The Introduction of Compulsory Income Management into New Zealand's Social Security System: The Case of the Youth Service Package

Abstract

As part of its 2012 Youth Service package, the Government has introduced compulsory income management for recipients of the new Youth Payment and Young Parent Payment benefits. The scheme involves dividing beneficiaries’ payments between automatic redirections for rent and other bills, an electronic payment card that can only be used for food and groceries and a cash payment of no more than $50 per week The only other country to operate comparable programmes is Australia which introduced income management in 2007 as part of the Northern Territory Emergency Response. This paper presents a preliminary assessment of the income management scheme introduced in the Youth Service package. We examine the design of, and apparent rationale for, the policy and consider some of its implications. We also compare the New Zealand policy with the way income management operates in Australia. We conclude that there is no evidence of widespread poor expenditure patterns amongst the two target groups that might justify the blanket application of the policy; that the design of the scheme inhibits people’s ability to budget optimally; and risks a number of negative and perverse outcomes. It appears that the rationale underlying the use of income management is to deter benefit receipt rather than to assist with financial management. In our view, this is not an appropriate use of the policy, especially if in doing so the scheme also risks negative outcomes.