{"id":75964,"date":"2025-10-13T15:59:11","date_gmt":"2025-10-13T15:59:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/75964\/"},"modified":"2025-10-13T15:59:11","modified_gmt":"2025-10-13T15:59:11","slug":"pm-christopher-luxon-seemingly-transmutes-political-gold-into-sht","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/75964\/","title":{"rendered":"PM Christopher Luxon seemingly transmutes political gold into sh*t"},"content":{"rendered":"

Tough and decisive? PM Christopher Luxon and Social Development and Employment Minister Louise Upston have announced a scheme to restrict Jobseeker benefits for 18- and 19-year-olds. Photo \/ NZME<\/p>\n

Whenever John Key\u2019s National government found itself sinking in the polls, its social development minister, Paula Bennett, would spring up behind the Beehive theatre\u2019s lectern like a beaming leopard-print jack-in-the-box to announce it was getting tough on beneficiaries. Mandatory drug-testing! IUDs for solo mums! <\/p>\n

\n Few of Bennett\u2019s schemes ever
\n went anywhere \u2013 they were media stunts rather than credible policies \u2013 but they fulfilled their primary goals: generating outrage, filling airtime, creating the illusion of a tough and decisive government.\n <\/p>\n

The coalition\u2019s approach to welfare policy has been more restrained \u2013 possibly because its record on benefit numbers is so terrible. And so is its polling, so the Prime Minister and Social Development and Employment Minister Louise Upston have duly announced a scheme to restrict Jobseeker benefits for 18- and 19-year-olds. From November next year, they\u2019ll need to pass a parental assistance test to access a benefit \u2013 unless they have children themselves.<\/p>\n

This was signalled in the 2025 Budget and originally set to come into effect in July 2027, but needs must and if there\u2019s one thing that might turn around this government\u2019s ratings it\u2019s the Prime Minister snarling \u201cthe world doesn\u2019t owe you a living\u201d at deadbeat teenagers.<\/p>\n

All social animals punish free riders \u2013 members of the group who enjoy the benefits of co-operation without contributing. The constitution of the Soviet Union famously warned, \u201cHe who does not work, neither shall he eat.\u201d You can\u2019t have social-welfare systems without policing their abuse. Politicians who attack youth beneficiaries are tapping into primordial instincts: deep, prehuman desires to punish antisocial freeloaders; the innate dislike of teenagers as a species.<\/p>\n

But the morality of beneficiary-bashing is complicated by our economic system, which needs a certain level of unemployment to function properly. In recent years that level has been quite high: we\u2019ve needed people to lose their jobs and go on the dole to stabilise prices, and the burden of those job losses falls on younger workers because they\u2019re the least skilled.<\/p>\n

The new benefit restriction applies to households where parents earn $65,529 or more. There will be provisions for applicants who can demonstrate they cannot reasonably rely on their parents, although there\u2019s never anything reasonable about the institutional cruelty of WINZ.<\/p>\n

Number plucking<\/p>\n

But how was that number arrived at? It\u2019s significantly less than the median household income. Displaying his usual grasp of policy detail, Christopher Luxon explained, \u201cWell, we chose that. It\u2019s the number that we chose.\u201d<\/p>\n

More troubling is the lack of abatement. A well-designed benefit system needs to balance support for those on low incomes with an incentive to work. If you\u2019re receiving a benefit and you\u2019re offered a part-time job, the government desperately wants you to take it \u2013 it\u2019s the pathway to paying net tax instead of consuming welfare.<\/p>\n

But if it reduces your benefit by the amount you\u2019re earning there\u2019s no incentive to transition into the workforce. Sensible welfare systems use abatement rates to avoid this problem. If you\u2019re currently on the Jobseeker benefit you can earn $160 a week with no penalty, and once you\u2019re over that amount your benefit reduces by 70 cents for every dollar you earn.<\/p>\n

Economists refer to this as an effective marginal tax rate, or EMTR. High EMTRs function as benefit traps, discouraging people on welfare from entering the workforce. The one thing politicians have to avoid when they\u2019re designing welfare policy is a punitive EMTR.<\/p>\n

And as of November 2026, when this new regime takes effect, a household earning $65,528 with an 18-year-old beneficiary will lose $13,942 \u2013 the annual Jobseeker income after tax \u2013 if the household\u2019s income increases by $1 a year. Any EMTR over 100% is seriously distortionary; the government\u2019s new regime introduces an effective marginal tax rate of 1,394,200%.<\/p>\n

This perverse outcome was criticised by the New Zealand Taxpayers\u2019 Union, a right-wing lobby group not known for its love of beneficiaries but which has a basic grasp of economic theory and was alarmed to see a conservative government introduce a policy that could inadvertently lift welfare numbers.<\/p>\n

In his post-cabinet press conference, Luxon was asked whether the policy would incentivise parents close to the threshold to quit their jobs so their children would be eligible for the benefit. His reply was, \u201cI would hope that\u2019s not the case.\u201d<\/p>\n

Doh?<\/p>\n

Why did this happen? Two popular theories. First, there were polls in the field, the government\u2019s energy announcement was a disaster and Luxon had been personally embarrassed by a botched attack on Chris Hipkins in which his office sent a letter about bipartisanship to the Labour leader but leaked it to the media before Hipkins could read it. Luxon needed a quick win, so a tough-on-welfare policy was rushed forward without basic analysis.<\/p>\n

Second, Luxon is still obsessed with his government\u2019s KPIs. One of these is to reduce the number of people receiving the Jobseeker benefit to 140,000. It was 190,000 when the coalition entered office and 216,000 by the end of this year\u2019s June quarter. It could reduce the number of beneficiaries by growing the economy and creating more jobs, but great leaders think outside the box: you can also reduce benefit numbers by simply making people ineligible for the benefit.<\/p>\n

Unfortunately the rushed policy seems likely to undermine the strategic goal. The Ministry of Social Development now has 12 months to design an abatement scheme that avoids the EMTR trap while still reducing overall Jobseeker recipients.<\/p>\n

Luxon\u2019s reverse-Midas touch has delivered another miracle, transmuting everything he comes into contact with \u2013 even the pure political gold of beneficiary bashing \u2013 into excrement. <\/p>\n

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