By Robert Reid*
Budget 2021 is upon us, and there are indications that the balance sheet is looking much better than expected when Labour won their absolute majority last year.
The pandemic has underscored to us how important it is to better support our most vulnerable, and we think there’s ample space in the books to support some evidence-based policy changes that restore dignity to our welfare system. Not only are higher benefits popular, and vital to ensure children, people with disabilities and parents and caregivers can flourish free from poverty, but they appear to be helpful in improving employment outcomes for those for whom paid work is appropriate and possible.
Economists across Aotearoa have been stunned at how little unemployment the country has experienced since the COVID-19 pandemic began, peaking at 5.2% in the September quarter and falling ever since. Wage subsidies have been a key factor in this; however, we believe the Covid Income Relief Payment (CIRP) enabled its recipients to make faster transitions into decent employment.
CIRP was a 12-week income support measure available to workers made redundant by COVID-19 between March and October 2020. While it was modest ($490 for full-time workers), significantly this was almost double the adequacy of the usual Jobseeker payment. This gave more security for its recipients, allowing them time and focus to find employment, rather than requiring them to find their local foodbank and queue (sometimes for hours) for themselves and their families.
This has served as an inadvertent trial of two of the main findings of the Welfare Expert Advisory Group: higher main benefits, and a form of individualisation of benefits, meaning the earnings of a recipient’s partner impacted on receiving CIRP in very few cases.
Welfare advocacy groups have been quick to highlight the hypocrisy of a two-speed benefit system that favours the newly unemployed, and we agree 100%. It is in New Zealand’s best interests to ensure that everybody has enough income to meet their needs and so they can live in dignity, including those whose capacity for paid work is limited, and our children, our future workforce. The CIRP shows part of what is possible when benefits are lifted to a decent level. Discussions that we’ve had with hundreds of CIRP recipients indicate that people who received the CIRP were able quickly return to the workforce, with most people securing work that paid better and/or had better hours.
This suggests that broader access to decent income support is a key factor to smoothing the social impacts of market shocks, as well as the wellbeing impacts of personal shocks such as accidents, health and disability issues, and leaving unhealthy or even abusive relationships. This would help prevent people from spiralling into debt. It would also help ensure that it’s harder for exploitative employers to offer lower paying work – because there will be fewer people forced to take it out of desperation.
The inadvertent trial
From October 2020 onwards, FIRST Union conducted a survey of hundreds of union members made redundant during the COVID-19 period to ensure that they had been treated fairly and legally, and were aware and had access to all the support services they needed. Amongst this group were 258 union members made redundant by a major retailer (out of a larger group of around 600 workers that were made redundant), who, due to the timing of their redundancy, were eligible for the CIRP payment.
In April and May 2021 we contacted these members again to see what their current situation was. We made contact with 156 of them, providing encouraging data:
- After seven months almost half of respondents were either back working (44%), or in training (3%). Only one fifth (21%) were on a benefit while another fifth (20%) had taken the opportunity to retire.
- Of those that were back working, 43% had found work within about a month of their redundancy, while three out of five of those now working were able to do it within the period of the CIRP (12 weeks).
- Of those that had returned to the workplace, more than two-thirds said that the wages in their new job were better (46%) or about the same (31%), while almost four out of five workers said that their new hours of work were better (52%) or about the same (25%).
A future of disruption
Our union has had no choice but to do this kind of work for decades, supporting members as globalisation and international wage pressure has created waves of redundancies that have thrown whole industries out into the cold. Opening up the wood and forestry industries to foreign ownership and international competition, for example, has damaged living standards for whole areas of rural Aotearoa.
This time with CIRP, our data suggests a strong economic argument for increasing and individualising benefits. These were people employed in low-paying low productivity retail positions that are “falling upwards”: our discussions indicate that reducing the financial and mental stress that accompanies redundancies has assisted with wellbeing and life in general, and has made it easier to redeploy within the workforce.
Covid-19 is one wave of unemployment, but it is not the only one and certainly not the last. People have to leave or refuse work all the time, for multiple reasons. Subsequent pandemics, the spectre of automation, and the need to transition to a low-emissions economy represents a much broader challenge that will affect many more jobs and people.
Raising and individualising benefits helps ensure that people, including the newly redundant, can live in dignity, and people for whom paid employment is appropriate, can transition easily back into decent work. We might pay more in the short-term, but the savings – in health, justice and housing costs – last a lifetime for children and also for adults. We all benefit from this, as people who are not desperate and stressed and in despair about how to pay the bills can better contribute their skills in care giving and paid employment towards creating a vibrant productive society.
*Robert Reid is President of FIRST Union and served on the Welfare Expert Advisory Group in 2018.
9 Comments
Our union has had no choice but to do this kind of work for decades, supporting members as globalisation and international wage pressure has created waves of redundancies that have thrown whole industries out into the cold. Opening up the wood and forestry industries to foreign ownership and international competition, for example, has damaged living standards for whole areas of rural Aotearoa.
The untold symptoms of "Free Trade" We traded our jobs for debt, that's what free trade was about. China got the jobs we got the debt.
Yes, with hindsight the dangers of globalisation seem obvious but there were other drivers in the beginning, lifting China out of abject poverty etc. Warning sirens should have sounded as soon as it became clear that FDI was not on the table without China owning a controlling interest and that intellectual property was a western concept that was not a shared view. The globalisation of IP was completed by selling it via our Academic institutions.
The idea that there would be productivity improvements due to the lowering of input costs was naïve in hindsight as the resulting products could not be bought as cheaply as the imported finished goods. The destruction of otherwise innovative industries was complete once it became clear that the pollution could also be exported. Jobs had been exported never to return.
Where to from here will be interesting indeed, while the US has its exorbitant privilege it can continue to issue debt for goods but China has access to a number of the resource pools it used to need from the US so this will continue as long as the local population does not replace the US as the number one consumer of output and useful work.
And still ~$40 billion is yet to be dispensed via transfer payments into the deposit accounts of deserving beneficiaries.
Wrong. It was $12.8b. The rest went on bailouts for businesses that had squirrelled away profits into trust accounts and claimed the Wage Subsidy instead of using the business funds. They're all about to be audited to find out if they were entitled to the subsidy in the first place.
The systems figures are so manipulated that the best way to assess our current position is to know exactly how many people are on some sort of state support. It is well over 1.2 million add in 400,000 government employees and your not far away from the number of people busting there guts to keep this debt ridden government going. State dependency will keep this government going until it crash's and burns.
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