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Social Unemployment Insurance

The Government proposal for social unemployment insurance (SUI) aka 2-tier welfare is imminent. If implemented, it would be the biggest change to New Zealand’s welfare system since the introduction of ACC in 1974, and has been designed behind closed doors.

We are concerned that:

1. SUI is being prioritised instead of welfare reform, and will do far less to reduce child poverty.

o Thus far, it seems parents who leave work to look after children, for example after leaving abusive relationships, will be excluded from SUI

o SUI is time-limited: after a short period, it will exclude parents with chronic disabilities

o It is unclear how will SUI include people in (multiple) part-time jobs, self-employment, casual and precarious work, if at all.

o SUI is unnecessary; it is possible to reduce unemployment-related financial distress via adequate welfare which would also better address many other issues (such as child poverty).

o The Welfare Expert Advisory Group explicitly rejected SUI in its 2019 report, stating: "we do not recommend changing our social welfare system to a social insurance model"

2. It is unclear that the SUI (and its development) will uphold te Tiriti o Waitangi

o For such a big change - potentially involving investment funds - has there been co-design with te Tiriti partners, and iwi & hāpū involvement in the proposal from the beginning?

o The SUI forerunner - the Covid-19 Income Relief Payment - produced discriminatory outcomes: Pākehā applicants were more likely to receive it than Māori or Pacific applicants. How has the policy process changed to ensure this does not happen again?

3. SUI will add to poverty traps (high clawbacks & levies) for families on low- and moderate- paid-work incomes

o A new SUI levy of 1%-2% will be subtracted from every additional dollar earned. This comes on top of a recently-announced increase in the clawback for Working For Families tax credits (from 25% to 27% abatement) from April 2022 which is set to reduce entitlements for 89,000 families. Some families may only receive 5 to 7 cents (or less) of every additional dollar earned, after they pay PAYE income tax, ACC levy, SUI levy and have clawbacks for Working For Families and Accommodation Supplement and compulsory student loan repayment.

For more information see:

Social Unemployment Insurance: Concerns From Equity And Anti-Poverty Perspectives (Child Poverty Action Group)

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