$500,000 to get a job: expert

Photo / Dean Purcell

New Zealand would have to invest about $500,000 in each unemployed person to give them the "human capital" required to get paid work, a welfare expert says.

Professor Peter Saunders, an Australian who is president of the Foundation for International Studies on Social Security, said the only way to cut welfare spending in the long term was to invest upfront in education, childcare and supporting people in work for the first few years.

"Policies will be costly and success will take time," he said.

"If we are going to do it properly, let's put the money in upfront and not expect a return overnight."

Professor Saunders, from the University of New South Wales, is "the other Peter Saunders" - not the Professor Peter Saunders of the right-wing Centre for Independent Studies, also in Sydney, who is one of three international advisers to the Government's welfare working group chaired by economist Paula Rebstock.

Social Development Minister Paula Bennett got the two mixed up in a parliamentary exchange in May.

One of the other Australians, Professor Paul Smyth of Melbourne University, said the original "welfare state" on both sides of the Tasman was based on keeping people off welfare through regulated labour markets, ensuring that the vast majority of working-aged men had well-paid fulltime jobs to support their families.

Now that the labour market had become more fluid, with more part-time and casual work, he called for a shift to a "social investment state" that would give everyone the skills required to get well-paid work in this market.

Professor Saunders said about half the people who went on to benefits in New Zealand went off them within a year, but those who were still on benefits after a year stayed on them for an average of four more years.

At the couple rate of $323 a week, that would cost $67,000 over four years.

"That calculation does suggest that there is money to be made in investing lots of money in getting people off benefits," he said.

But as an illustration of what might be needed, he said you would need to invest $530,400 at an interest rate of 5 per cent to earn an income of $510 a week, equivalent to the minimum wage for a 40-hour week.