Young people on the Jobseeker benefit say they are barely surviving as they struggle to find work while dealing with threat of losing their only source of income.
In August, the government introduced a traffic light system which sanctions those who are not meeting certain obligations.
It is managed through a phone call system - but one job seeker said he missed a call from MSD because his phone had been disconnected.
Others have told RNZ's Checkpoint they are desperately searching for work but there are simply not enough jobs.
Hārema, 21, is on the Jobseeker benefit because after a year and a half of applying for jobs, he is still searching.
When he moved to Auckland in March last year, he was homeless, but through a programme with Kaupapa Māori based youth organisation Mā Te Huruhuru, he was put on the benefit and placed into Kainga Ora housing.
He said after his weekly expenses are taken out from his benefit, he is left with few dollars to spare.
"After my rent has been taken out, I'm left with $230 and $100 of that goes towards kai, which barely lasts me a week, then I've got about $30 to put on power. Then my internet bill is quite expensive and that kind of leaves me with nothing really, so I'm just barely surviving."
Since the traffic light system was introduced, he has been put into orange light once, because could not answer a call from MSD.
After explaining to MSD that his phone was disconnected, he still faces the possibility of losing his benefit.
"I actually emailed them because I had a case manager assigned to me and I told her that unfortunately I won't be able to call, but I can make a hui, we can schedule a hui.
"The next day I get a letter in the mailbox saying that my benefit's going to be cut."
Hārema is one of the more than 5000 people who are now at orange or red lights as part of the government's new traffic light system, according to MSD's latest data.
People are put there for what the ministry said was "not taking the steps required to continue receiving payments, such as finding or preparing for work."
He said there was a unfair generalisation associated with people on the Jobseeker benefit that they do not want to work.
"The stigma's out there, I think it's just the lack of understanding around, we're trying to get work, they're telling us to get work. There's no work out there."
Aaliyah receives $480 a week on the Jobseeker benefit and her accommodation supplement. Once her rent, power, water and Wi-Fi bill is taken out, she is left with little money for food for the week.
"The sanctions have done nothing but add so much stress. I feel like young people are already under so much stress on the daily to find jobs, make ends meet, and often the amount of money you get from WINZ doesn't make ends meet.
"You're already trying to find ways to pay your bills or it's like picking and choosing what not to pay for that month."
She usually can not afford public transport as it is $15 one way into the city from where she lives and does not have a car because she can not afford that either.
Jobs she has applied for also require her full driver's license, which currently costs $96.10 for a learner's license and $167.50 for restricted.
"They want all these qualifications that cost a lot of money to get and those are basic jobs, then you don't get paid a lot working in things like fast food which you don't see get advertised much anymore because everyone needs a job.
"I've seen so many people on the hunt for jobs and just no one could get one, especially in my area. I've been looking for a job since December last year, so it's like nearly a year."
She said the pressure of losing her benefit or facing sanctions made life very stressful.
"A lot of people I know, young people, work so hard, no one realises that. They're just like, 'Oh, you're getting handouts from the government. It must be so easy to just sit at home and do nothing'.
"But it's so stressful and draining and incredibly taxing on your body, your mental health."
Aaron Hendry, the founder of Kick Back, a 24-hour shelter on Auckland's Karangahape Road, said they were seeing an increase in youth homelessness and people struggling with their mental health.
The shelter supports rangatahi who are living on the street, or struggling day to day to make ends meet.
He said they were seeing children as young as 13 sleeping rough.
"Many that come to us that are seeking support are also struggling with ongoing experiences of depression and anxiety and suicidal ideation.
"It's a reality when you don't have that stability and when we're not actually meeting people's basic human rights and basic human needs."
The unemployment rate reached a three-year high of 4.6 percent in the three months ended June, up from a revised 4.4 percent in the previous quarter.
Figures released in August showed people aged between 15 and 24 make up almost half of the unemployed, and many of them want more work but cannot get the hours.
Government responds
Minister for Social Development Louise Upston told Checkpoint she would expect people to go to orange if they have a reasonable reason why they were unable to comply.
"That's taken into consideration and could well mean going back to green."
She said support available through MSD did not require data to be available on somebody's phone and there is a range of support available to help people get to job interviews.
"I would encourage anyone who's in that situation just to make sure that they are talking to MSD. That's the point of reaching out to them, knowing what assistance is available, whether it is for petrol or costs to get to interviews, assistance with drivers licences."
From her press release, it said 5922 people were at orange and red lights for not taking the steps required to meet their obligations.
In response to Hārema studying towards a carpentry certificate and being on the Jobseeker benefit, she said he might not be on the right benefit.
"The Jobseeker benefit is for those who are not in work, education or training and 98 percent of people are complying with their obligations to look for work and prepare for work which is great news," she said.
Since the traffic light system has been implemented, 225 people have had their benefits cut.
"This is about supporting more people into employment. What we've seen in the last quarter despite there being challenging economic times, over 16,000 people on the Jobseeker benefit have exited into work, so we want to provide at the MSD frontline the practical steps and support available to people to help them on their job search."
She said she did not have evidence that cutting people from the Jobseeker benefit would cost the government.
"Well, there may be some who don't require the benefit, and so for them to have a benefit ended actually doesn't cause them significant harm.
"What the data is telling me is only 1 percent are at red, 1 percent at orange, the significant majority, 98 percent are complying. They understand it's plain and simple for them to understand what their obligations are, which is a big, big part of the system."
Upston said she wanted people to know what the steps are to improve their chance to get a job and to make it easier for people to understand the system.
"Too many people have said in the past that it's complicated and they may in the past have been sanctioned purely because they didn't know what it was they needed to do. We've made it really clear and really simple because we want to help job seekers until employment."
For people who are stressed about not being in work, she said she wanted people to contact MSD to go into a work seminar to talk to a case manager or a work broker.
"Whether it's transport costs, whether it's a taxi fare to get to an interview, whether it is to participate in a programme if they've got mental health difficulties, I visited a programme like that in Auckland last week or whether it is to help fund a driver's licence."
She said the government has seen 16,000 people exit the Jobseeker benefit into jobs.
"There are jobs out there. I accept this is very challenging economic time that we have inherited, it is incredibly difficult. But I want to remind you that the sanction is not for not finding a job. The sanction is for not taking the steps that a job seeker is needing to take.
"We are dealing with the consequences of a previous government whose excessive spending has led to high inflation, high interest rates."
Data from MSD shows the number of people receiving benefits has gone up 8 percent in the last year, people receiving the Jobseeker benefit has gone 13 percent and people receiving the Jobseeker work ready payment going up 12 percent.
The minister said these numbers were expected to increase.
"Treasury forecast that it would go up until January next year, so we're dealing with it," she said.
"That's why we've made welfare reforms, that's why we've introduced more case management, that's why we've introduced phone-based case management, and we have introduced the traffic light system."
