More than 40% of workforce being supported by wage subsidies

Business

Number of workers being supported by wage subsidies surpasses a million, as payments totaling $6.6 billion are made

7th Apr 20, 2:10pm by Jenée Tibshraeny

More than 40% of New Zealand’s workforce is now being supported by the Government’s wage subsidy scheme.

1.073 million people, or 41% of those in employment as at December 2019 (the most recent labour market figures available), are being supported by the subsidy.

Because unemployment has likely increased since the December quarter, the 1.073 million workers being helped by the scheme will make up an even larger portion of the current workforce.

The Ministry of Social Development has paid $6.6 billion to support these workers (914,931 employees and 158,198 sole traders).

To further put the numbers in perspective, $6.6 billion is equivalent of 2% of gross domestic product (GDP) pre-COVID-19.

Finance Minister Grant Robertson said: “We moved early to get money got out the door to protect jobs and support New Zealanders through the lockdown. We won't be able to save every job and every business, but we are making sure people have the underlying support they need to get through this.”

Minister of Social Development Carmel Sepuloni said MSD staff are getting the payments out to support workers and businesses at an unprecedented pace. MSD has brought in more front-line staff to take on the work load.

“In a number of countries, similar schemes aren’t paying out yet. We’ve moved fast and early, supported by a dedicated team at MSD,” she said.

“We continue to ask people to remain patient, and know that staff are working as hard as they can to process applications.”

Under the scheme, employers, contractors, sole traders, self-employed people, registered charities and incorporated societies can receive a subsidy to help pay wages if they can show a 30% decline (or expected decline) in revenue for any month between January and June 2020 compared to the same month in 2019.

Treasury estimates the 12-week scheme will pay out between $8 billion and $12 billion. For each full-time worker, businesses receive a lump-sum payment of $7,029.60, and for each part time worker $4,200.

The full value of the subsidy has to be passed on to employees, unless their normal wages are below the subsidy, in which case the employee must be paid at least their normal wages.

The public can use a search tool on the Ministry of Social Development’s website to see which businesses have received the wage subsidy and how much they’ve received.

Altogether, the COVID-19 support measures announced by the Government to date are expected to be worth nearly $25 billion.

Robertson is considering of ways to provide broader income support too.

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37 Comments

by Squishy | 7th Apr 20, 2:29pm 1586226595

It would be useful to get MSDs current YoY application and queue information. The economic legacy may be a lesson in humility for New Zealand.

Forgot to add: Shall we have a look at that database and locate some fraud?

by Carlos67 | 7th Apr 20, 2:27pm 1586226437

Obviously this cannot continue so everyone needs to pull their heads in and make the lockdown work or either you will get sick or financially crippled.

by gingerninja | 7th Apr 20, 2:30pm 1586226639

Cue the incessant, desperate, blindly self interested and tribal rantings of the interest.co.nz equivalents of poor Mike Hosking.

https://www.reddit.com/r/newzealand/comments/fvq26z/poor_mike_hosking/

by J.C. | 7th Apr 20, 2:44pm 1586227487

Entertaining stuff. There's this comment: "He’s an opportunist who saw a market gap for a belligerent contrarian in NZ media and slotted right in."

Just one thing. He's not a "contrarian." He loves the status quo.

by RickStrauss | 8th Apr 20, 9:38am 1586295483

In fairness, he's often contrarian toward the positions he held vehemently a day or two before.

by Independent_Observer | 7th Apr 20, 2:46pm 1586227610

That is brilliant

by gingerninja | 7th Apr 20, 3:37pm 1586230648

My personal favourite (and also very prevalent in these hallowed halls):
"One thing this whole saga has taught me is how easy it is to become a qualified immunologist, economist and all round logistical expert. I never thought I could go from a career in IT to a scholarly hero from a Dan Brown novel in just two weeks".

by Andrewj | 7th Apr 20, 4:01pm 1586232101

but Judging people, better not to go there.

by RickStrauss | 7th Apr 20, 10:01pm 1586253662

Renowned author Dan Brown?

by RickStrauss | 7th Apr 20, 10:01pm 1586253673

by Fritz | 7th Apr 20, 5:40pm 1586238048

How would you address the unfolding economic (and social) carnage Ginger?
Any thoughts?

by profile | 7th Apr 20, 2:45pm 1586227558

A great way to allow broader income support would be to allow industries that can work in isolation continue to work - to start paying for the $25 billion and cut out the shiny arse, deadweight loss middleman. Worksafe can already jail you if you don't follow SOP's so there is already plenty of stick.
Or perhaps Grant could give non locked down S. Korea a call?
https://www.statista.com/statistics/1102777/south-korea-covid-19-daily-…

by Independent_Observer | 7th Apr 20, 2:49pm 1586227742

Can't help but think this is a disaster whatever happens from here. How many weeks can the government keep this up before it cripples us permanently going forward? And for what purpose, given how bad things are likely to be when we stop anyway? Perhaps we should just be paying the rate of a job seeker instead?

by profile | 7th Apr 20, 2:56pm 1586228191

Don't worry - Neve's got this.

by Kate | 7th Apr 20, 3:17pm 1586229448

It's a 12-week scheme, paid out in a lump sum to the employer. But I assume the employers run their payrolls on whatever their normal pay period is. I wonder what happens with the excess sums paid out where the employees return to work earlier than 12-weeks in?

I'm guessing the government's thought is that even once businesses open back up they will have still cash flow issues/disruption.

by Fritz | 7th Apr 20, 5:43pm 1586238231

In terms of your last paragraph, the answer is 'yes'.
Once lockdown ends, there will be very few firms that receive more than half of their usual revenue.

by FCM | 8th Apr 20, 7:59am 1586289581

It's giving a lot of employees 12 weeks to sort out a financial plan for the next 18 months. I hope they are making the most of it as you can already read about the job losses that will double down by the day.

by cs | 7th Apr 20, 5:19pm 1586236742

The government can support incomes as long as it wants to as long as the real economy can sustain the resulting spending without undue inflation. The government cant go broke unless it made a peverse choice to. Cutting incomes now further than they already have would just lead to a terrible deflationary spiral and mass default by households on their nominal obligations. A depression. Keep households solvent so that when the lockdown ends they can resume spending at reasonable levels. Then further government deficits will be needed for a while to sort out the idle labour caused by the demise of tourism etc. Green New Deal projects and lots of redeployment to replace foreign labour.

by fat pat | 8th Apr 20, 3:52am 1586274738

How many weeks can the government keep this up
It's interesting to compare Germany to NZ. Munich is one of the epicenters of the German crisis. Everyone is still milling around. Kebab, Indian pizza places open for take away. Lots of people outside walking and running. My understanding is that factory production is still operational in some sectors, although everyone apparently wears masks and sits far apart at the cafeteria. I guess the difference is due to Germany having 30 ICU beds per 100K people and NZ having only 3.

by waymad | 7th Apr 20, 3:00pm 1586228429

One aspect that I doubt the Gubmint has given any thought to is the strong likelihood that many SME's in useful sectors (essential, but expanded - I heard on RNZ that there are 60K SME's in construction alone) with older owners will simply take the money, quietly divest, and exit stage left. The age profile in such industries is possibly skewed towards the upper end - it would be Interesting to run a sector-by-sector median-age comparison.

Because, for many, the enforced cessation of activity will have given such folks the opportunity to consider whether doing the ongoing engagement with Councils, Worksafe, IRD, MBIE, their ITO - it's a long list - is worth it for the few remaining years of their working lives.

by K.W. | 10th Apr 20, 7:15pm 1586502931

You are bang on the money. A lot of older business owners are closing up for good, as they have no appetite to go into debt just before their retirement. Most small business owners have given personal guarantees over their business debt facilities, or their house is the security for these loans, so to continue operations is to put at risk their personal assets and their homes. So they are choosing to exit quietly while they still can get out unscathed. As for their employees, they have the dole to look forward to.

by bw | 7th Apr 20, 3:10pm 1586229010

And there's probably a whole sector of our 'business' community that might have to rethink their income base, as those in Australia are also doing? Any 'wages' is better than no wages.

Rental properties offered at half price to secure tenants amid coronavirus pandemic

https://tinyurl.com/urb2mdl

by CN | 7th Apr 20, 8:59pm 1586249981

Due to new Healthy Homes Guarantee Guidelines, and insurance and rates increases, the landlords costs are going to increase. And now the landlord will realise that they never had pricing power and will be unable to raise their weekly rental prices and pass on their higher costs. Landlords will learn that they are subject to market pricing, subject to effective demand and effective supply.

1) Effective supply has increased due to former Airbnb rentals now being offered in the long term rental market.
2) Effective demand has fallen as tenants leave and move home with parents or other relatives, friends, etc due to loss of employment.

Also heard that parents previously paying for child to live nearer central Auckland for proximity to University. Now the parents have stopped paying (as they lost their job) and the child is moving home.

by Miguel | 7th Apr 20, 11:40pm 1586259608

Don't forget the high levels of immigration are likely going to turn disappear and even go into reverse as unemployment rises.

This will be a big driver of whats to come

by andreas_od | 7th Apr 20, 3:10pm 1586229011

NZD and NZX is still going up for some weird reason. Apparently this is "good news" in our "new normal "

by J.C. | 7th Apr 20, 3:34pm 1586230456

Yes, USDNZD and USDAUD down alongside USDJPY. The script says stronger NZD and AUD when "risk on" and weaker JPY.

by scarfie | 7th Apr 20, 3:27pm 1586230062

What could go wrong?

by Wrong John | 7th Apr 20, 3:38pm 1586230707

Labour is doing what Labour does best. Giving away money.

by sharetrader | 7th Apr 20, 4:10pm 1586232659

in times like this we need the government to spend spend spend to keep the economy moving
even JK did that through 2009 that is why he did not cut all the bad programs labour brought in which he should have done before he left office and I am thinking WFF here
god forbid what would happen if we had a Ruth Richardson in charge

by Independent_Observer | 7th Apr 20, 5:26pm 1586237163

And all the National voters saying, no thanks I'm fine. Give it the truly needy. (Yeah right...)

by redcows1 | 7th Apr 20, 5:53pm 1586238794

We don't do handouts, it distorts the free market, and anyway we saved for a rainy day unlike beneficiaries. ;)

by RickStrauss | 7th Apr 20, 10:03pm 1586253803

This resembles NZ's last ten years in absolutely no way whatsoever...

We could only wish all the own-two-feeters had saved for a rainy day.

by Fritz | 7th Apr 20, 7:32pm 1586244757

I'd like to see the government being much more proactvie on the economic plan coming out of lockdown.

Something I would like to see them do is, in addition to their normal social housing build programme, go into some of the big private greenfield developments in Auckland and get contracts to build lots of affordable housing.

Places like Milldale, and down south.

If built at no profit, they should be selling these for at least 20% less than market price.

by Independent_Observer | 7th Apr 20, 8:09pm 1586246997

But they're trying to prevent house prices from falling - or at least that would appear to be what the reserve bank are doing. By adding supply 20% below market, you're pushing the market down. Unacceptable behaviour in NZ. Especially if we have no immigration, we'll probably have to start knocking houses down to keep supply and demand out of equilibrium (god forbid price might change).

by Rob | 8th Apr 20, 12:32am 1586262743

Unfortunately both governments let house prices get far too out of control compared to wages, and the OECD. Economist warned this for years. They should have solved it in the good times. The higher it goes, the bigger the mess when it falls

by Uh Oh | 8th Apr 20, 9:56am 1586296574

Cure worse than disease?... it's decimating lower to middle class incomes and assets who ultimately foot the bailouts/ future tax bills

Was it worth it?

If we really want to save lives - why is there not more focus on ongoing health issues that have the highest death rates? i.e. heart disease + strokes (15.2 million people in 2016) - the global death toll from other causes dwarfs the global death toll caused by Covid-19, even Tuberculosis killed 1.3 million in 2016 according to the World health organisations own website
None of these freeze the worlds economies - yet have a greater impact on human life - in the Millions of victims
https://www.who.int/news-room/fact-sheets/detail/the-top-10-causes-of-d…

Maybe it's just the use of the word 'Virus" and media scaremongering about possible 'Contagion' that has paralysed economies and caused such a dramatic turn of events in such a short time

by solardb | 8th Apr 20, 11:54pm 1586346874

I put off applying for the subsidy till this Monday. It was paid into my bank account today.
Only took a couple of paydays to realize there's no point trying to tough it out, it seems lie a large amount at first, but actually its less than one months total businesses expenses. After this month some of them will reduce, (stock purchases etc ), so I think for a lot of businesses, it probably is the difference to still been there at the end of the lockdown, or not.