The Government’s hallmark scheme to insure New Zealanders against unemployment is gathering political and business opposition before a law can be drafted.
Finance Minister Grant Robertson this week said the Government would pass law by the 2023 election, enacting the Government’s proposed income insurance scheme, to be funded by employers and employees through an ACC-like levy system.
He said the Government would not have the scheme up and running until 2024 at the earliest.
But the Government faces cross-party opposition as it moves to legislate, and the political opposition was bolstered in submissions on the proposed law from some of the country’s major employers, released on Tuesday.
READ MORE:
* Do we need an Income Insurance Scheme?
* Unemployment insurance scheme is good for workers and the country
* National attacks unemployment insurance proposal as ‘job tax,’ Greens say it creates ‘two-tier’ welfare system
National Party leader Christopher Luxon has confirmed National would repeal any law setting up such a "job tax" if his party wins the election.
“The income insurance scheme is another tax on jobs … It’s a massive disincentive, there’s major flaws in it and we don’t support it whatsoever,” Luxon said on Tuesday. “We’d repeal it.”
ACT leader David Seymour, similarly, said income insurance was a “very expensive tax on jobs” the party had abandoned as being unworkable.
”If you want an income insurance scheme that people will find useful, you end up like Canada with 2% or 3% payroll tax. We don’t think that that’s an acceptable amount of money to take off people.”
Green Party social development spokesperson Richard Menèndez March said the scheme risked creating a “two-tier” welfare system.
“We are concerned that this scheme doesn’t address the pressing needs of those already out of work, and that some of the most vulnerable groups of people will miss out.”
Under the scheme, workers who become unemployed through redundancy, health conditions, or disabilities would be provided with 80% of their salary for four weeks by their employer. The insurance system would then pay 80% of their prior salary for six months.
The proposed levy for the estimated $3.54 billion the scheme would cost each year was 1.39% of a worker’s salary, paid by both the worker and the employer. A person earning $1160 a week could expect a $16.12 levy, and $928 in weekly insurance payments if made redundant.
“Our motivation for doing this is that both after the Christchurch earthquakes, then again in the period of Covid, we’ve created ad-hoc schemes to deal with people having sudden job loss. We felt that this was a gap,” Robertson said on Monday.
Robertson began talking about a possible need for such a scheme in 2020, during the height of the Covid-19 pandemic, but Labour did not explicitly campaign on the proposal at the election that year. Both the Council of Trade Unions and Business NZ have encouraged the Government to create such a scheme.
Despite the support of the leading union and business organisations, major employers and business groups were joined by the social support organisations in opposing the proposal in submissions published by MBIE on Tuesday.
Hospitality NZ, representing 2500 businesses and 173,000 employees, said income insurance was not needed as workers’ rights in New Zealander for redundancy and dismissal were “incredibly strong”.
“This scheme will be easy to manipulate in the real world. We regularly hear from members about employees who want to leave their job asking to be made redundant.”
Sealord, said to employ more than 1000 people, said businesses could “ill afford” the proposed levies in the coming five years, as companies already faced higher costs.
“As evidenced in similar schemes overseas, [income insurance] payments … provide an incentive to remain unemployed for longer. At the very least, they may reduce the urgency with which people losing their jobs will seek alternative employment.”
Both supermarket chains, Foodstuffs and Countdown, opposed the scheme.
Foodstuffs, a co-operative of New World and Pak’nSave franchise owners, said there was “no clear evidence” such a scheme was required, and Countdown said it “seldomly” made workers redundant.
Vegetables New Zealand, a lobby group for 700 vegetable growers that employ more than 10,000 workers, warned of the scheme acting as an “unfair tax” on the short-term contracts used throughout the industry.
The outcome could be less seasonal workers coming to New Zealand, instead heading to “more equitable tax regimes” like Australia, Vegetables NZ said.
The scheme was supported by unions. The Public Service Association said it was “urgently needed” as it would close a gap in the social safety net.
But organisations concerned with the welfare system, Child Poverty Action Group and the Salvation Army, opposed the scheme.
“The proposed scheme introduces further complexity to the income support system and will result in a two-tiered approach to welfare that is more likely to increase inequalities than reduce them,” the Salvation Army said, in its submission.
© 2022 Stuff Limited