families working, or moving into work, and we know that income and employment are linked to improved living standards.
Families are most commonly using this money for essentials like food, utility bills, children’s education, clothing and activities.
17 What’s the recent uptake like for each component?
Families Tax Credits
The total number of Working for Families Tax Credits recipients in February 2008 was 279,500. This figure includes 1,700 people who received payments from both the Ministry of Social Development and Inland Revenue in the month of February 2008.
February 2008 the Ministry of Social Development paid
Working for Families Tax Credits to 97,800 recipients (down
17% from February 2005 prior to Working for Families), due
to the decline in beneficiary numbers.
Working for Families – Q & AsWorking for Families – Q & As In February 2008 Inland Revenue paid Working for Families Tax Credits to 183,400 recipients – an increase of 115,600 or 170% compared to the same month prior to Working for Families.
There are also an additional group of families who will receive payments when tax returns for the year are filed.
There were 113,200 families with children receiving the Accommodation Supplement at the end of February 2008 compared to 108,400 in February 2004 – an increase of 4,800 or 4%. The number of working families with children receiving the Accommodation Supplement during this period has more than doubled from 14,200 to 35,700.
There were 30,000 New Zealand families receiving Childcare Assistance at the end of February 2008 compared to 18,700 in February 2004 – an increase of 11,300 or 61%. Of this total 21,200 were working families, not in receipt of a main benefit. This is an increase of 15,600 (278%) when compared to the end of February 2004.