Pushing those on the DPB to work

The NZ Herald reports:

A sole parent with three young children paying the $332 average rent for a three-bedroom house in Papakura would get $206 in family support and $165 in accommodation supplement on top of the $278 DPB, a total of $649 a week.

Lets assume that she could walk straight into a job.

What would happen if she got a job for 25 hours a week at $20 per hour, or $500 per week – by no means the minimum hourly rate.

Firstly, because she is working more than 20 hours, she'd get the in work tax credit. She’d get $500 ($407 net) a week in income. Her family support will be the same, her accommodation supplement would reduce just $5.00. But the $60 In work Tax Credit bumps up her income to $833.00 - an extra $184.00 per week .

Sounds good. But even if she get 20 hours free, she`ll still be paying at least $180 a week in childcare and after school care, assuming she has two preschoolers at the right age and one child who is at school - leaving her nothing extra to pay for transport to get to work and clothes to wear to work.

Would you work for about $1.00 extra an hour? If so, what would you do if your child gets sick? What would you do if you cant get 20 hours free childcare because your childcare centre doesn't offer it or your kids are the wrong age?

If she got a job for $17.50 an hour for a 40 hour week - that’s $700 ($562 net) - she`d get $110.00 accommodation supplement and the same WFF assistance – totalling $878.00. That is $229 extra than the benefit and allowances.

Even better. But after child care costs, an income of $36,400 would leave her less than $50.00 extra to pay for transport to get to work and clothes to wear to work.

One big fat voting bribe

National has pledged to keep Working for Families intact to please the rich.

It is not keeping the WFF it should have kept - that is, reducing it for those who earn more than $50,000 and eliminating it for those who earn $100,000. Those people get to keep their tax cuts and WFF because they need their certainty.

Despite concerns we hold about the system, I consider that offering people certainty is much more important in these tough economic times," [Key] said.

These people don't need certainty, they need to learn how to budget.

Furthermore, those who earn over $60,000 and get a pay increase or promotion get to keep around 10% of it if they have kids due to the abatements in WFF, the accommodation supplement and the tax rate. Better to have another child for financial security and less job stress - and you get to take parental leave in the process, often topped up by the employer.

Employer groups should be having a chat to National about this. WFF should be for those who need it, not for those who either can't budget or mortgage themselves to the hilt.

Or both.

Average family spends $15 a week more than they earn, wealthy families even more due to increased interest rates

A study by the website interest.co.nz has calculated that a family on an average wage paying an average mortgage is now spending $15 more a week than they are earning. An average household has two kids and an average family is wage is $72,000, with the average pay increase in the past four years being $8,600 - or 12% on a $72,000 income.Also the figures assume a family on $52k has after tax income increase of $9204, and a family on 92k a $6448 increase.

On 72k you get about the same amount of family assistance as the In Work Payment - about $3600 a year. On $36,000 - half that income - you get about $10,000 a year in WFF - without bracket creep. So I assume that "earning" include WFF payments, because if it doesn't, i.e. either means that those on lower incomes are saving more than those on higher incomes or spending way more then $15 per week more than they earn.

UPDATE It does. Bernard Hickey's blog compares families on three incomes ranging from $52,500 - $92,000. They all spend the same on petrol ($66 a week, up from $40 in 2004), and on food ($164 per week, up from $142).So petrol and food has gone up $48 per week for all income earners. Food hits equally.

The difference is in the mortgage. A family on a higher income has a higher mortgage. But even in 2004 families on 52k were was spending more than they were earning because they bought houses that were too expensive and were mortgaged to the hilt. Increased interest rates has just made that worse to the extent that even the average family on $72k now has a deficit.A family on $52k spends $208 on a $112k mortgage, ( up $60), a family on $92k, $400 on a $213k mortgage(up $116). For low income families with a mortgage, a reduction in interest rates would soften the wallet more than a measly Government tax cut.