More generous Covid-19 leave scheme 'could save NZ money overall'
Monday, 1 March 2021
Financial support for people who have been told to isolate at home needs to be made more generous to reduce the risk of people ignoring health advice, economists say.
Several recent Covid-19 community cases have attended work or moved around the community, when they should have been isolating.
The Covid-19 leave support scheme, designed to ensure people stay at home when told to self-isolate, currently pays out $1176.60 for full-time workers and $700 for part-time workers, as one lump sum to cover the two-week period.
There is also a short-term absence payment for those waiting for the result of a test.
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Economist Shamubeel Eaqub said the amount paid should be linked to people’s income, rather than a flat rate. If the payments were not enough to meet their financial requirements, people were more likely to break the rules and go to work against advice, he said.
He said officials were “stuck in an MSD mindset, rather than considering the alternative of not getting it right can be really expensive”.
“It’s better to be more generous to help people stay home than be stingy and have a lockdown for a week or two with enormous cost.
“We’re currently relying on people’s goodwill and goodwill can be bought … we’ve seen over and over that people on low incomes feel compelled to go to work because they have to pay rent and buy food.”
ANZ chief economist Sharon Zollner said the risk of making the payment more generous was that it might encourage people to “game” it.
But she said, compared to the wage subsidy scheme, the cost of this payment so far had been negligible. “It seems better to err on the side of being too generous. If we’ve paid someone to stay home and they really didn’t need to, that’s annoying. But if they don’t stay home because the payment is inadequate, then we all pay the price.”
Infometrics economist Brad Olsen said changing the application process was a “no-brainer”. He said at present, it was too difficult for people to claim and workers were left vulnerable because they relied on their employer to apply for them.
“It should be through the health system. Once you’re told to isolate, it just pays you. We’ve got to pay people upfront because paying them retrospectively won’t help if you’re in a tough place.”
CTU policy director Craig Renney, who worked in Finance Minister Grant Robertson’s office while the scheme was designed, said there was a strong case to be made for making the scheme more generous, which could help ensure more people stayed home when told to.
“These schemes should make workers’ decisions about staying away from work to protect others as easy as possible – both administratively and financially,” Renney said.
“The minimum wage would certainly be a good starting point. Ideally it would be a living wage.”
Robertson has been approached for comment.