Government income insurance schemes prove polarizing

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The government has finally issued public submissions on its plans to introduce unemployment insurance, with support from workers’ rights advocates, but talks of unintended consequences from employers

Businesses and unions are at odds over a national income insurance scheme, with the former warning of higher prices and reduced hiring if the plan goes through.

The government has released nearly 250 public submissions on the proposal, with concern over the design and accelerated pace of the insurance scheme also a common theme in commentary.

In February, Finance Minister Grant Robertson unveiled plans for a social unemployment insurance scheme to provide a seven-month cushion to people made redundant or unable to work due to ill health or work. disabilities.

The $3.5 billion annual cost would be funded by a 2.77% levy split equally between employees and employers.

The government has already postponed the planned implementation date from 2023 to 2024 due to concerns about the impact on businesses, which made fresh criticism in their submissions.

Foodstuffs NZ, owner of the Pak’n’Save, New World and Four Square brands, said there was “no evidence to indicate that New Zealand has a material problem with persistently high levels of unemployment which necessitate government intervention on the scale proposed”.

Foodstuffs NZ public policy manager Sarah Tuohy said some employers would not be able to absorb their share of the costs, especially with inflation at record highs.

“Therefore, employers will either have to create efficiencies (e.g. employing fewer staff, having staff work fewer hours, refraining from raising wages, etc.) to offset the costs of NZIIS , or pass on the costs of collection to the end consumer of the goods or services the business provides in the form of price increases.

Fishing company Sealord, which employs more than 1,000 people in New Zealand, said any benefits of the scheme were outweighed by ‘inherent disadvantages’ such as the potential duplication of pre-existing redundancy provisions and the added cost to employers .

Sealord also argued that the scheme would encourage people to stay unemployed longer, writing: “As a rule of thumb in economics, if you pay more for something, you will get more for it. Unemployment is no different.

“We strongly support this initiative as a new labor market institution that can help workers transition from displacement, without their wages being dragged back as they are forced to take the first job that comes to them whether or not you can provide for your family.”
– FIRST union

The General Practice Owners Association of Aotearoa, which represents providers of general medical and urgent care services across the country, warned of the potential unintended consequences of the program as well as its accessibility.

The association’s chief executive, Philip Grant, said the desire to address current inequalities was laudable, but warned that evidence of similar models abroad suggested costs could explode in a short time.

Because GPs were funded through a 50/50 split of government grants and capped patient fees, they couldn’t simply increase their income to match the growing expenses, Grant said.

In its brief, the FIRST union said it was crucial that workers who lost their jobs had greater support structures given the impacts of climate change, automation and changes in globalization.

“We strongly support this initiative as a new labor market institution that can help workers transition from displacement, without their wages being dragged back as they are forced to take the first job that comes to them whether or not you can provide for your family.”

While the proposed program is not “a panacea for comprehensive social protection reform”, it also did not conflict with the earlier findings of the 2018 Social Protection Expert Advisory Group, which the union wanted the government to adopt more quickly.

NZEI Te Riu Roa, the country’s largest education union, said the scheme would not only benefit those made redundant but also their children.

“Strong communities with reliable and secure jobs help tamariki to be successful and secure and help build the social capital that sustains successful schools and early childhood education centers,” the union said.

Stronger unemployment provisions could be particularly helpful for support staff in schools and early childhood education centers, who often had relatively poor dismissal clauses in their contracts compared to teachers working in the workplace. compulsory education.

Finance Minister Grant Robertson said it was not surprising that unions represent a large number of supporters of the income security scheme. Photo: Mark Mitchell/Pool

Civil Service Association policy adviser Kirsten Windelov said the scheme was urgently needed and should in fact be extended to cover the two voluntary job losses.

The exclusion of those terminated for poor performance or gross misconduct was “an import of outdated punitive approaches that run counter to the overall goals and broader benefits of the program,” Windelov said.

Other social service organizations have criticized the focus on unemployment protections over welfare reforms, with the New Zealand Council of Christian Social Services saying it is concerned about “the codification of a system of two-tier welfare and the moralization of paid work it creates”. .

Auckland Action Against Poverty coordinator Brooke Stanley Pao said the organization opposes the income security scheme, calling on the government to instead support livable incomes for all and universal services to ensure “the protection of all persons, families and communities, whether they have work that is recognized or not”.

Finance Minister Grant Robertson said he wasn’t sure what percentage of bidders backed the scheme, but said there was “a wide variety of views”.

Robertson said it’s understandable that most of the positive submissions come from the labor movement, given the program would mean so much to low- and middle-income workers.

National Party leader Christopher Luxon said his party opposes the program and would repeal it if elected next year.

“It’s another jobs tax, it’s a huge deterrent, it has major flaws and we don’t support it at all.”

Although the Cabinet has yet to take a formal decision on whether to adopt the scheme, it has already started hiring staff to work on its design and implementation.

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