Have tougher benefit sanctions worked?

Eighteen months ago in August 2024, the Government introduced a traffic light system and new sanctions for beneficiaries who do not meet their obligations. The new measures are designed to move people into work and provide tougher consequences for those who repeatedly fail to meet benefit obligations. Here we look at how the number of benefit sanctions has changed since the measures were introduced, unpack which groups are over-represented in the sanctions numbers, and discuss whether the policy has worked.

The traffic light system applies to Jobseeker Support or Sole Parent Support beneficiaries that have work-related or social obligations associated with their benefit. These obligations relate to finding and preparing for work, taking part in Work Ability Assessments to help Work and Income understand what kinds of work beneficiaries can do, and social obligations such as taking care of dependent children. Youth Payment and Young Parent Payment recipients are also part of the traffic light system but have different obligations.

If a beneficiary doesn't meet their obligations and they don't have a good reason, Work and Income call this an “obligation failure” and the beneficiary is moved to orange in the traffic light system. If the beneficiary doesn’t contact Work and Income and get back on track with their obligations within five working days, they are moved to red in the system.

Once a beneficiary is at red, their benefit can be reduced or stopped depending on how many obligation failures they have against them. In May and October 2025, additional non-financial sanctions were introduced including completing an approved employment-related training programme or course, keeping a record of all job search activities, Money Management (which means 50% of their benefit is put onto a payment card that can only be spent on essentials such as groceries, health needs, transport and education needs at approved stores), and Community Work Experience which requires the beneficiary to get a position at a community or voluntary organisation.

The Government has also tightened rules around benefits and sanctions, such as extending the period an obligation failure counts against a beneficiary from one year to two years, and requiring Jobseeker Support recipients to reapply for their benefit every six months.

The new, tougher policy towards beneficiaries has certainly increased the number of benefit sanctions. In the September 2024 quarter, just over 14,400 sanctions were imposed on beneficiaries compared with just under 10,400 in the June quarter and just 7,500 in the March quarter. Bear in mind that the traffic light system was introduced in August 2024 – halfway through the September quarter.

The number of sanctions subsequently declined. Reporting at the time said that monthly sanctions were lower in the month of September 2024 than they were in August 2024. The number of sanctions subsequently fell to just over 13,500 in the December 2024 quarter and has since declined gradually to almost 12,900 in the September 2025 quarter (Chart 1).

Despite this gradual decline since they were first introduced, sanctions in the September 2025 quarter were double the average number of quarterly sanctions over the three years from the June 2021 quarter to the June 2024 quarter prior to the traffic light system being introduced.

To put these figures in context, at the end of the September 2025 quarter, just over 98% of beneficiaries were on green status in the traffic light system, less than 1% were on orange, and 1% were on red. These figures have remained consistent since the traffic light system was introduced.

Chart 1 also shows that the vast majority (98%) of beneficiaries sanctioned since August 2024 have been Jobseeker Support recipients. And over the 15 months from the September 2024 quarter to the September 2025 quarter, around two-thirds of sanctions were for beneficiaries failing to attend appointments with Work and Income or their service provider, a quarter were for failing to prepare for work, and a relatively small number were for failing to participate in work (Chart 2). Three quarters of sanctioned beneficiaries saw their benefit reduced, the rest had their benefit suspended or cancelled.

Chart 3 shows the demographic breakdown of people who received benefit sanctions over the period from the September 2024 quarter to the September 2025 quarter and compares it with the demographics of benefit recipients in the September 2025 quarter. The beneficiaries include Jobseeker Support and Sole Parent Support. These are the benefits to which the traffic light system is mainly applied.

Young people aged 15 to 24 years are notably over-represented in the sanctions statistics making up 46% of all sanctions despite making up only 19% of beneficiaries. Men are also over-represented in the sanctions statistics, making up 68% of sanctions and only 45% of beneficiaries, as are Māori (49% of sanctions, 40% of beneficiaries) and Pacific People (20% of sanctions, 14% of beneficiaries). Young people, Māori, and Pacific People are already over-represented in beneficiary statistics, which alone makes them more likely to receive sanctions. Being over-represented in sanctions statistics is a double whammy.

In introducing the changes, the Social Development Minister Louise Upston said, “There are responsibilities that come with receiving a benefit, and there will be no more excuses for job seekers not knowing what those responsibilities are." In response, Labour said the approach is "punitive" and “kicks people while they're down”, while the Greens said it inflicts "pain and misery" on people in poverty. The Child Poverty Action Group (CPAG) has said, “sanctions reduce already inadequate incomes and punish families who are struggling to survive.”

An Obligations and Sanctions Rapid Evidence Review prepared by Ministry of Social Development for the Welfare Expert Advisory Group in 2018 concluded that:

• policy design and administration needs to carefully balance the benefits and potential negative effects of work-related sanctions,
• empirical evidence (from overseas) provides no guidance on sanction severity that could be considered ‘ideal’ in achieving this balance, and
• evidence from the US and UK suggests that a very harsh sanctions regime can have important adverse effects that drive people away from, rather than closer to, employment.

So, with benefit sanctions it’s important (and difficult) to strike the right balance between encouraging beneficiaries to find sustainable employment and putting them under so much pressure that they either disengage with the benefit system (and sink further into poverty), or enter employment that is either less sustainable, lower paid or a poorer fit for their skills than they would have found had they not been pressured to find work.

Placing beneficiaries into sustainable employment is challenging at the best of times. In its regular series of reports What happened in the 12 months after people left the benefit system, Ministry of Social Development has found that sustainable employment is hard to come by for many beneficiaries. The 2024 report found that of people who exited a benefit into employment between 2018/19 and 2022/23 (June years), between 50% and 59% didn’t remain in employment for 12 months. That’s an alarmingly high, and stable statistic, especially when one considers it covers the economically volatile pandemic years.

Research by the Benefit Advisory Service in 2021 points to a, “Growing body of international literature (that) questions the efficacy of sanctions in influencing behavioural change”. Such research suggests that sanctions might result from the chaotic life circumstances of those in poverty rather than a deliberate decision not to comply with benefit obligations. Researchers also express concern that many beneficiaries might not fully understand their benefit obligations or how to avoid sanctions.

The Benefit Advisory Service’s own quantitative and qualitative study of 248 people reinforced the international literature, finding that benefit sanctions resulted in people going without necessities such as food, using food banks, stealing, taking out loans, or begging. Many participants reported being sanctioned because of administrative errors or because they lacked a clear understanding of the obligations associated with their benefit. The majority of research participants did not apply for a review of their sanction. However, of those who did have the decision reviewed, the majority were successful. This finding suggests that the process of identifying obligation failures could be improved.

In 2024, The Salvation Army reported that a brief analysis of their clients found, “Instances of clients reaching out for food support who had been sanctioned incorrectly but could not feed themselves while they waited for Ministry of Social Development to sort it out.”

Amongst any group of unemployed people there will be a spectrum of personalities and attitudes that encompass people who are highly organised and motivated to find a job to those who are less motivated and less well organised. The Government expects additional obligations, and tougher sanctions will push people into work who would otherwise have stayed on a benefit. The concern is that when jobs are scarce, vulnerable people are being forced into poor quality work or pushed out of the system and deeper into poverty.

We simply don’t know if this has been the case for some people. Careful research is required, such as delving into the Integrated Data Infrastructure (IDI) to track people who have stopped claiming Jobseeker Support and other benefits since the tougher sanctions policy was introduced. However, the Ministry of Social Development, which uses the IDI to track beneficiaries into and out of employment, has said that they, “Could not provide data about sanctions that led to someone re-engaging and then finding work because it could not link the sanction and the person finding a job.” If it is difficult to track someone who enters work, it will be even harder to track other outcomes. If people sink further into poverty and more vulnerable circumstances, they are more likely to fall through the cracks and therefore not show up in any datasets. Even if it were possible, this kind of quantitative analysis would also miss the motivations and struggles beneficiaries face, which is best captured in qualitative research.

By the Government’s own performance benchmarks, the traffic light policy has yet to have the desired effect. The Government set a target of 50,000 fewer people receiving Jobseeker Support by 2030. Using the December 2023 quarter as its base, that’s a fall from 190,000 to 140,000. When the traffic light policy was introduced in the September 2024 quarter, the number of Jobseeker Support recipients had risen to just under 205,000 and by the September 2025 quarter, the number had risen again to 218,000 (Chart 4).

During this period, economic growth has been slowing, job vacancies have dried up, and unemployment rates have risen – for example, the unemployment rate of people aged 15 to 19 years was at 23% for the whole of 2025. The Māori unemployment rate hit 11% in the September 2025 quarter. For Pacific People, it was even higher at 12%.

The number of beneficiaries might have been even higher if the new, tougher obligations had not been introduced. But that’s a hard sell when job vacancies are so scarce. The Ministry of Business, Innovation and Employment’s Jobs Online index shows that job vacancies were 8.1% higher in the month of September 2025 than they were in August 2024 when the traffic light system was introduced, but the overall number was well down on pre-COVID levels and the COVID peak. There were 26% fewer job vacancies in September 2025 than there were in September 2019, and 47% fewer than in September 2022 when the economy was going gangbusters (Chart 5).

Those people that are out of work are facing fierce competition for the few jobs that are out there. Seek data shows that job applicants per vacancy were 265% higher in September 2025 than they were in September 2019, and 322% higher than they were in September 2022.

We need objective New Zealand research into what happens to beneficiaries after they are sanctioned. I emphasise objective because, in researching this article, I got the impression that research on the subject is often used to promote whatever people (politicians especially) already believe. We vote for political parties that have very clear and often opposing stances on how beneficiaries should be treated. Yet (thankfully) a lot of us haven’t experienced unemployment or the benefit system and probably don’t know anyone who has. Beneficiaries shouldn’t be political footballs. Our approach to them should be evidence-based, underpinned by basic human decency.

And it is not enough to assess the new benefit reforms in isolation. They need to be examined against the broader context of what the Government is doing to stimulate job-rich economic growth, improve productivity and earnings, smooth people’s transitions through work, education and training, and through the welfare system—and ultimately, lift New Zealanders’ living standards, especially for those at the bottom of the income and wealth distribution.