Have we already gone too far down the hammock road

Discussions about the DPB have been doing the rounds. It seems The Grey Shade has been offline for the last few days doing some research and calculations on how much people will earn under various benefit low income scenarios. Whilst the calculations are welcome, the conclusions are seriously flawed and apparently in contradiction with his observations in passing.

"In NZ we try to minimise child poverty and benefits (particularly for families) are set at a level designed to achieve that. The circumstances of low-income working families are little different to beneficiaries so any objection to beneficiaries having children should, to be consistent, also apply to low-income working families. This point is strengthened by considering that many working families may, in fact, be classified as beneficiaries. Consider a single-income two-parent family with two children paying $200 pw rent in Napier. If they eanr $560 per week they will still be eligible (just) for an unemployment benefit of about $7 per week (plus accommodation supplement and family support). They would have a disposable income (after rent, tax and benefits) of $365 pw but would be classed as beneficiaries (if they bothered to apply or were already on it). On the minimum wage ($320 per week?) the unemployment benefit would be $174 per week and the disposable income $334 pw. With incomes of $80 pw or less the benefit is unabated at $330 pw and the disposable income will range from $223-285. Single-income two-parent beneficiary families with two children, living in secondary centres and paying $200 pw accommodation costs, therefore have weekly disposable incomes in he range $223 - 365 (with most over $285). On the average wage ($40,000 py) the disposable income increases to only $414. Hardly enough to define the difference between poverty and plenty...."

"United Future's income-splitting policy would also help but only a complete move to a universal "basic income" system will restore complete fairness to families (and others). Such a move would have the interesting side effect of eliminating the (increasingly artificial) distinction between beneficiaries and workers thereby making Judy Turner's press release and this posting impossible.
"

So we have a well set out argument showing there is very little difference at the margin for a working person between full reliance on the state and someone on the average wage.

His "Hardly enough to define the difference between poverty and plenty" highlight the very problem that New Zealand is faced with. Compared to its average incomes there is an over generous system of benefits that drains any incentive to work. For those capable of earning say 80% of the average wage, they may as well take a benefit and work 10 hours a week for cash. The difference between $414 and the upper range of beneficiary incomes of $365/week is only $49. They would be far better off working 10 hours at $10/hr and having the rest of the week off.

Fundamentally flawed incentives. And like so many of the left the wrong conclusions are drawn.

Greyshade cites Keith Rankins, universal benefit, which skirts quickly over the disincentives to work posed by high beneficiary income compared to work.
There should be a clear and substantial gap between benefits unearned and wages paid. There should also be reasonable time limits on benefits. In that we differ.

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The biggest problem in creating such a gap is the means-tested benefit system we have in this country. That is what creates ridiculously high abatement rates (effective marginal tax rates) for middle income families. If we had universal things like, for example, a child benefit, then the gap between working and not working would be a) bigger and b) more consistent, because other things would be less likely to abate away as your wage income increased...

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