Social Development Minister Louise Upston promised to cut 50,000 people from Jobseeker support by 2030. Since that announcement, the number has moved in exactly the wrong direction. By December 2024, 223,512 people were on Jobseeker, up roughly 33,500 from when the target was set. Total beneficiary numbers hit 427,236, or 13.2% of the working-age population, the highest since the welfare system was restructured in 2013.
The June 2025 quarter brought modest relief, with the total easing to 406,128. But that figure is still 6.6% higher than a year earlier, and the fastest-growing cohort is the one the economy can least afford to lose: 18-to-24-year-olds, up 32% in a single year.
Sanctions are hitting the wrong target
The government’s signature welfare policy is a traffic light sanctions system introduced in 2024. Penalties for non-compliance doubled from 7,500 in March 2024 to a peak of 14,400 by September, before settling at 12,900 by September 2025.
But the numbers tell a damning story about the policy’s reach. Only 1% of beneficiaries were in the red zone and 1% at orange, meaning 98% of the caseload is untouched. Two-thirds of sanctions were for non-attendance at Work and Income appointments, not refusal to work.
Infometrics principal consultant Rob Heyes is blunt: “Benefit sanctions have not worked, probably largely because there are not enough jobs for beneficiaries to move into.” He told NZCity that “the number of beneficiaries has continued to rise after they were introduced and the job market has been tough with vacancies drying up.”
You cannot sanction people into jobs that do not exist.
The private economy is not pulling its weight
MSD’s own Benefit System Report 2025 confirms that benefit numbers began rising from early 2023 “in line with weakening economic conditions,” and that annual GDP to March 2025 fell 1.1%. This contraction happened on the current government’s watch.
Even the jobs being created are the wrong kind. Employment Hero’s NZ general manager Neil Webster warns that headline figures mask deterioration: “New Zealand has more people in work, but fewer of the skills that drive innovation and fewer hours being delivered overall.” Average hours worked fell 4.7% year-on-year, more than three times Australia’s 1.3% decline. Science and Technology employment dropped 3.7%, while Sales, Marketing and Media roles collapsed 19.5%.
The EMA’s Head of Advocacy Alan McDonald acknowledges unemployment remains elevated, noting “we had hoped it would bottom out at 5.3%, even though some projections have it going to 5.5% by later this year.” Manufacturing indicators are improving, with the BNZ-BusinessNZ PMI at 56.1, but McDonald flags a structural problem that sanctions cannot fix: “We’re also still hearing about skills mismatches, especially for entry-level roles after the COVID schooling disruptions.”
Tightening the safety net while the floor drops
While more people need help, the government is making it harder to get. Emergency food grant decline rates rose 60% in two years, from 3.96% in 2023 to 6.33% in 2025. Emergency housing grant declines are worse: the rejection rate jumped from just over 3% to nearly 34%, and quarterly spending collapsed from more than $36 million to $9.64 million in the same period a year later.
MSD calls this “strengthening” approval processes. Community advocates call it something else entirely.
What business owners should actually worry about
The welfare headline is a symptom. The disease is an economy that hasn’t found its floor. A 1.1% GDP contraction, falling hours, shrinking high-skill employment, and record Jobseeker numbers all point to a private sector that is not generating the volume or quality of work needed to absorb available labour.
For business owners, that means suppressed consumer spending, a thinning talent pipeline for growth-oriented firms, and a government target that is now functionally unachievable without a genuine economic recovery. The 50,000 Jobseeker reduction was always hostage to private-sector job creation. With the policy lever touching 2% of the caseload and the economy still contracting, the credibility gap between promise and performance is widening every quarter.
Sources
- RNZ: Beneficiary numbers soar to 12-year high despite government’s reduction promise (2025-02-19)
- RNZ: Have benefit sanctions actually worked? (2025-11-06)
- NZCity: An economist says benefit sanctions aren’t working
- MSD: Benefit System Report 2025 (2025)
- MSD: Benefit Fact Sheets Snapshot December 2024 Quarter (2025)
- MSD: Benefit Fact Sheets Snapshot June 2025 Quarter (2025)
- EMA: Unemployment rises but hiring rebound may not be far behind (2025)
- Employment Hero: NZ jobs rise but hours shrink — productivity gap widens (2025)
- The Spinoff: Emergency food grant decline rates up 60% in two years (2026-03-04)
- The Spinoff: Are welfare reforms leaving vulnerable New Zealanders with nowhere to turn? (2026-03-05)