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Unemployment Insurance Scheme needs a lot of homework

John Doe

John Doe

Auckland, August 31, 2020

 

Photo by Jonathan Rados on Unsplash

In May 2020, the government signalled its interest in exploring new forms of unemployment insurance saying, “We have an opportunity to reset some of the foundations of the safety net for working New Zealanders.”

At the same time, it announced the Covid-19 Income Relief Payment (CIRP). This created a higher tier of benefit above the existing Job Seeker Support (JSS) benefit for workers that had been made redundant because of Covid-19; paying recipients $490 a week for up to 12 weeks.

In stark contrast to the very limited JSS benefit, people can receive CIRP even when their partner is earning up to $102,000 a year.

This kind of payment highlights where the government might head next.

New Insurance Model

A “Social Insurance” policy would see us move to some form of compulsory unemployment insurance model, whereby all workers and firms contribute to a social/unemployment insurance fund, much like ACC, with the fund focused on providing those laid off with a temporary benefit.

Overseas, this is often set at 60% to 80% of a worker’s previous salary.

These payments step down over time so that unsuccessful job seekers eventually end up being paid the normal JSS benefit amount.

There is a lot that seems appealing about this, but before we rush in there are some real hard issues to deal with, not least of which are the issues associated with how we work.

Some difficulties

For many in non-standard work situations, access to redundancy insurance payouts would fraught with difficulty. This is because even though non-standard workers pay tax and ACC levies, they do not simply work 40 hours a week as an employee.

They often work for their own small business, or as contractors working odd and inconsistent hours. How does someone access redundancy benefits when technically they are not ever laid off, they just do not get a call or find there is no more work to do?

These issues should not simply be waived away by saying they are “minor details” to be ironed out.

Countries the world over struggle with these very same issues, so much so, that the OECD says, “The success of social insurance hinges on how it handles non-standard work.”

There are no simple answers.

Hard questions

We cannot be overawed by the political economy of a pandemic and get pushed into making quick policy decisions. The next government should learn from the rollout of the current CIRP and ask hard questions.

How many non-standard workers accessed the CIRP scheme?

Are there opportunities to make international companies and their app-based workforce data collection part of the solution for non-standard workers?

How will the scheme work so that it does not drive a wedge between the stark reality of the welfare system for most people and how middle-class workers experience “welfare?”

Who is ensuring that non-standard workers have a voice in the development of this kind of policy?

Social/unemployment insurance is not necessarily a bad idea, but the details of who benefits and who contributes need to be very well considered by all before any further decisions on social insurance are made.

Julian Wood is a Researcher at Maxim Institute based in Auckland.

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