The Government has finally released public submissions on its plans to establish unemployment insurance, with support from labour advocates but talk of unintended consequences from employers

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

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

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

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

The Government has already delayed the planned implementation date from 2023 to 2024 due to concerns about the impact on businesses, which offered further criticism in their submissions.

Foodstuffs NZ, which owns the Pak’n’Save, New World and Four Square brands, said there was “no evidence to indicate New Zealand has a material problem with high and persistent levels of unemployment that requires 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, particularly with inflation at record highs.

“Therefore, employers will either have to create efficiencies (for example employ fewer staff, have staff work fewer hours, refrain from salary increases etc) to offset the NZIIS costs, or pass on the levy costs to the end consumer of the goods or services the business provides in the form of price increases.”

Fisheries company Sealord, which employs over 1000 people in New Zealand, said any benefits from the scheme were outweighed by “inherent downsides” such as the potential duplication of pre-existing redundancy provisions and the additional cost for employers.

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

“We strongly support this initiative as a new labour market institution that can help workers transition after displacement, without their wages being dragged backwards as they’re forced to take the first job that comes their way, regardless if you can support your family on it.”
– FIRST Union

The General Practice Owners Association of Aotearoa, which represents providers of GP and urgent care services across the country, warned of potential unintended consequences from the scheme as well as its affordability.

The association’s chief executive Philip Grant said the desire to address current inequities was laudable, but warned evidence from similar models overseas suggested costs could balloon in a short space of time.

As GPs were funded through a 50/50 split of government subsidies and capped patient fees, they could not simply increase their income to match growing expenses, Grant said.

In its submission, 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 to globalisation.

“We strongly support this initiative as a new labour market institution that can help workers transition after displacement, without their wages being dragged backwards as they’re forced to take the first job that comes their way, regardless if you can support your family on it.”

While the proposed scheme was not “a panacea for overall welfare reform”, it also did not conflict with the earlier findings of the Welfare Expert Advisory Group from 2018, which the union wanted the Government to adopt more swiftly.

NZEI Te Riu Roa, the country’s largest education union, said the scheme would benefit not just those displaced from employment but their children.

“Strong communities with reliable and secure employment support tamariki to be successful and secure and help create the social capital that supports successful schools and early childhood education centres,” the union said.

Greater unemployment provisions could be particularly helpful for support staff in schools and early childhood education centres, who often had relatively poor redundancy provisions in their contracts compared with teachers working in compulsory education.

Finance Minister Grant Robertson says it is unsurprising unions make up a large number of the income insurance scheme’s supporters. Photo: Mark Mitchell/Pool

Public Service Association policy advisor Kirsten Windelov said the scheme was urgently needed, and should in fact be expanded to cover both voluntary job losses.

Excluding those made redundant for poor performance or gross misconduct was “an importing of outdated punitive approaches that work against the overall aims and wider benefits of the scheme”, Windelov said.

Other social services organisations were critical of the emphasis on unemployment protections over welfare reforms, with the NZ Council of Christian Social Services saying it was concerned about “the codification of a two-tiered welfare system, and the moralisation of paid work that this creates”.

Auckland Action Against Poverty coordinator Brooke Stanley Pao said the organisation opposed the income insurance scheme, calling on the Government to instead back liveable incomes for all and universal services to ensure “the protection of all people, families and communities whether they’re in work that’s recognised or not”. 

Finance Minister Grant Robertson said he did not know exactly what percentage of submitters supported the scheme, but said there were “a wide variety of views”.

Robertson said it was understandable that most positive submissions came from the union movement, given the scheme would mean a great deal to low- and middle-income workers.

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

“It’s another tax on jobs, it’s a massive disincentive, there’s major flaws with it and we don’t support it whatsoever.”

While Cabinet is yet to make a formal decision on whether to adopt the scheme, it has already begun hiring staff to work on its design and implementation.

Sam Sachdeva is Newsroom's national affairs editor, covering foreign affairs and trade, housing, and other issues of national significance.

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