Historical | Working for Families at 22: The Clark-Era Reform Still Shaping New Zealand

Written by Andrew Yang

Twenty-two years after it was written into policy, Working for Families continues to shape how Aotearoa New Zealand supports Kiwi families across the country. Helen Clark’s Government has long since left office, but the promise behind its reform, to ease the financial pressures of raising children while making paid work more rewarding, has endured (Cullen, 2004). This promise would find renewed interest in March 2026, upon the government turning to the scheme’s in-work tax credit to provide a temporary relief from rising living costs for families (Inland Revenue, 2026a). Yet even its name hints at a question that has underscored the policy’s history: when support is intended for children, how much should depend on their parents’ employment? The Clark Government’s reform improved family incomes, but the gains were uneven, leaving a legacy that warrants both recognition and closer examination (Dalgety, 2010). 

The Promise of 2004 

In 2004, New Zealand was a growing economy, giving the Clark Government room to address a problem that growth itself had not. Many low-income parents could enter low-paid work without meaningfully improving their family’s finances (Dalgety, 2010, p. vi). Employment, therefore, did not necessarily result in getting ahead. Finance Minister Michael Cullen would then present a solution. Working for Families was the centrepiece of that year’s Budget, framing support for parents as an investment in the country’s future workforce. The initial projected cost was $1.1 billion a year once fully implemented, which was a substantial commitment to the idea that family well-being and economic prosperity could advance together (Cullen, 2004). 

This commitment gradually took shape. Between October 2004 and April 2007, the package increased family tax credits and expanded assistance with childcare and housing. Families could also earn more before their tax-credit payments began to reduce. These changes addressed practical difficulties, with higher wages accompanied by reduced assistance, while childcare absorbed part of the gain. Making employment worthwhile required looking beyond the pay packet to what remained in the household budget. Through addressing several costs together, Working for Families aimed to make the transition into paid work more financially sustainable for Kiwi families (Dalgety, 2010, pp. 1–2, 56). 

Within that package, however, support came on different terms. The Family Tax Credit was available to all eligible families who received wages or a main benefit. The in-work tax credit, introduced in April 2006, initially required families to meet minimum working hours and receive no main benefit (Dalgety, 2010, pp. 5, 56). Therefore, a parent could be employed yet still miss out on this additional payment as they also receive a main benefit. This distinction placed a condition on part of the assistance available for raising children: financial need mattered, but so did the source of a family’s income. 

The Gains and their Limits 

Early results would give substance to the government’s promise. Using a poverty line set at 60% of the 2004 median income and adjusting for inflation, the 2010 evaluation reported that child poverty fell from 26% in 2004 to 18% in 2008. Additionally, it is estimated that an extra 8,100 sole parents were in paid work by June 2007 because of the reform (Dalgety, 2010, pp. 11, 25–26). These findings support a substantial achievement in both family incomes and sole-parent employment. The recognition of these gains, however, does not settle the debate of whether they are shared fairly or whether every condition attached to receiving support was justified. 

The employment story also becomes more complicated upon consideration of different households. More recent Treasury modelling estimated increased paid work among sole parents, but reductions among partnered adults, particularly women. Additional support could make employment more attractive to one family while allowing another to manage on fewer paid hours (Mok & Mercante, 2014, pp. 23–24). Whether or not the latter represents failure depends on the standard applied, as increasing employment and enabling parents to balance earning with caring are not necessarily the same objective. 

Children’s living conditions would provide another test of how widely these gains were shared. Between 2004 and 2008, hardship declined among children overall, but the evaluation would find no statistically significant improvement among families receiving benefits. The assessment considered everyday pressures such as affording adequate food, clothing and paying bills on time (Dalgety, 2010, pp. 26–27). For a reform intended to ease the cost of raising children, this unevenness matters. The aggregate gains deserve praise, whilst offering less reassurance about the progress for children whose parents relied on benefits. 

The question, then, is whether encouraging employment justified this uneven reach. St John and Dale (2010, p. 238) argue that the in-work tax credit placed its employment objective in conflict with addressing child poverty. Making work more rewarding may benefit children through higher family incomes, giving the policy a reasonable defence. However, the official evaluation could not isolate the credit’s employment effect, despite considering the payment a likely driver of gains (Dalgety, 2010, p. 45). Evidence that the package encouraged employment, therefore, does not, by itself, aid in establishing that excluding beneficiary families from this payment proved necessary to achieve those gains. 

A Lasting But Incomplete Reform

Although the reform outlasted its architects, so has this tension. In March 2026, the government announced a temporary increase of up to $50 a week in the in-work tax credit commencing from April 1 (Inland Revenue, 2026a). The increase was scheduled to end on 31 March 2027, or earlier if 91-octane petrol maintained a price below $3 per litre for four consecutive weeks (Inland Revenue, 2026a). Remaining ineligible were families receiving a main benefit, but they could still qualify for the Family Tax Credit (Inland Revenue, 2026b). Therefore, the scheme’s continuing role in delivering relief carries a familiar limitation: access to additional support still depends on more than just the financial pressures of raising children. 

So, did Working for Families work? On balance, yes. The policy improved family incomes and helped more sole parents into paid employment. These are substantial achievements which should not be discounted. However, they do not, by themselves, justify every condition attached to support. Twenty-two years later, the case for preserving the reform is stronger than the case for leaving it untouched. Making work pay remains a legitimate objective; more complete success combines such ambition with adequate support for children whose parents receive benefits. Their needs remain, regardless of where the family’s income comes from.

References

Cullen, M. (2004, May 28). Budget 2004: Families package good for growth. Beehive.govt.nz. https://www.beehive.govt.nz/release/budget-2004-families-package-good-growth

Dalgety, J. (2010). Changing families’ financial support and incentives for working: The summary report of the evaluation of the Working for Families package. Ministry of Social Development; Inland Revenue. https://www.msd.govt.nz/documents/about-msd-and-our-work/publications-resources/evaluation/receipt-working-for-families/wff-full-report.pdf

Inland Revenue. (2026a, March 24). In-work tax credit increase from 1 April. https://www.ird.govt.nz/in-work-tax-credit-increase

Inland Revenue. (2026b, April 9). Government payments that affect your Working for Families. https://www.ird.govt.nz/working-for-families/types/government-payments

Mok, P., & Mercante, J. (2014). Working for Families changes: The effect on labour supply in New Zealand (New Zealand Treasury Working Paper No. 14/18). The Treasury. https://www.treasury.govt.nz/sites/default/files/2014-11/wp-14-18.pdf

St John, S., & Dale, M. C. (2010). The New Zealand experience of child-based work incentives. European Journal of Social Security, 12(3), 216–241. https://doi.org/10.1177/138826271001200303