The Government is looking at ways of introducing an ACC-like insurance scheme for people who lose their jobs.
The Productivity Commission earlier this year noted most OECD countries have some form of unemployment insurance, which people can draw down on for a set period of time if they lose their job.
Finance Minister Grant Robertson told interest.co.nz New Zealand needs a sustainable scheme, which gives people security and keeps them connected to the labour market.
He said more policy work had to be done to determine whether everyone who suffers a job loss should receive the same amount of money (which would be more than Jobseeker Support), or whether they should receive an amount equivalent to a portion of the income they previously earned.
Robertson referenced ACC and indicated the scheme could be paid for by a combination of employer, employee and government contributions.
It isn’t yet clear whether Labour will campaign on unemployment insurance ahead of the September 19 election.
Robertson noted the Government started looking at the issue before Covid-19. He said work was “moving forward” but there was “still a way to go with it”.
Prime Minister Jacinda Ardern likewise threw her support behind the concept, saying she didn’t want to keep seeing a “pattern” of “ad hoc” responses in times of crisis. She noted that in response to Covid-19, her government implemented a similar support scheme for the newly unemployed, as previous governments did in the wake of the Canterbury Earthquakes and 2008 Global Financial Crisis.
People who lose their jobs between March 1 and October 30, 2020 are eligible to receive a Covid-19 Income Relief Payment for up to 12 weeks. In most cases, this is worth more than Jobseeker Support.
Robertson clarified a permanent unemployment insurance scheme would operate the same through both economic booms and recessions.
He denied it was middle class welfare, in that people who lose higher paid jobs could get paid more than those who lose lower paid jobs or are longer-term welfare dependents, unable to work.
“There are two different debates here. I don’t think it’s useful to draw them together. One is about the adequacy of the welfare system, the other is about what we do in situations when people lose their jobs and how we keep them in the labour market,” Robertson said.
“It’s a big piece of work, so I’m not pretending it can easily be resolved. But it is an important one, not just in a crisis.”
ACT and Labour potential unlikely bedfellows
It’s questionable whether the Green Party would support such a regime, should it form a government with Labour after the election.
It wants the country’s welfare system boosted in line with recommendations made by the Government’s Welfare Expert Advisory Group.
The Green Party also wants to ensure that everyone who isn’t in paid full-time work, including students and part-timers, receives a ‘Guaranteed Minimum Income’ payment of at least $325 a week after tax. Single, childless people on Jobseeker Support currently receive $251.
ACT on the other hand, is campaigning on introducing an unemployment insurance regime under which someone who loses their job would get up to 55% of their average weekly earnings over the previous year. The maximum they’d get over a year would be $60,000.
The payment could be claimed for one week for each five weeks the person has worked, up to a maximum of 26 weeks per claim. So someone who has worked continuously for only one year could claim up to 10 weeks’ cover.
National’s Finance Spokesperson Paul Goldsmith said his party didn’t have a stance to share on unemployment insurance.
Pros and cons of different options
Coming back to the Productivity Commission, its ‘Inquiry into Technological Change, Disruption and the Future of Work’ in March 2020 concluded there was merit in pursuing what it coined “income smoothing” options.
The Commission said New Zealanders face “unusually large” falls in income by international standards when they lose a job.
In 2015, about two-thirds of those who reported a job loss didn’t receive Jobseeker Support. About half of these people weren’t eligible because their partner earned too much.
The Productivity Commission outlined three “income smoothing” solutions, but didn’t land on a preferred option:
| Option | Features, strengths and weaknesses |
| Unemployment insurance (UI) |
|
| Portable individual redundancy accounts (PIRAs) |
|
| Adjustments to current benefit and tax credit policies |
Benefits and tax credits would be adjusted to increase income-replacement rates for those who currently face large falls in income after displacement. For example:
|
The Commission noted schemes that require employers to essentially pay premiums for an insurance scheme could come at the cost of lower wage growth. By increasing the cost of labour, they could also discourage firms from hiring staff.
It said a scheme like a PIRA, which would pay out an amount relative to what someone paid into the scheme, wouldn’t be great for recent entrants to the workforce. Workers who experience multiple job losses would also quickly deplete their accounts.
“Further, as with KiwiSaver, self-employed people would not benefit from employer contributions,” the Commission said.
“The Government could underwrite the accounts of those with small balances, but this would add complexity to the system.”
ACC-type approach better suited to higher paying scheme
As for how much a scheme should pay out, the Commission said: “If the Government determined that a replacement rate near 50% was desirable [IE someone who loses a $60k/year job gets equivalent of $30k/year], then adjustments to current benefit and tax credit policies is the most obvious option.
“Sole parents and couples with children on low and average wages already achieve at least 50% income-replacement rates in the shorter term under current policy settings. Single people on higher incomes are the main group facing very low replacement rates. Time-limited increases to Jobseeker Support could reduce this gap.
“If the Government sought a higher replacement rate, then more substantive reform - probably involving broad or universal coverage - would be required. UI or PIRAs could meet this criterion. The CTU [Council of Trade Unions] submitted that a 50% income-replacement rate “would be wholly unacceptable, being little improvement on the status quo” and argued instead that the “ACC model of 80% is a sensible and accepted minimum.”
The CTU’s former policy director/economist, Bill Rosenberg, in a paper written in November 2019, noted: “The biggest income losses are not, as might be thought, among low skilled people but among graduates with degrees.”
He also made the point that unemployment insurance schemes in Northern Europe include help for recipients to find a new job, retrain, or relocate if necessary.
Ardern said the Future of Work Tripartite Forum - a partnership between the Government, Business New Zealand and the CTU - was the best place to do more work on an unemployment insurance scheme.
42 Comments
This is one of those cases though where the private sector can’t offer this (well not without the government making it compulsory). Optional private unemployment insurance is mainly taken by those who know they are likely to be made unemployed and the premiums and payouts reflect that.
this actually fits quite well -- it takes some of the burden and responsibility fromt eh state to the individual for saving, albeit compulsory, and looking after themselves -- it rewards people for how long and hard they have worked -- ie more benifit the longer you have been employed - does nothing for people already on benifit - would probably grow over time to self sustain itself like ACC's pot - and if it had been in place the last ten years -- might have saved us 10 billion in borrowing so far -
ACT and David Seymour are no longer a joke -- he has been as impressive as any mp this term - good to see labour pick up on the idea though -
The problem is KP (I almost used just nuts!) that the majority of people are already just struggling to survive. Add in another 'compulsorty savings scheme' and where will they find the money?
I understand the merits of the argument in principle, but our Governments have for too long presided over, and resisted change from a low wage economy. Fundamentally unaffordable by most people, but being pushed by ones on really good incomes.
As the sole breadwinner if I lose my job unexpectedly my family would be screwed. The nature of my work means it would take about 8 weeks to find another job. To survive those 8 weeks we'd need to dump most insurance immediately, take a repayment holiday on the mortgage, draw down the savings earmarked for long-term replacement of big ticket essentials, and draw on the overdraft. That might just help us to survive until we qualified for jobseeker, but after that the debt spiral would begin if a job wasn't forthcoming. I imagine my situation is better than most - I have low debt, depreciate assets and budget well.
I'd support a limited ACC-type insurance that would get me through those 8 weeks.
NB: I'm at low risk of losing my job but a true safety net shouldn't require people to financially castrate themselves before they can access it.
Do all Libertarians have to have exactly the same views? fitting your facetious definition i assume. What about the left are they all socialists? The right all fascists? I always find it odd that libertarians are the only ones who are forced to be confined to other peoples definitons of what they policy they are "supposed to be about"
Do all Libertarians have to have exactly the same views? fitting your facetious definition i assume. What about the left are they all socialists? The right all fascists? I always find it odd that libertarians are the only ones who are forced to be confined to other peoples definitons of what they policy they are "supposed to be about"
What do you understand libertarianism to be? For me, it's all about property rights (please note that 'property rights' refers to much more than the ownership of land if you're not aware).
And the idea someone should be able to do whatever they hell they like with land while they have a bit of paper that says, it is theirs for now, really needs revisiting. One person can do much permanent damage to land and ecosystems on the grounds they "own" it. I believe we are at a time when we must let this notion go and be less anthropocentric about the whole planet, to be honest. One person, as they "own" some land for the moment can denude it and alter it permanently with no recourse as far as "libertarians" are concerned.
The libertarian ideal is not really something this overused, overpopulated planet can afford.
Libertarian ideals are not as far from your thinking as yo might think... again.. its about property rights (i mean property in a general sense)...
Do you disagree with the following
"i can do whatever i want with what I own only as long as I and I alone deal with the consequences.... and where my actions impose on others I should bear those costs"
To me this encompasses liberterianism.
There has got to be a better way then workers (often low paid ones) being the first casualty of economic crises. Especially when they are ones created by greed such as the GFC.
If we can find a system that keeps people in jobs, it will ultimately keep people spending which will positively keep the economy ticking along.
However businesses should have to put some money aside during the good times too, to support their employees during downtimes. Recessions are inevitable - yet some businesses and people think and live like the good times will never end. Case and point the amount of businesses which have been very profitable over recent years right now all wanting government handouts. We Simply cannot be in this position again and it is not the governments job to prop businesses up that should have been better prepared.
It's time to put an end to that thinking now, so we can all be better prepared when the next recession comes.
If we can all be a bit more resilient and better prepared, we will be much better off.
We effectively already have one for health. I would also get behind compulsory 3rd party car insurance if it could be done in a competitive way. As I’ve said above it’s almost impossible for the private sector to offer unemployment insurance without being reamed by people who know they about to lose their job.
Agree,.. a classic case of adverse selection and moral hazard.
You would have ppl signing up who felt their job was at risk... and you would have ppl getting fired for slacking off and not showing up because they have insurance in place.
As it transpires we have this unemployment insurance in place... its called general taxation and the unemployment benefit.
The elephant in the room with all the options outlined is whether a person has become unemployed through no fault of their own (company restructuring, whatever), or because of their own neglect, bad behaviour, criminality, whatever. But I guess that would mean that employers and employees would have to take full responsibility for their actions, and that's a formula that isn't de rigeur these days.
Well many countries have an Unemployment Insurance Fund which is contributed through as a levy on your wages and gives you 3 or 6 months pay if you lose your job .
It takes a whole lot of pressure off the welfare system and its NOT means tested , its insurance that you pay for , and you get it if you are made redundant or lose your job due to circumstances beyond your control
Its actually not a bad idea
There is also the obvious benefit from creating another public agency that ends up holding billions in cash reserves down the line; if these reserves could be made available available for long-term capital projects and growth initiatives around the country, it might solve some of our infrastructure funding issues.
The net economic effects would benefit everyone though. Economic downturns would be much less crippling.
If I’d paid into it the last 20 years I wouldn’t have got a cent, but in saying that I would feel a lot safer knowing I had 6 months of income if needed, and my tax money wouldn’t have been sucked up so much during disasters and downturns.
Let me educate you on how an insurance scheme works: you pay premiums to the insurer in order to claim compensation payouts at a later stage when the insured event occurs. Unlike universal welfare like jobseeker benefits, you don't have an automatic right to such a payout.
You are obviously not getting a dime from a scheme like this if you haven't held a job in the last 6 months or so.
Can't people already buy income protection insurance? I thought this was normal if one owns a home I would have thought and a requirement of banks. IMO a deposit insurance scheme for banks is more important.
The whole point of the unemployment benefit is to do what the minister is suggesting, as that is also supposed to be a temporary thing, and keep people connected to the labour market. If it isn't adequate, then they need to change it.
Would you be happy with the UB paying some people out at $1000 a week or so? The current couple of hundred bucks a week isn’t going to work for people who are used to a decent income.
Income protection insurance is terribly expensive- mainly because the people who buy it know they are highly likely to use it.
Income protection insurance isn't really a thing that is affordable to many; mortgage repayment insurance exists but isn't mandatory and frankly a deposit insurance scheme to protect people who have cash stashed away is low down the list when a global pandemic leads to a shutdown of the global economy. Also, many will not qualify for an unemployment benefit if their partner has kept their job and it certainly doesn't pay out at a rate that could cover the average mortgage repayments even if they could.
This scheme was laid out mid-lockdown by the always-worth-a-look Michael Reddell. It references a U of Lausanne short paper, also worth an RTWT.
I suggest people have a look at the site www.politicalcompass.org to better understand how the word "libertarian" has been hi-jacked by the right. The political spectrum is not a straight line, it's more like a graph.
Once again, a stupid policy that is non production and a waste of funds creating extra costs.
Just make Kiwisaver compulsory at a slightly higher level, and provide the opportunity to access those funds if you do lose your job.
If you dont, say 95% of us, then those 95% still have an economic benefit when they retire.
Instead of a "COST" for their WHOLE working life.
Next we will be adding the cost of insuring against being hit by a bus walking across the road.
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