Income support and other assistance for sole parents in New Zealand A comparative summary with other OECD countries MAPP555, 13 September 2012

Who are sole parent families? MAPP555, 13 September 2012

Why do governments care about sole- parent families? MAPP555, 13 September 2012

Total spend on families MAPP555, 13 September 2012

Income support for non-working sole parents DPB (Domestic Purposes Benefit) for non-working sole parents who: are the parent of a child under 18 who is dependent on them; are not in a relationship with the other parent; do not have a partner or have lost the support of their partner; are 19 or over. (Source: Work and Income benefits/domestic-purposes-benefit-sole-parent.html) benefits/domestic-purposes-benefit-sole-parent.html MAPP555, 13 September 2012

Income support for non-working sole parents (cont.) How much can you get if you are a non-working sole parent? A maximum weekly rate at $ net or $ gross. In addition: A maximum hospital rate at $42.38 net or $47.35 gross is also granted. (Rates applied as of 01 st April, At: Work and Income procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_pare nt_tables.htm) procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_pare nt_tables.htm MAPP555, 13 September 2012

Income support for non-working sole parents (cont.) But: following changes will be applied from 15 th,October, 2012: Youngest child between five and 13: look for part-time work (any suitable job between 10 and 20 hours a week); Youngest child aged 14 or older: look for full- time work (any suitable job between 20 and 40 hours a week). (Source: Work and Income parents.html) parents.html MAPP555, 13 September 2012

In comparison with other OECD countries Australia: similar support for sole parents with residency for 2 years with the amount of AUD 546.8/ fortnight + medical allowance of AUD5.8 but work testing applied; Chile, Mexico and USA: no similar direct supports; Denmark: supports provided in the Family Allowance for a child aged 0-17 at DKK 4,363/year; Spain: no ongoing support but does have a one- off birth grant at a maximum about of EUR 1,000 (Source: OECD MAPP555, 13 September 2012

Employment Incentives for Sole Parents in New Zealand New Zealand’s background in supporting sole parents Income support and tax cuts Free and efficient childcare Jobs with family friendly hours 1/3 of sole parents in New Zealand currently have no interaction with the benefit system due to incentives and 40% appear to have had 20 hours or more of paid work per week as of June 2009 MAPP555, 13 September 2012

The OECD and Incentives Incentives provided by other countries in the OECD include: Within the USA they have the Personal Responsibility & Work Opportunity Reconciliation Act which is a time-limited benefit France adopted the 35-hours work policy which provided flexible hours for workers within firms It also has a highly developed universal pre-school system for two to six year olds

The OECD and Incentives Continued The United Kingdom under the Blair government had a large focus on reducing child poverty and unemployment where sole parents receive up to £20 a week for up to 6 months if they agree to look for work and then £40 if they do receive a job MAPP555, 13 September 2012

Sole parent employment rates across the OECD, around 2007 MAPP555, 13 September 2012

Who should pay child support? All parents not living in the same household as their children Who should determine child support payments in NZ? * Child Support Agencies and in NZ it is the IRD Aim of the child support is to support children whom * Their parents had split up Two people who had a child but aren’t living together Child Supports and Childcare Supports

*The person caring for the child generally applies for child support. We call this person the custodian. *A standard formula is used to calculate how much child support must be paid by the paying parent. *The annual amount is divided into monthly amounts, than the CSA let the paying parent know how much they need to pay, and the custodian know how much they will receive. * The money than passes on to the custodian to assist with the care of the child, or the government, if the custodian is receiving a sole parent benefit like the DPB. How does child support work?

Comparing child support in NZ with other OECD countries Who determines child support payments? Rigid v discretion in determining child support levels Age of child for payment requirements

Childcare support

Net childcare costs for a sole-parent family with full- time earnings of 67% of the average wage, 2004 MAPP555, 13 September 2012

What interventions work? Increased financial support for working has been shown both nationally and internationally to help encourage sole parents into full-time or part-time work (OECD, 2008; DoL and MSD, 2002). In-work benefits similar to the in-work tax credit have been shown by the OECD to effectively improve work incentives. MAPP555, 13 September 2012

Sole parents’ employment increased due to the working for families changes estimated additional 8,100 sole parents engaged in some paid work as a result of the WFF changes increased numbers of sole parents were working 20 hours a week or more. Sole parents’ periods of benefit receipt were shorter and sole parents previously on benefit were staying off benefit longer.

Future of support for Sole Parents in New Zealand Ongoing support Additional registration requirements?

References Work and Income benefit-sole-parent.html; benefit-sole-parent.html Work and Income procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_parent_tables.htm; procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_parent_tables.htm Work and Income parents.html; parents.html OECD procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_parent_tables.htm purposes-benefit.html purposes-benefit.html purposes-benefit.html Families Commission (2010), Economic Wellbeing of Sole-Parent Families OECD (2011), Doing Better for Families OECD (2011), OECD Family Database, OECD, Paris.

Examples of financial assistance available to NZ Single parents Domestic Purposes benefit (DPB) – financial assistance to provide for bare necessities Accommodation Supplement – helps cover costs of housing Disability allowance – if your child has a disability or medical condition Childcare subsidy – if your child/ren attend a childcare centre Oscar Subsidy – if child/ren attends after-school programme or holiday programme Working for families – payment provided to all families with children under 18 if income <$120,500 per year In-Work Tax credit of $60 per week – If working 20+ hours per week Child support – if custodial parent - collected by IRD from non- custodial parent MAPP555, 13 September 2012

Income support for sole parents [Specific direct income support – eg DPB in NZ] How does this compare with other OECD countries? (eg Australia similar but work and means tested, Spain has no ongoing support but does have a one- off birth grant, Chile, Mexico and USA have no similar specific direct support) Source: OECD policy summary Which of these differences do we think is the greatest/ most significant in terms of outcomes sort esp in NZ setting? MAPP555, 13 September 2012

Employment incentive for sole parents Not all parents are the same. Female Sole Parents who received DPB were –likely to have few work skills, work experience and restricted access to reliable and affordable childcare (MSD, 2003) Interventions for work-ready sole parents focus on financial incentives and reducing external barriers eg improving access to quality childcare and finding jobs with family- friendly hours (OECD 2008 in IRD/MSD 2010) MAPP555, 13 September 2012

NZ interventions for promoting sole parent employment the Independent Family Tax Credit in July 1996 (later renamed the Child Tax Credit) payable to families not receiving an income- tested benefit or New Zealand Superannuation abatement rates in July 1996 that encourage sole parents receiving Domestic Purposes Benefit (DPB) and Widow’s Benefit to work part-time work-testing for sole parents with children over the age of 6 years in February 1999 (coinciding with an 8% decline in DPB numbers) and its subsequent replacement with Enhanced Case Management in March 2003 (coinciding with a 4% decline in DPB numbers). MAPP555, 13 September 2012

Childcare and other supports Free 20 hours childcare Maternity leave MAPP555, 13 September 2012

How effective have supports been in the New Zealand experience Working for Families – implemented October 2004 to April Main objectives: –make work pay by supporting families with dependent children so that they are rewarded for their work effort –ensure income adequacy with a focus on low and middle income families with dependent children to address issues of poverty, especially child poverty –achieve a social assistance system that supports people into work, by making sure that people get the assistance they are entitled to, when they should, and with delivery that supports them into, and to remain in, employment MAPP555, 13 September 2012

Sole parents’ employment increased due to the working for families changes In the quarter ended June 2007, there were an estimated additional 8,100 sole parents engaged in some paid work as a result of the WFF changes, increased numbers of sole parents were working 20 hours a week or more. Sole parents’ periods of benefit receipt were shorter and sole parents previously on benefit were staying off benefit longer. In 2007, two out of five sole parents who were not employed considered themselves available to work. MAPP555, 13 September 2012

Conclusions and potential focus Summary of presentation Outline of any potential lessons that can be learnt from other OECD countries Where is NZ heading? MAPP555, 13 September 2012

Income Support & Assistance for sole parents in NZ for Domestic Purpose Benefit Who can get it? *Parent of a child under 18 who is dependent on you *Not in a relationship with the other parent *Do not have a partner or you have lost the support of your partner *18 or over (or if they were legally married or in a civil union *Must be a New Zealand citizen or permanent resident *Have lived in New Zealand for at least 2 years at any one time since becoming a New Zealand citizen or resident (unless you are a refugee) MAPP555, 13 September 2012

Important statistics about DPB *As of February 2010, there were 97,000 New Zealanders on DPB for sole parents in February *43,000 sole parents on DPB have a child aged six and over. *Over half had one child and 30 per cent had two children. *Māori make up 38 % of DPB sole parents who will be *Pacific Island people make up 8 %. *12,500 DPB who will be work-tested have recent work experience or have completed training. *New Zealand is one of the few countries in the OECD to have no work expectations for sole parents with children aged under 18 years. *15 per cent of sole parents on DPB have been in some paid work during the last year. *number of sole mothers who work full-time has increased significantly in the last 15 years. *Sole mother full-time employment rates increased rapidly when work tests were previously introduced for people receiving DPB ( ). Important statistics about DPB *As of February 2010, there were 97,000 New Zealanders on DPB for sole parents in February *43,000 sole parents on DPB have a child aged six and over. *Over half had one child and 30 per cent had two children. *Māori make up 38 % of DPB sole parents who will be *Pacific Island people make up 8 %. *12,500 DPB who will be work-tested have recent work experience or have completed training. *New Zealand is one of the few countries in the OECD to have no work expectations for sole parents with children aged under 18 years. *15 per cent of sole parents on DPB have been in some paid work during the last year. *number of sole mothers who work full-time has increased significantly in the last 15 years. *Sole mother full-time employment rates increased rapidly when work tests were previously introduced for people receiving DPB ( ). MAPP555, 13 September 2012

References procedures/deskfile/main_benefits_rates/domestic_purposes_benefit_sole_parent_ta bles.htm focus/domestic-purposes-benefit.html focus/domestic-purposes-benefit.html focus/domestic-purposes-benefit.html Families Commission (2010), Economic Wellbeing of Sole-Parent Families OECD (2011), Doing Better for Families OECD (2011), OECD Family Database, OECD, Paris. MAPP555, 13 September 2012