This is deliberate

Stuff reports:

Pensions have risen by $67 a week in the last five years –  while the incomes of parents of childre

n born into low income and beneficiary households have fallen further and further behind.

The gap is poised to grow even larger as the country enters a long period of low inflation because while pensions are pegged to average wage rises, benefits are linked to living costs, or the CPI.

The latest round of benefit adjustments painted a stark picture of the growing disparity. Pensions increased 2.07 per cent, or $11.60 a week for a married couple, in line with wage rises. But other benefit rates rose by only 0.51 percent.

This is deliberate. Benefits are tied to inflation so they remain static in real terms. NZ Super has a floor tied to the average wage, to maintain relativity to working income.

The reason is because retiring from employment and going onto NZ Super is meant to be permanent.  While going on a benefit should generally be temporary. You don’t want people remaining on welfare for an extended period of time. Making benefits more generous reduces the gap between work and welfare.

Analysis of household data by Stuff.co.nz shows Government payments to over-65s have eclipsed those of any other age group, sparking harsh criticism the Government prioritised elderly over the young, which make up nearly half of New Zealands lowest earners.  

This has been the policy of all Governments in the last 20 years or so. NZ Super is linked to wages, and other benefits linked to inflation.

If you linked all benefits to the average wage, it would have costed tens of billions of dollars and many more people would be on welfare.

I actually think having NZ Super linked to the average wage will become unaffordable in the long term. As more and more NZers are aged over 65, we won’t have enough working NZers to support a universal wage linked pension. I’d propose that it be also linked to inflation – but say CPI + 1% – this would mean it always grows in real terms, but becomes more affordable.

In 2010 the Government adopted a policy change, to index superannuation with the average wage, while benefits remained driven by inflation. GST rose to 15 per cent that year, and tax cuts were not applied to benefits. 

No. Wrong. This has been policy for 15 years. In 2010 that policy was put into statute, but the policy has applied since the 1990s.

Labour Party finance spokesman Grant Robertson said while the elderly had been looked after, Government policy meant younger generations would not reach retirement with the same level of savings or income base.

“If you look at the 2010 tax cuts, they very specifically protected the incomes of the elderly, and that’s good that they did that.

“But at the same time they completely failed, and in fact went in the opposite direction, for people on main benefits. They took a policy decision to deliberately exclude those on main benefits from having their incomes protected, so to me that is definitely to the detriment of other age groups.”

Also wrong. The main benefits being inflation adjusted were fully compensated for the increase in GST.