Impacts of the Families Package and subsequent changes

Earnings bunching at benefit abatement thresholds: evidence from recent policy changes

The Ministry of Social Development commissioned Motu Economic and Public Policy Research to undertake this study. Abatement thresholds for main benefits such as Jobseeker Support (JSS), Sole Parent Support (SPS), and Supported Living Payment were raised in April 2020 and April 2021. The team analysed the effects of these changes on recipients’ employment and earnings behaviour, and their net incomes.

Results show no sign that more recipients chose to work because of the increase in abatement thresholds. There is evidence of some ‘bunching’ of weekly earned income around the thresholds. Despite this bunching, estimates of the behavioural responses to the abatement threshold incentives are relatively small. They are much smaller than those found in a study that look at responsiveness of taxpayers to New Zealand tax thresholds.

The lack of responsiveness found in the study may be partly due to a lack of awareness of abatement settings. Another possible explanation is that people are not able to adjust their earnings readily.

People receiving main benefits experienced improvements in economic wellbeing and housing conditions

We commissioned the Roy McKenzie Centre for the Study of Families and Children to track trends in wellbeing over time for people receiving and not receiving main benefits and compare trends for different family types from 2008 to 2020.

Researchers found that people receiving main benefits experienced greater improvements in economic wellbeing and housing conditions from 2016 to 2020 than those not receiving a main benefit. However, people receiving main benefits still scored lower than those who were not.

There were differences between family types over time for some indicators, but no family type consistently experienced better or worse outcomes on all the indicators.

Families’ incomes did not bunch and shift in response to the 2018 increase in the Working for Families abatement threshold

We commissioned Motu Economic and Public Policy Research to look at whether parents responded to changed work incentives that resulted from increasing the abatement threshold for Working for Families as part of the Families Package.

The study focused on whether there were responses to changes in the financial incentives around abatement thresholds that occurred with the Families Package.  The researchers found no evidence that parents responded to this particular change in financial incentives.

The introduction of the Winter Energy Payment had positive effects

We commissioned Motu Economic and Public Policy Research to estimate the impact of the Winter Energy Payment on a range of outcomes. 

Researchers found that the Winter Energy Payment had mildly positive effects for recipients. Estimates suggest that during the winter months recipients spent more on energy, required less hardship assistance, and experienced improvements in some health and wellbeing outcomes. However, only a few of these estimated effects were statistically significant.

Accommodation supplement changes in the Families Package did not lead to a notable increase in rents

A study we commissioned Motu Economic and Public Policy Research to undertake found that the Families Package increases to maximum possible Accommodation Supplement rates did not lead to a notable increase in the rents people pay. After two years, around 90 percent of the extra increase in assistance in areas with higher increases in maximum rates was captured by Accommodation Supplement recipients, not landlords, as an increase in after-rent income.

Long-term trends show no evidence of rents for Accommodation Supplement recipients increasing faster than overall rents for new tenancies following the Families Package changes.

Income gains in the first year of the Families Package averaged $55 per week for recipient families

We looked at how incomes changed in the first year following implementation of the package. We estimated that over half of all families with children received Families Package payments in its first year, with an average increase in payments for recipient families of $55 per week.

This study could not be undertaken until well after implementation, so that we could count the extra income that families could receive as a lumpsum after the end of the first tax year. It does not capture the full income gains from the Families Package because Best Start and the paid parental leave extension were not fully implemented in the first year, and the Winter Energy Payment was paid for a shortened period.

Mothers in the first cohort to qualify for Best Start and extended paid parental leave gained $6,800 in income on average in the first three years of the policy

This article examines the size of the income gains for mothers in the first cohort to qualify for Best Start and extended paid parental leave up till their children's third birthdays. Using linked administrative data, the authors estimate that having a birth on or after 1 July 2018 increased financial assistance received by mothers by almost $6,800 on average when compared to pre-reform cohorts (a 5% increase in total income). For Māori mothers, the average increase was almost $9,600 (a 7% increase in total income). This natural experiment offers new opportunities for research on the causal effects of increased financial assistance in children's early years on life-course outcomes

Mothers in the first cohort to qualify for Best Start and extended paid parental leave gained an additional 10 percent increase in income as a result in the first six months of the policy

This study focussed on the effects of the changes to early-years entitlements that introduced a Best Start tax credit (replacing the Parental Tax Credit) and increased paid parental leave in the first six months. Mothers and first parents in same-sex couples in the first cohort to qualify gained an additional $55 p/w as a result. This is equivalent to an extra 10% increase in their income, on top of income gains from other parts of the Families Package.