Unemployment insurance scheme is good for workers and the country

Tuesday, 8 February 2022

Scheme would apply to workers who were laid off or had to quit jobs due to health conditions (video first published in February).

Kerry Davies is national secretary of the PSA, Laures Park is Matua Takawaenga, NZEI, Rachel Mackintosh is vice-president of the NZCTU, & assistant national secretary of E tū, Glenda Alexander is industrial services manager at the NZNO, and Sandra Grey is national secretary of the TEU.

OPINION: We would like to challenge some of the recent analysis of the proposal for unemployment insurance . This proposal was jointly worked on by the New Zealand Council of Trade Unions (CTU), Business New Zealand and the Government. It included input from the many women who both lead and work in the trade union movement – ourselves included.

It would revolutionise support for workers, who would be offered up to seven months of income protection should they be made redundant or have a health or disability condition that prevents them from working. It would have broad coverage for contractors, casual workers, and those in insecure work.

The CTU believes that protecting workers, families and communities from the impact of unexpected economic change is one of the most fundamental things we can do as a society. Yet protecting workers from a sudden loss in income is something we don’t do well in New Zealand. There is no statutory redundancy, statutory income protection, or statutory notice periods.

* Government proposes unemployment insurance scheme funded by 1.39% tax

The CTU said unemployment insurance “would revolutionise support for workers, who would be offered up to seven months of income protection should they be made redundant or if they have a health or disability condition that prevents them from working”.

* How social insurance could provide a safety net for NZ's most vulnerable workers

* Do New Zealand workers need an national income insurance scheme?

* New Zealand lacks protection for workers made redundant

National’s Christopher Luxon has criticised the proposed unemployment insurance scheme as a “job tax”.

The insurance proposal brings all of these in – and should be welcomed by anyone who cares about the lot of vulnerable workers in New Zealand.

The Green Party’s Ricardo Menéndez March said the proposed scheme focused too much on prior work history, meaning those who were already earning more would be paid more.

Don’t just take our word for it. Economists at Motu have identified the cost of the current system on incomes – they call it “wage scarring”. This is when workers take the first job that is available, rather than a job that better meets their skills and talent. During a recession like the global financial crisis (GFC), they estimate that $15 billion is lost a year, and that the system New Zealand has “harms workers’ mental health and economic security in the short term, and negatively affects their earnings and mortality risk in the long term”. The OECD agrees.

Contrary to some claims, this programme will most support those workers most likely to be made redundant. Evidence from official data is that these are women, young people, Māori, and Pasifika. It is workers on low incomes. Most workers who lose their jobs are in relationships, meaning many will receive no income support from the state. For women this often places them at an extreme disadvantage, especially where they have children. This proposal helps stop that from happening.

We saw this employment effect occurring during the start of Covid-19. When unemployment rose in the first wave, women lost jobs more heavily than men – the numbers of women out of work increased by 17,000 in the year to September 2020. The female unemployment rate stayed higher than the male for six months after that peak – demonstrating the uneven recovery.

Under this insurance proposal those workers would have had economic security, training opportunities, and wrap-around support. This is why we – as women who work in the heart of the trade union movement and who were involved in its development – back this proposal.

At an individual level job loss is a tragedy. When there is large-scale job loss it is an economic disaster. We all know the long-term impact that the closure of large employers has had on small towns. The effect is not only direct. It’s found in every local shop, every local business, and every local school.

We saw this during the painful restructuring of economy of the 1980s, and during the GFC. It is likely to happen again in the future as industries change, skills change, and technology changes. It’s time to learn the lesson. Insurance protects the whole community and helps local economies regenerate and renew.

This insurance covers not just job loss through economic change. It also covers workers who suffer jobs losses from health and disability conditions. ACC cover only supports workers who suffer accidental injury.

Workers who develop illnesses like cancer, arthritis, or who have mental health problems often receive little or no support from the existing welfare state – a point noted by the Welfare Expert Advisory Group, which called for a scheme to support these workers. This proposal closes that gap, and gives workers precious time to get well, or to get organised. It would work to help get Kiwis into work, if that is right for them and their situation. It’s stopping poverty upstream.

We don’t believe we help create a better New Zealand by holding back protection for vulnerable workers until every other problem New Zealand faces has been addressed. We can do two things at once. Countries that have insurance schemes like the one proposed have lower levels of inequality, better welfare states, and better standards of living for all their residents.

The proposal has been endorsed by the National Affiliates Council of the CTU, which includes representation from the CTU Runanga, the Women’s Council, and Komiti Pasifika. All recognise the benefits this proposal will bring to their communities.

We don’t make moral judgments about who should benefit from the scheme. We seek to make sure that when workers need help they can get it. We hope that you do too. The consultation is open until April 26, and we encourage all New Zealanders to contribute to the debate.