An advocate for children living in poverty fears the interests of kids will be "buried" in any Government plans to shake up the welfare system.

Child Poverty Action Group spokeswoman Susan St John said plans to introduce an employment insurance need to be looked at carefully.

"The issues are really, really complicated and I would certainly be extremely dubious about it as any kind of solution to New Zealand's situation," the Associate Professor in economics said.

She said more work needed to be done by experts in the field.

"They've just plucked this out of the air and announced it on the radio this morning," Dr St John said.

"Is it just going to be like some bright idea that comes out of the task force run by Don Brash, that comes out with these half-baked privatised solutions?" She said.

Social Development Minister Paula Bennett has appointed a Welfare Working Group which will be chaired by former Commerce Commission chairwoman Paula Rebstock.

Ms Rebstock told Radio New Zealand this morning that any form of employment insurance would sit alongside the welfare system and will be looked at by the Working Group.

Dr St John said New Zealand seemed to be tying welfare programmes to paid work - such as KiwiSaver and Working For Families - and that created a larger gap between rich and poor.

"New Zealand is probably going to really regret it if it goes too far down that track," she said.

Ms Rebstock told Radio New Zealand that the employment insurance will be looked at by the Working Group.

"Right now, if you are in a relationship with someone and you become unemployed, the chances are you would not be entitled to a social welfare benefit.

"But if you are involved in an insurance scheme and you have contributed, then you would also be in receipt of an unemployment benefit for a period," Ms Rebstock told Radio New Zealand.

She said the system could be similar to Canada's Employment Insurance scheme.

"It is clearly within the terms of reference of the group," Ms Rebstock said.

In order to be eligible under the Canadian scheme, the unemployed person must have worked between 420 and 700 "insurable hours", depending on their local unemployment rate.

The scheme has a two week waiting period before the insurance payments kick-in and the payments are 55 per cent of the unemployed person's income up to a maximum of $C43,200 (NZ$60,227.50) but can be more if the person is a member of a family on a low household income.

The unemployed person must also fill out a report every two weeks on their employment status.

Asked if the Working Group would look at the amount of money received by beneficiaries, Ms Rebstock said that was outside the scope of the review.

Dr St John said that does not make sense because the purpose of a benefit is to provide people in need with the means to live.

"The whole level of the assistance is vital to any consideration. When you cut out one of the main designs of the welfare system, you're going to come out with something that does not hang together," Dr St John said.

The Welfare Working Group was formed as part of the Government's welfare package announced in March.

Ms Bennett said it would look at the causes and solutions of long-term welfare dependence and would develop options for creating a more sustainable and fair welfare system.

"With almost one-in-five children living in benefit-dependent families, breaking the cycle of welfare dependence is essential to avoiding a life of limited income and limited choices," Ms Bennett said in a written statement.

She said taxpayers currently spend $7.6 billion per annum on main benefits.

"Based on past trends and current policy settings, the proportion of New Zealanders receiving long-term benefits is expected to increase unabated. The fiscal, social and economic costs of that are unsustainable," she said.

Victoria University's Institute of Policy Studies will host the Welfare Working Group.

Members include academics, employers and community leaders, with Ms Rebstock chairing the group.

They will have their first meeting this month and are expected to report back by December.

The Working Group

Paula Rebstock (Chair)

Chairwoman of New Zealand Railways Corporation, chairwoman of the Insurance & Savings Ombudsman Commission, chairwoman of Probation Expert Panel and a Member of the Shared Services Establishment Board (Health). She was formerly Chair of the Commerce Commission and a Director of the Foundation for Research, Science and Technology.

Professor Des Gorman

Prof Gorman is heads up the University of Auckland's School of Medicine and the Clinical Training Agency Board. He is executive chairman of the National Health Workforce Board (Health Workforce New Zealand) and a member of the National Health Board.

Professor Kathryn McPherson

Prof McPherson is currently the Professor of Rehabilitation (Laura Fergusson Chair), Auckland University of Technology.

Associate Professor Ann Dupuis

Dr Dupuis is Associate Professor of Sociology, School of Social and Cultural Studies, Massey University.

Catherine Isaac

Ms Isaac is the former president of the ACT party and now managing director of Awaroa Partners. She was also a founding director of St Lukes' Group, now Westfield and a member of the Board of the Wellington Community Trust from 1999 to 2003.

Sharon Wilson-Davis

Ms Wilson-Davis has 20 plus years owning and operating businesses in the hotel and hospitality industry. She has been CEO for the past 13 years of the Tamaki Ki Raro Trust which is aimed at helping with the development of Te Puea Marae and providing commercial, social and cultural stability for the Tainui people.

Adrian Roberts

Mr Roberts is the founder and managing director of In-Work New Zealand, a provider of employment services for people on benefit who have a history of unemployment.

Enid Ratahi Pryor (QSO)

Ms Ratahi Pryor is Chief Executive of Te Tohu O Te Ora O Ngati Awa, a Maori social and health service provider based in Whakatane.

- NZ HERALD STAFF